What is Superannuation Guarantee?
The Superannuation Guarantee (SG) is the minimum percentage of a salary that an employer must contribute to an employees super fund. This percentage is legislated by The Australia Government and is controlled by the ATO.
The current SG percentage rate is 9.5% of employees “ordinary time earnings” or commonly known as OTE.
What is OTE?
Ordinary Time Earnings (OTE) is generally what your employees earn for their ordinary hours of work. It includes commission, loadings, allowances. It does not include overtime or reimbursements. The ATO has prepared a checklist to assist employers in categorising OTE.
Who is eligible for superannuation?
Generally, superannuation contributions must be paid for:
- an employee aged 18 or over who earns $450 or more (before tax) per calendar month; and
- an employee under age 18 working over 30 hours per week, who earns $450 or more (before tax) a calendar month.
You are NOT required to make super payments for employees who are:
- paid less than $450 (before tax) in a calendar month;
- aged under 18 years of age and working 30 hours or less per week;
- non-resident employees paid for work done outside Australia;
- resident employees paid by non-resident employers for work done outside Australia;
- covered by bilateral superannuation agreements with other countries;
- certain senior foreign executives who hold certain visas or entry permits;
- paid to do work of a domestic or private nature for not more than 30 hours per week (part-time nanny or housekeepers for your personal home);
- members of the various Defence Forces (the Defence Forces has a scheme called Military Super);
- high-income earners with multiple employers who have ATO approval to opt-out of receiving super with an exemption certificate for a specific period of time.
What is changing?
The Superannuation Guarantee rate is increasing to 10%, effective 1 July 2021 and will then continue to increase until it reaches 12% on 1 July 2025.
|1 July 2016||9.5%|
|1 July 2017||9.5%|
|1 July 2018||9.5%|
|1 July 2019||9.5%|
|1 July 2020||9.5%|
|1 July 2021||10.0%|
|1 July 2022||10.5%|
|1 July 2023||11.0%|
|1 July 2024||11.5%|
|1 July 2025||12.0%|
What do you need to do?
- Speak to your payroll software provider to ensure they are on top of this rate change;
- Any individual agreements with an SCG rate of more than 9.5%, but less than 10% must be reviewed;
- Notify your employees, they may need to review their Salary Sacrifice or after-tax contributions arrangements;
- Remuneration Packages will need to be updated; this could mean a pay decrease for employees. For example; an employee earning $100,000.00 package with the current 9.5% superannuation contribution, they were receiving before tax $91,324.20, however, with the super rate increasing to 10%, the before-tax pay will be decreasing to $90,909.09;
- It is a good opportunity to do some housekeeping, and ensure your super obligations have been met (super payments and calculations).
Please be advised: Although the SG rate is legislated to increase to 10% from 1 July 2021, in the wake of the COVID-19 crisis, there is considerable lobbying going on within the Morrison Government to delay this increase yet again.
About Employment Innovations
Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.