Changes to Superannuation Guarantee in 2021

Contents

• Super Guarantee Rate Increases
• SG Considerations
• Salary Sacrifice & SG
• Removal of $450 per Month SG Threshold

Super Guarantee Rate Increases

After being put on hold for the 2015-2021 financial years at 9.5%, the progressive increases to the rate of Super Guarantee (SG) that were legislated under the Rudd government in 2011 are due to recommence from 1 July 2021.

From 1 July 2021, the rate of SG will increase to 10% of Ordinary Time Earnings (OTE).

There was some debate around whether this should proceed in the post-COVID economic climate, however, to date (including in the 2021 Federal Budget) the government has announced no plans to alter the legislated increases so it is fairly safe to assume the 1 July 2021 increase will go ahead.

From there, the rate is due to increase by 0.5% per annum as follows:

SG Considerations

Employers should ensure their payroll software is kept up to date and correctly configured so that their employer super contributions are calculate correctly - most cloud-based software will take care of this with a minimum of fuss.

From a commercial perspective, employers should consider the impact of this increase on their overall employee remuneration (including on-costs such as payroll tax). Employers who engage employees on a ‘super inclusive’ remuneration package will need to decide what to do ahead of 1 July – do employees get their super increase at the expense of their take-home wages?

Salary Sacrifice & SG

Employers should also be aware of changes to the interaction between Salary Sacrifice contributions & Super Guarantee that were effective from 1 January 2020.

From this date, an employee’s salary sacrificed super contributions can’t be used by their employer to count toward satisfying employer SG obligations.

SG needs to be calculated based on the new concept of ‘OTE Base’ which is an employees Ordinary Time Earnings (OTE) plus any amounts which would have been OTE had they not been salary sacrificed into a complying super fund.

Essentially, this is designed to ensure that SG is paid on top of any salary sacrifice contributions the employee elects to make. Again, employers should review their payroll system to ensure this is calculating SG correctly in accordance with these new requirements.

Removal of $450 per Month SG Threshold

The recently announced 2021 Federal Budget also included a proposal that the minimum monthly earnings threshold of $450 per month to qualify for Superannuation Guarantee will be removed by 1 July 2022. This would result in more low-income earners receiving employer SG contributions. Note this change will still need to be legislated however it is hard to see it being opposed.

Our team at BLG Business Advisers are always here to assist you, so to find out more or clarify details around superannuation guarantee for your business prior to 1 July 2021, please don't hesitate to talk with us.

We wish you and your business every success!

*This information is relevant at the time of publishing and is subject to change*