Are you ready for the SG increase?

From 1 July mandatory increase applies to superannuation guarantee.

An increase to the superannuation guarantee (SG) is set to go ahead from 1st July. This will see the base rate rise from 9.5 per cent to 10 per cent, followed by incremental half percentage point increases each year over the next five years.

SUPERANNUATION GUARANTEE RATE

1 July 2020 – 30 June 2021  –  9.5%

1 July 2021 – 30 June 2022  –  10%

1 July 2022 – 30 June 2023  –  10.5%

1 July 2023 – 30 June 2024  –  11%

1 July 2024 – 30 June 2025  –  11.5%

1 July 2025 – 30 June 2026  –  12%

Businesses should plan their approach to the increase as soon as possible as ATO penalties will apply to those who under-pay, make late payments or make no payment at all.

What do you need to do?

  • Check with your payroll software provider to ensure they are on top of this rate change
  • Any individual agreements with an SCG rate of more than 9.5%, but less than 10% must be reviewed
  • Notify your employees as they may need to review their Salary Sacrifice or after-tax contributions arrangements
  • Remuneration packages will need to be updated; this could mean a pay decrease for employees. For example, an employee earning a $100,000 package with the current 9.5% superannuation contribution would be receiving $91,324.20 before tax, however, with the super rate increasing to 10%, the before-tax pay will decrease to $90,909.09
  • Alternatively, for staff receiving a salary plus superannuation package, the additional cost will be borne by the business
  • This is a good opportunity for your business to do some housekeeping and ensure your super obligations have been met (super payments and calculations).

Changes to the Superannuation Contribution Caps

For the first time since 2017, the superannuation contribution caps will be increased by Indexation. The new contribution caps will apply from 1 July 2021 as follows:

  • Concessional cap – increased from $25,000 to $27,500 per annum from 1 July 2021
  • Non-concessional cap – increased from $100,000 to $110,000 per annum from 1 July 2021

These changes will also have ‘flow-on’ effects on other superannuation contribution measures such as the three year bring forward rule and the carry-forward unused concessional contributions rule.

If you need further information on these changes please contact us.

 

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