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Changes to superannuation

From 1 July 2021, all employers will be required to pay the increased mandatory superannuation guarantee contribution (SGC) of 10% to all eligible employees.

Key fact

  • Australia’s compulsory superannuation system requires employers to pay a percentage of an employee’s earnings into their superannuation account.
  • From 1 July 2021, the amount of superannuation that must be paid will increase to 10 percent. Depending on your arrangements with your employees there are different ways that this increase can be accounted for.
  • Employers should communicate the change to the superannuation amount including any impact this will have on an employees take home pay as soon as possible. 
  • From 1 July 2022, the current income threshold above which superannuation contributions must be made will be removed. This means that employees who earn less than $450 per month (and satisfy a range of other criteria) will be entitled to superannuation.

Superannuation amount to increase

From 1 July 2021, employers will be required to increase superannuation contributions to 10 percent.  

This will continue to increase up to 12 percent by 2025.  

The following table provides the past and future superannuation amount increases. 

Financial Year

Super Guarantee Rate

1 July 2002 – 30 June 2013

9%

1 July 2013 – 30 June 2014

9.25%

1 July 2014 – 30 June 2021

9.5%

1 July 2021 – 30 June 2022

10%

1 July 2022 – 30 June 2023

10.5%

1 July 2023 – 30 June 2024

11%

1 July 2024 – 30 June 2025

11.5%

1 July 2025 – 30 June 2026 and onwards

12%


What does this mean for me as an Employer? 

In preparation for 1 July 2021, employers should review their wages arrangements with their employees as these arrangements may impact how businesses budget for and pay your employees superannuation.  We will examine these scenarios closer.

Scenario 1:  Employee's salary includes super (the employee has a “Total Remuneration Package” (TRP))

  • Employer may elect to take the additional 0.5 percent super (taking the total contribution to 10 percent) from an employees salary as the employee is paid on a total package amount.
  • The employee will receive a reduced take home pay, however their TRP will not be impacted.
  • Alternatively, the employer may elect to increase the employees TRP to account for the additional 0.5 percent super.

Scenario 2: Employee has a “Salary + Super” contract 

  • Employer is required to pay the additional 0.5% super for each employee.
  • Employer will pay more however employees will not face any changes to their take home pay. 

We strongly recommend that employers communicate these changes with their employees as soon as possible and prior to 1 July 2021. 

Income threshold 

The entitlement to super payments depends on an employee meeting a number of criteria. This may include their employment status, age, weekly work hours, and income.

Recent changes to superannuation arrangements mean that from 1 July 2022, employees earning less than $450 per month may be entitled to super.

We recommend the use of the ATO Super Guarantee Eligibility Tool if you are unsure as to whether you are obligated to make super contributions to your employees.

Penalties

Employers who fail to pay the minimum amount of super guarantee to their eligible employees by the due date may receive a super guarantee charge (SGC).  The SGC is made up of:

  • The amount of super owed to the employee; 
  • Interest (currently 10 percent); and 
  • Administration fee ($20 per employee, per quarter).

The ATO can take stronger action if an employer does not pay the SGC including court imposed fines, orders to pay up to 200 percent of the SGC amount, imprisonment or Director Penalty Notices to recover the unpaid SGC from Director’s personal assets.

To find out more, contact HIA's Workplace Services team

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