Changes to the Superannuation Guarantee
The superannuation guarantee (the SG), being the compulsory superannuation amount payable by employers to employees, will be increasing from 9.5% to 10%, taking effect on 1 July 2021. The SG rate will further increase each financial year by increments of 0.5% until it reaches 12% from 1 July 2025 onwards. As such, salary and wage payments made on or after 1 July will need to apply the increased SG contribution.
The impact that the upcoming changes to the SG rate will have on employers is contingent on a particular employee’s employment contract. Some employees receive superannuation exclusive of their base salary, whereas for other superannuation is absorbed within their total employment cost package (TEC).
If superannuation contributions are made exclusively of an employee’s annual base salary, there will be no change to the take home pay as a result of the SG rate increase.
If superannuation is absorbed within the TEC Package, an increase in the SG rate will result in a variation to the components of the TEC Package. Employer superannuation contributions will increase, and the annual base salary will decrease. However, while an employee’s take home pay decreases, there is no change to the overall value of the TEC Package.
Employers should review their employees’ employment contracts to determine whether there will be a change to their employees’ take home pay. Employers must also review and update their payroll and accounting systems commensurately to reflect this 0.5% increase to the SG rate from 1 July 2021.
For more specific information on any of the material contained in this article please contact Sathish Dasan on +61 8210 1253 or sdasan@normans.com.au.
