Do your contracts reflect impending superannuation changes?
The following should not be considered legal advice and is for general use only.
As EOFY approaches, it’s important for employers to carefully consider changing superannuation obligations. This is particularly important this year. Not only is the superannuation guarantee amount increasing, but various changes proposed in the 2021-22 Federal Budget will be coming into force, such as removing barriers to employee superannuation guarantee eligibility. Here’s what you need to know.*
Key takeaways to prepare for 1 July 2022 changes
- The minimum superannuation percentage employers need to pay is increasing, and monthly income thresholds are being removed at the beginning of the new financial year.
- Employers should review any awards or agreements that apply to their workforce, as well as employment contracts. Clauses relating to superannuation and salary should be closely considered, with particular caution required if the salary is inclusive of superannuation.
- Payroll settings and accounting software should be checked and updated to reflect the changes to ensure payments are properly calculated.
What is the ‘superannuation guarantee’?
The Superannuation Guarantee (Administration) Act 1992 (Cth) and the Superannuation Guarantee Charge Act 1992 (Cth) together regulate the payment of the superannuation guarantee. Together, they typically require employers to pay a minimum percentage of an employee’s earnings (and, in some cases, contractors’) into a superannuation fund on a regular basis to avoid penalties. This payment is known as the Superannuation Guarantee.
Superannuation Guarantee increase
Between 1 July 2014 and 30 June 2021, the Superannuation Guarantee was set at 9.5%. As of 1 July 2021, the Superannuation Guarantee increased to 10% in accordance with government legislation designed to keep superannuation balances in step with the cost of living pressures.
As of 1 July 2022, the Superannuation Guarantee amount will again increase by 0.5% to 10.5%, with the government prescribing a further 0.5% increase each year until 1 July 2025, where it will then remain at 12%. The expected Superannuation Guarantee schedule is detailed in the table below:
Superannuation Guarantee Percentage Amounts
|1 July 2021 – 30 June 2022||10.00%|
|1 July 2022 – 30 June 2023||10.50%|
|1 July 2023 – 30 June 2024||11.00%|
|1 July 2024 – 30 June 2025||11.50%|
|1 July 2025 – 30 June 2026||12.00%|
|1 July 2026 – 30 June 2027||12.00%|
|1 July 2027 – 30 June 2028 and onwards||12.00%|
It is important to remember that in some circumstances, employers may need to pay a higher rate than the minimum required by the Superannuation Guarantee (such as under Modern Award, enterprise agreement, or contract of employment).
Changes to the Superannuation Guarantee monthly income threshold
Previously, employers were only required to pay the Superannuation Guarantee if the eligible employee’s gross earning threshold was over $450 or more per month. However, as of 1 July 2022, the $450 monthly threshold will no longer apply and employers will have to make Superannuation Guarantee payments to all eligible employees, irrespective of how much they are paid.
If you have any questions regarding these changes or how to implement them, please contact us.
*While many other superannuation-related changes will be coming into effect from 1 July 2022, this article will only address those directly relevant to an employer’s day to day administration of the superannuation guarantee payment. Please seek advice from your accountant if you require information regarding other changes occurring in the superannuation area.
The above should not be considered legal advice and is for general use only.