The superannuation guarantee (SG) is set to increase from 9.5% to 10% from 1 July 2021. SG is payable on an employee’s ordinary times earnings and has been 9.5% for a number of years.
The SG rate is set to increase over a number of years when in 2025/26 it will be 12%. As an employer it is important to ensure you pay superannuation for your employees at this new rate. Penalties will be imposed for not meeting your SG obligations. This includes not paying the required super guarantee amount, not paying the SG by the due date and not paying the SG to an employees’ chosen super fund.
Superannuation is often referred to as an add-on to wages. This makes it easier to compare pay rates against Award and Enterprise Agreement rates.
Some employees (typical executives and professionals) have their wages expressed inclusive of superannuation, ie: their package is $90,000 including superannuation. For this group of employees, their take home pay will actually reduce on 1 July 2021 if no adjustment is made.
Some employees already receive more than the legal minimum superannuation contribution due to their employment contract or a salary sacrifice arrangement. The increase to 10% does not automatically mean those currently receiving extra SG will receive the increase.
Those employees salary sacrificing into superannuation also face the risk of exceeding their tax deduction limit for superannuation from 1 July 2021. This is due to their employer paying more in SG contributions.
It is a good time to review your employees’ contracts and salary sacrificing arrangements. For more information, contact your trusted adviser at Green Taylor Partners.
