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Are you ready for the July 1 changes to superannuation?

From 1 July 2021, a number of changes to superannuation will take effect.  The compulsory superannuation guarantee (SG) rate will rise for the first time since 2014, the maximum amount of SG an employer is required to pay based on employee quarterly earnings will increase, and both the concessional and non-concessional superannuation contributions caps will rise. 

With only one week remaining before the end of the financial year, this is the last chance for employers to put arrangements in place to meet their super obligations going forward.

What is the superannuation guarantee?

Employers are required to pay compulsory superannuation contributions to employees, known as the superannuation guarantee (SG).  The SG rate is the minimum percentage of an employee’s Ordinary Time Earnings (OTE) that an employer must contribute to the employee’s superannuation fund. 

The current SG rate of 9.5% will increase to 10% from 1 July 2021, and will continue rising in 0.5% increments annually until it reaches 12% of employee OTE by 1 July 2025.

What is the maximum superannuation guarantee an employer needs to pay?

The Maximum Superannuation Contribution (MSC) base is the amount set by the Federal Government which is the maximum limit on an employee’s earnings base for each quarter of a financial year.  An employer does not have to pay SG for the portion of an employee’s earnings above this limit.

From 1 July 2021, the maximum amount an employer will be required to pay superannuation based on employee earnings will increase from $57,090 to $58,920 per quarter ($228,360 to $235,680 per year).

When does the superannuation guarantee need to be paid?

Compulsory superannuation contributions generally must be paid for:

  • any employee aged over 18 or who earns a minimum pre-tax amount of $450 per month; and
  • any employee aged under 18 who works over 30 hours per week and who earns a minimum pre-tax amount of $450 per month.

There are exceptions for when superannuation payments are not required.  The Australian Taxation Office has tools to assist employers with working out whether superannuation contributions need to be paid.

Employers are required to make regular superannuation contribution payments to their employees’ complying funds.  SG contributions must be paid by the 28th of the month following the end of each quarter, however employers may choose to pay contributions more frequently (i.e. monthly).

In order for the contributions to be tax deductible, employers should ensure that contributions are paid before the quarterly due dates, as the contributions are only deductible once they are received by the employees’ funds.

What happens if I don’t pay the correct super contributions or I miss the payment due date?

Employers are required to pay the correct SG rate for their employees.  This means that from 1 July 2021, employers must pay the minimum 10% SG rate, or they will be in breach of their obligations. 

Where contributions are paid late, employers are obligated to lodge SGC statements and are liable to pay the super guarantee charge, which can be significant.  The super guarantee charge is made up of the components below, and is not deductible for the employer:

  1. the super guarantee shortfall amount, calculated on the employee’s salary or wages (not ordinary time earnings);
  2. nominal interest of 10% per annum, accrued from the start of the relevant quarter; and
  3. an administration fee of $20 per employee, per quarter.

It’s important to note that the Director/s of a company that fails to meet its SGC liability can be held personally liable.

How is the superannuation guarantee paid?

Following the introduction of SuperStream in 2016, employers are required to pay employee SG contributions electronically and in a standard format.  Cloud accounting systems, such as Xero or QuickBooks Online have SuperStream functionality within the software.  Alternatively, payments can be made via a super fund clearing house. 

SuperStream compliance is mandatory for all employers.  If you need assistance with SuperStream or would like to discuss SuperStream and your obligations further, contact our team on 07 3217 2477.

Changes to superannuation contribution caps

As a result of indexation, contribution caps for both concessional and non-concessional contributions will increase by 10% from 1 July 2021.

  • Concessional contributions cap will increase from $25,000 to $27,500 per year.
  • Non-concessional contributions cap will increase from $100,000 to $110,000 per year.

Visit our website to learn more about the changes to superannuation contribution caps.

What do employers need to do before 30 June?

Employers will need to ensure their payroll systems and employee documents are updated from 1 July 2021:

  • Check with your payroll software provider to ensure the minimum SG rate change has been updated;
  • Check with your payroll software provider to ensure the maximum superannuation base change has been recorded;
  • Check to ensure your payroll system is correctly capturing all ordinary time earnings amounts;
  • Review and update employee agreements and remuneration packages. The increase to the SG rate may result in some employees on fixed salary packages seeing a decrease in their take-home pay from 1 July. 

For example, an employee earning a $90,000 salary package (inclusive of SGC) with the current 9.5% superannuation contribution would currently receive a before-tax total of $82,191.78.  However, once the SG rate increases to 10%, the employee’s before-tax pay will decrease to $81,818.18.  Employers may wish to communicate this change to affected employees to manage potential grievances.

We can help

At Apiary Financial, we know that complying with Australia’s complex superannuation laws can be difficult and time-consuming for business owners.  If you need assistance with calculating your employees’ superannuation entitlements, reviewing salary arrangements or implementing cloud accounting software, please contact our team on 07 3217 2477.