Compulsory employer superannuation contributions will continue to be increased to 12% by 2025.
The Superannuation Guarantee increase will support Australians to add more savings into their retirement funds.
What changes will occur?
Since 1 July 2021 super has already increased from 9.5% to 10%. With the incoming Financial new year there will be another jump to 10.5%. Incremental increases of 0.5% over the next three years are to follow until the Super Guarantee reaches 12%.
A critical increase, designed to help individual retirees achieve a supported retirement. Sustainability of the aged pension will be improved, and pressure will be taken off future federal government budgets as the population ages.
What does this mean for employers?
Business owners should ensure they are compliant with this change as penalties from the Australian Taxation Office will apply, should they fail to fulfill their requirements to update pay incorrectly.
If your payroll system is a Single Touch Payroll, this shouldn’t be an issue, as your program may automatically update to the new rate. However, some programs will require a software update to adjust to these changes.
Xero should update to the new rate automatically, however MYOB, Intuit Quickbooks, and Reckon users should all check to ensure they have the correct software updates for the changeover.
What does this mean for employees?
The impact of these changes will depend on the structure of employment packages within a company. Contracts usually fall into the following two categories:
- a base salary plus super (Category 1); or
- a total remuneration package which includes super (Category 2).
Category 1: There will be no affect on take home pay. Additionally, an employer must pay the increased contribution because super is exclusive of the employee’s salary.
Category 2: The employee’s total remuneration package will absorb the change in super. Provided that the employee is paid above the applicable minimum rate, this will decrease the employee’s base salary.
Employers cannot change the contract of an employee from one arrangement to another.
