Important Updates: Superannuation Guarantee Increase and Abolition of the $450 Threshold for Businesses
As we approach the commencement of the new financial year, it is of utmost importance for businesses that employ staff to remain abreast of significant updates pertaining to the Superannuation Guarantee (SG) rate and the abolition of the $450 threshold. These updates carry significant implications for businesses’ obligations and the superannuation contributions of their employees.
Superannuation Guarantee Increase:
Effective from 1 July 2023, the SG rate will undergo an increase from 10.5% to 11%. This increment will be implemented gradually on an annual basis until it reaches 12% on 1 July 2025. It is imperative for businesses to fully comprehend the impact of this rate change on employee remuneration.
Impact on Employee Remuneration:
It is crucial to note that the 0.5% increase in the SG rate does not automatically translate into a universal salary raise for all employees. The adjustment in pay will depend on the provisions specified in the employment agreements. For employees whose remuneration is based on a “total remuneration” structure, encompassing base salary, SG contributions, and allowances, the increased SG rate can be factored into the overall package. Consequently, this may lead to a reduction in take-home pay, as a higher percentage of the total remuneration is allocated to the superannuation fund. Conversely, employees who receive a rate in addition to superannuation will not experience changes in take-home pay, but employers will need to augment their superannuation contributions.
Calculation and Payment of SG:
To avoid incurring the superannuation guarantee charge, employers must meticulously calculate and pay the correct amount of SG in the new financial year. Ensuring accurate calculations throughout the month is particularly vital for employees whose salaries are disbursed on a date other than the first day of the month. For instance, employees who are paid on the 15th of the month should receive the appropriate SG rate for both June and July in their pay, rather than solely the June rate.
Software and System Updates:
Employers should conduct a comprehensive review of their software systems to confirm whether all employer super rates have been updated to reflect the new 11% rate. It is essential to ascertain whether the software will automatically adjust the rate or if manual adjustments are required. This step is crucial to maintain precision and ensure compliance.
Review of Superannuation Salary Packaging Arrangements:
Employers must undertake a thorough review of their superannuation salary packaging arrangements to ensure that the calculations align with the updated SG rate. Ensuring accuracy in these calculations is paramount to avoid errors and to adequately reflect the SG rate increase.
Abolition of the $450 Threshold:
Since 1 July 2022, the $450 threshold for superannuation guarantee contributions has been eradicated. Consequently, employees aged 18 and above must receive superannuation at a rate of 11% of ordinary time earnings (OTE). This change eliminates the previous threshold requirement and extends superannuation entitlements to a broader range of employees.
By staying well-informed about these updates and proactively addressing their implications, businesses can fulfill their obligations and effectively manage the changes in the superannuation landscape. It is vital for employers to diligently assess and adjust their payroll systems, as well as communicate these modifications to employees in a clear and concise manner. Taking these measures will ensure compliance and foster a harmonious employer-employee relationship when it comes to superannuation matters.
Key takeaways:
- The Superannuation Guarantee (SG) rate will increase from 10.5% to 11% starting from 1 July 2023, reaching 12% by 1 July 2025.
- Employers should review their software systems to ensure accurate calculation and payment of the updated SG rate.
- Businesses need to adjust their superannuation salary packaging arrangements to align with the increased SG rate.
- The $450 threshold for superannuation guarantee contributions has been abolished, extending superannuation entitlements to a broader range of employees.
Posted in IRIQ Articles