A quick overviewThe Superannuation Guarantee (SG) is scheduled to increase to 10% from 1 July 2021. If you have employees, you need to be ready for this legislated increase.
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 and if you don’t want to go it alone, you can always 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, you should speak to your payroll software provider to make sure they are on top of this rate change. Your accountant or bookkeeper may also be able to help.
- 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.
- This is also a good opportunity to do some housekeeping to ensure your super obligations have been met (including super payments and calculations).
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.