Superannuation Changes and the Impact on Employers

Tuesday May 18, 2021

The 2021 Federal Budget saw significant changes to the Superannuation Guarantee (SG), which – when legislated – will have implications for many businesses in Australia. Superannuation Guarantee is the proportion of wages that employers must contribute to their workers’ retirement savings and, as an employer, it’s important to stay abreast of any legislative changes.

Consider the financial impact of SG changes at an early stage and make any adjustments well before the date of legislative change. It’s also a good opportunity to ensure your superannuation processes are in order.

Currently, if you pay an employee $450 or more (before tax) in a calendar month or in some cases $350 (make sure you check your award), you have to pay them SG on top of their wages.

If your employee is under 18 or is a private or domestic worker, they must also work for more than 30 hours per week to qualify.

You pay super regardless of whether the employee:

  • is full-time, part-time or casual
  • receives a super pension or annuity while still working – including those who qualify for the transition-to-retirement measure
  • is a temporary resident, such as a backpacker or a working holiday maker – when they leave Australia, they can claim their super through theDeparting Australia superannuation payment (DASP) program
  • is a company director
  • is a family member working in your business – provided they are eligible for SG.

You don’t have to pay super for:

  • non-resident employees you pay for work they do outside Australia
  • some foreign executives who hold certain visas or entry permits
  • members of the army, naval or air force reserve for work carried out in that role
  • employees who opt out of receiving super if you’re covered by anSG employer shortfall exemption certificate in relation to the employee for the quarter
  • employees temporarily working in Australia who are covered by a bilateral super agreement – you must keep a copy of the employee’s certificate of coverage to verify the exemption.
  • If you’re a non-resident employer, you don’t have to pay super for resident employees for work they do outside Australia.

(Source: ATO)

Super Guarantee legislative changes in the Federal Budget 2021 include:

  • Superannuation Guarantee (SG) is legislated to increase half a per cent a year before reaching a final value of 12% by 2025. This means the SG rate will increase to 10% from July 1, 2021 and rise by 0.5% per year thereafter.
  • Removal of the $450 minimum income threshold under which employees do not have Superannuation Guarantee (SG) paid by their employer.

With the removal of the $450 minimum threshold, about 300,000 part-time workers (around 3% of employees) — mostly women — will receive SG. For the first time, regardless of how much a person earns, they will be entitled to employer-paid superannuation.

The plan won’t come into force until the first financial year after Parliament approves the legislation. The Government expects that this will occur before July 2022.

When the compulsory SG contribution level is increased to 10% on July 1, you’ll need to adjust your payroll systems to pay the increased amount to your eligible employees.

If you don’t pay the correct rate of SG into your employees’ super accounts by the quarterly due date, you may have to pay the Superannuation Guarantee Charge. This ATO penalty for late or inaccurate payment includes all the SG amounts owing to an employee, plus interest and an administration fee. You will also need to report and rectify any missed payments by lodging an SG Statement with the ATO.

If you would like assistance with employer-paid superannuation, please get in touch with the HR Dept. We can help put efficient systems in place that will minimise the impact of any legislative changes.

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