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Superannuation Guarantee Changes in The New Financial Year: What Employers Need to Know

Changes

Superannuation is set to undergo some significant changes in the 2022/23 financial year, and this will have a major impact on every business. It’s imperative employers understand these changes and prepare accordingly.

1. Superannuation Guarantee rate rise from 1st July 2022, to 10.5%

The superannuation guarantee statutory rate was set at 10% from 1st July 2021, with legislation in place to incrementally increase this rate to 12% by July 2025.

The next rate rise will take effect from 1st July 2022, increasing to 10.5%.

What does this mean for you as an employer?

These rate rises will have a significant effect on your business finances so it’s important to act now and prepare for a smooth transition.

  • Review your current superannuation costs for all employees, both hourly and salaried.
  • Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
  • For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
  • Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2022. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
  • Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12%.

Effect on employment contracts explained:

Typically, contracts provide that an employee is either paid in one of two ways:

Category 1 – A base salary plus super.

Where a contract falls within Category 1, the employee’s take home pay will not be affected, and the employer must pay the increased contribution as super is exclusive of the employee’s salary.

Category 2 – A total remuneration package which includes super.

Where Category 2 applies, then it may be possible to absorb the increased contribution into the employee’s total remuneration with a decrease in the employee’s base salary, provided that the employee is paid above the applicable minimum rate of pay under any award, enterprise agreement or the minimum wage.

This is dependent on how the contract is structured and an employer cannot change an employee’s contract between current arrangements. Employers must also be mindful of these changes for contractors (or other categories of “workers”) who are considered employees for SG purposes.   

Short-paid or late payment of superannuation incurs hefty penalties.

2. Removal of the $450 Monthly Earnings Threshold

The $450 per month eligibility threshold has been removed for most workers.

This means employers will need to pay the superannuation guarantee contribution (SGC) on all ordinary earnings, further contributing to the increased cost of the superannuation guarantee rate rise.

Businesses who rely on mostly casual workers who earn less than $450 per month will be significantly affected by the extra cost when it comes to paying SGC for the September quarter.

There are some exceptions to this change:

  • Employees under 18 and domestic workers need to work more than 30 hours per week and earn more than $450 per month.
  • Contractors deemed employees for superannuation contribution purposes must earn more than $450 per month.
  • Different rules apply to international and temporary workers.

Single Touch Payroll (STP) Super Reporting

All business payroll details are reported to the ATO through STP. This includes super amounts owed to employees. Business owners have no room for error or any leniency when making payment contributions. Delays in superannuation payments result in costly late payment fees and interest penalties.

Due dates for super contributions each quarter are:

  • Q1 (Jul-Sept) due date is 28 October.
  • Q2 (Oct-Dec) due date is 28 January
  • Q3 (Jan-Mar) due date is 28 April
  • Q4 (Apr-Jun) due date is 28 July

Where the due date falls on a weekend or public holiday, the due date is the next business day.

Numble can help you prepare for increased payroll costs

Be proactive and start costing your superannuation guarantee payments now to budget for the increased payroll.

We can help you review and prepare accurate reports of your payroll systems and costs, so you can plan accordingly for the impact of super expenses on your business.

Contact Numble today to get started.

Getting organised now means that you’ll be well prepared for the changes that will take effect on 1st July 2022.