As of 1 July 2021, the “Superannuation Guarantee” will be increasing from the current 9.5% to 10%. This means that by law, all employers will need to be paying 10% of eligible employees’ earnings from 1 July 2021 to their nominated superannuation fund.
Generally speaking, superannuation eligibility extends to full time, part time and casual employees who are over 18 years of age and earn more than $450 a month. More info on eligibility can be found on the ATO website.
Employee communication and budgeting
It will be important to identify and communicate this news to employees who are paid on a “superannuation inclusive package” as this may mean that their take-home income will reduce.
While it may seem welcome news to employees who are paid their superannuation on top of their income, employers will need to budget for this increased cost to the business.
Paying on time
As an employer, in order to ensure your superannuation processes are compliant with this change, it is important to have updated your payroll systems prior to the first pay run following 1 July 2021. With data-matching facilities in place, the ATO will be monitoring compliance and enforcing penalties so we strongly suggest preparing now for the change.
If you need guidance on the how to update your processes or budget for the upcoming change, please feel free to contact us and we can advise the best way forward for you and your business.
Why is this happening?
The Federal Government put this increase in place to ensure Australians accumulate more superannuation for retirement and decrease the dependence on pensions.
This update forms part of a greater scheme to gradually increase mandatory superannuation contributions to 12% by 1 July 2027. The increase dates can be found here.