By Australasian Convenience and Petroleum Marketers Association Executive Manager Employment and Training Elisha Radwanowski.
Change is coming to superannuation and its operation in business with an increase in the superannuation guarantee rate for the first time in many years, along with operational changes announced in the 2021 Budget. Now is the time for all businesses to understand what is changing and what they need to do to remain compliant.
New SG Rate from 1 July 2021
As outlined in the Superannuation Guarantee (Administration) Act 1992 (Cth), superannuation guarantee (SG) rate is going to increase from 9.5% to 10% from 1 July 2021. The rate will then continue to increase each year by 0.5% until it reaches 12% on 1 July 2025.
Getting ready now
Where staff are employed on a ‘salary plus super’ basis the change is a simple one to make, the business just has to go into the payroll system and change the superannuation % from 9.5% to 10% and communicate to the employee the change (this can be done as a separate letter or as part of the annual Confirmation of Employment process).
Where staff are employed on a ‘salary inclusive of super’ basis (also known as an ‘all-inclusive package’) then the superannuation amount is already included in the total remuneration for the employee, so the increase of the superannuation guarantee amount results in a decrease of the take home amount to the employee. For example, if the employee was on a ‘package’ of $5000 a month with super, prior to the change to the superannuation guarantee $475 superannuation would leave the employee with a pre-tax amount of $4525; however after the change to the superannuation guarantee the employee would be left with a pre-tax amount of $4500. The business must clearly communicate this outcome to effected staff as soon as possible.
New super choice rules
From 1 January 2021, as a result of changes to the Treasury Laws Amendment (Your Superannuation, Your Choice) Act 2020, all new staff must choose a superannuation fund. This change means that they option of the staff who do not choose a fund defaulting to nominated fund.
Getting ready now
Businesses should review their engagement and new starter processing to ensure that superannuation fund choices are clear and consistent with the changes and stress the importance to all parties in the employee set up chain (including payroll and admin) the importance of having the superannuation fund choice of the employee gathered, documented and used.
Budget 2021 changes
As part of the Budget 2021 proposed changes superannuation were made that are anticipated to come into full effect from 1 July 2022 including the removal of the $450 minimum threshold and the removal of the ‘work test’.
Removal of the $450 minimum threshold
Currently an employee must earn a minimum of $450 in a month before superannuation guarantee will apply. The changes to the rule will mean that superannuation will apply on all wages. There will be some difference for those under 17 years of age that will be clarified prior to the launch date of 1 July 2022.
Removal of the ‘work test’’ rule for voluntary contributions
Currently an employee aged 67-74 years can only make contributions to superannuation if they meet the work test. The proposed changes outline that from 1 July 2022 individuals will be able to contribute to superannuation without the work test element applying.
Published with permission from ACAPMA.