Initially, compulsory superannuation contributions were to increase over time between 1992 to 2002 from 3% to 9%. In 2010 it was proposed the rate be raised and legislation was passed to enable the continued increase of the rate over time to 12% by 2025.
Superannuation Guarantee Contributions (SGC)
From 1 July 2021, the Superannuation Guarantee (SG) rate will increase from 9.5% to 10%. You will need to consider the potential increased SG costs of these changes going forward and you will need to ensure your payroll systems are up to date to incorporate the increase SG rate.
The effect of the increase on particular salary packages need to be carefully considered to determine whether the additional 0.5% SG contribution needs to be added on top of the existing salary package (i.e. no change to the employee’s take home pay) or incorporated into the existing salary package amount (i.e. resulting in a reduction of the employee’s take home pay). In addition, you will need to consider the effect of the increase in the SG rate on relevant employee awards.
Superannuation Contribution Caps
In addition, from 1 July 2021 the annual concessional contributions cap will increase from $25,000 to $27,500. You may wish to remind your employees that concessional contributions made beyond this amount may attract higher tax rates and an excess contributions charge and therefore should generally be avoided.
If you have any questions about this update, or if you would like to ensure you will be ready by for these changes to super, contact us today
