Superannuation Guarantee increasing to 10% on 1 July 2021

The Superannuation Guarantee (SG) is scheduled to increase to 10% from 1 July 2021. If you have employees and we don’t manage your payroll, you need to be ready for this legislated increase. A number of businesses have been caught in the past for getting this wrong. Ignorance simply won’t wash, so if you’re in any doubt. Talk. to. us.  We can guide you through the process and double check the calculations are correct.

What is Superannuation Guarantee?

The Superannuation Guarantee is the minimum super an employer must pay to their employees super fund. The current SG percentage rate is 9.5% of employees Ordinary Time Earnings, but this is changing.

Ordinary Time Earnings or OTE, is generally what your employees earn for their ordinary hours of work. It includes commission, loadings and allowances but does not include overtime or reimbursements. The ATO’s checklist will help you categorise OTE, but you can ask us if you have questions.

What is changing?

The Superannuation Guarantee rate is increasing to 10% from 1 July 2021. It will continue to increase by half a percent each year until it reaches 12% on 1 July 2025.

What do you need to do?

  • Firstly, if we don’t handle your payroll, you should double check that your payroll software provider to make sure they are on top of this rate change.
  • Review any individual agreements with an SG rate of more than 9.5%, but less than 10%.
  • Notify your employees as they may need to review their Salary Sacrifice or after-tax contributions arrangements.
  • Update Remuneration Packages as it could mean a pay decrease for employees. Ask us more about communicating this message if you need to.
  • This is also a good opportunity to do some housekeeping to ensure your super obligations have been met (including super payments and calculations are correct).

Why is this important?

As an employer, it’s important to ensure you pay super at the new minimum rate. There are financial penalties applied for not meeting your SG obligations.

The Superannuation Guarantee Charge (SGC) is the penalty charged when employers don’t pay :

  • the required super guarantee contributions for eligible employees,
  • super contributions by the payment cut off date or
  • super to each employee’s chosen super fund.

More changes expected from the 2021 Budget

Treasurer Josh Frydenberg announced future super changes in the 2021 Federal Budget. Under the current superannuation arrangements, if an employee earns less than $450 per month from one employer, they are not entitled to receive the superannuation guarantee. The $450 threshold is set to be scrapped so employees will be entitled to employer-paid superannuation, regardless of how much money they earn.

This Government has indicated they expect this to come in before July 2022. We’ll keep you updated.

Got a question?

Teresa, our payroll and superannuation specialist can answer any of your questions.

Want to grow your business? Our Free Resources will Help