New superannuation increases

On 1 July 2021 the new Federal Budget kicked in, and so did the Superannuation Guarantee (SG) rate payable to employees. What changes do you need to be across as the new financial year commences?

Superannuation Guarantee Rate Increase

The SG rate increased from 9.5% to 10% on 1 July 2021, with further increases of 0.5% per year, from 1 July 2022, until it reaches 12% from 1 July 2025 onwards. Employers must update their payroll settings to reflect the 0.5% increase, however, the financial impact on the employee will depend on the terms of the existing and new salary packages.

The effect of the increase on salary packages need to be carefully considered to determine whether the additional 0.5% SG contribution will be additional to an employee’s existing package or incorporated into the existing salary package amount (e.g. salary including super). If the SG rate increase results in a reduction of an employee’s take home pay, employers will also need to consider whether they are complying with the relevant Modern Awards.

Salary Sacrifice Arrangements

Employers cannot use an employee’s salary sacrifice contributions to account for the extra 0.5%. The ordinary time earnings (OTE) base includes any sacrificed OTE amounts which means that contributions made on behalf of an employee under a salary sacrifice arrangement are not treated as employer contributions which reduce an employer’s charge percentage.

Concessional Contributions Cap

The annual concessional contributions cap which limits the annual concessional super contributions for employees will increase from $25,000 to $27,500. Concessional contributions made beyond this amount may attract higher tax rates and an excess contributions charge.

Next Steps

Don’t fall into the trap of underpayment and contact the Employment Law Team at Antunes Lawyers on (02) 9964 0499 to understand your obligations under these recent changes.