SUPERANNUATION CHANGES FROM 1 JULY 2022

Superannuation Guarantee Rate Increase to 10.5% from 1 July, 2022

If you run a business, you usually need to pay superannuation contributions for any eligible staff to a complying fund or retirement savings account. Currently, the minimum rate that you must pay is 10% of an employee’s ordinary time earnings (OTE). This is known as the super guarantee.

However, the Australian Government has legislated an increase in the super guarantee rate to 12% by 2025, due to concern that employees will not have enough super to give them a comfortable income when they retire. It is hoped that this increase will help retirees meet their basic needs in retirement.

The increase to 12% will not occur all at once, but in stages, to help business owners accommodate the changes. As of July 2021, the rate increased from 9.5% to 10%. This year, as of July 2022, the rate will increase to 10.5%. These incremental rate increases will occur each year until it reaches 12% in 2025.

Of course, if any of your staff already receive 10.5% or more, you may not need to increase their amount, depending on their employment agreement.

With global events, COVID-19 and economic challenges, there were questions about whether this year’s rate increase would go ahead. However, the recent federal budget had no changes, and so the increase will go ahead. Butt his is not the only impending superannuation change that businesses should prepare for.

‍Removal of the $450 per month threshold for super guarantee from 1 July, 2022 (Changes for under 18s working more than 30 hours per week).

Currently, you only pay the super guarantee for eligible employees who earn at least $450 in pre-tax income for one month. But, from 1 July 2022, you will have to pay super contributions for employees regardless of how much they earn, if they meet the other eligibility requirements. Employees who are under 18 will be eligible for super if they work more than 30 hours in a week, regardless of how much they’re paid.

This change will be of great benefit to women, who tend to have far less superannuation when they retire than men. The average superannuation payout for women is only one-third of the payout for men, so removing the income minimum should help redress this.

If you have staff, you will need to be ready for these changes by 1 July. Make sure your accounting and payroll system is up to date with super payments and are calculating the correct amounts for each eligible staff member.

You might consider ways to recover some of the increase by offsetting salary increases or reducing take-home pay. Talk to us about your options.

The ATO can penalise businesses that do not pay the minimum superannuation guarantee amount on time – the superannuation guarantee charge (SGC). This charge can work out to a larger amount than the super they were required to pay – and it is not tax deductible. So it is worth getting organised soon.

The ATO website has a wealth of information about super obligations to employees.

If you have any questions, please contact our office via email admin@optimumadvisory.com.au or call 02 9821 2455.

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