29 June 2021
by Karli Connors
- Related topics
- Personal Tax & Superannuation
The Government’s continued tweaking and changing of the superannuation rules are pitched at providing simplicity and an increased ability to contribute into superannuation. Treasurer Josh Frydenberg recently told Parliament the government’s plan would –
“make it easier for Australians to prepare for retirement and to be more secure once in retirement.”
The 2021 Federal Budget has maintained the legislated increase to the superannuation guarantee (SG), which will increase by 0.5% to 10% on 1 July 2021 and a rise of 0.5 per cent per year thereafter until it reaches 12 per cent by 2025.
|Year starting 1 July 2020||9.5%|
|Year starting 1 July 2021||10%|
|Year starting 1 July 2022||10.5%|
|Year starting 1 July 2023||11%|
|Year starting 1 July 2024||11.5%|
|Year starting on or after 1 July 2025||12%|
But what does this super increase mean to employers and employees?
With the super increase a range of factors need to be considered:
- Employees remunerated under a superannuation-inclusive package.
If an employee is remunerated through a superannuation-inclusive package, in the absence of a remuneration review, their take-home cash payments will likely reduce from 1 July 2021. We recommend employers consider communicating the potential decrease with their employees as early as possible to avoid any queries or complaints arising.
Alternatively, employers can consider a pay increase to ensure there is no loss in an employee’s income. This would require detailed planning to ensure this benefit is properly budgeted and communicated.
- Employees receive Super Guarantee contributions on top of their cash income
Employers will need to incorporate the increase in super payable in budgeting for upcoming employee benefits. Any budgets employers are preparing (e.g. salary/wage increases)
will have to consider the overall cost impact of increased wages and superannuation.
- Allowing for extra costs
When calculating employee entitlement provisions, it will be important to allow for the extra half a percent in the oncosts for both annual leave, long service leave and any wages accrued at year end. This is because they will be payable in the period the 10% super is applicable.
- Selection of Superannuation fund
New workplace determinations and enterprise agreements made on or after 1 January 2021, must ensure employees have the right to choose their superannuation fund.
Any budgets you are preparing, business case planning or cost recovery arrangements should also consider the increase in superannuation contributions.
If you want more information on how the super increase will affect your business or you personally, please reach out to your ESV Engagement Partner. We are here to help and remain focused on being your partner for growth.