A Quick Overview
On 1 July 2021, the Superannuation Guarantee (SG) is scheduled to increase to 10%. If you are a business and have employees, you will need to be prepared for this legislated increase.
What is Superannuation Guarantee?
The Superannuation Guarantee is the minimum required amount of super an employer must pay to their employees super fund. The current SG rate is 9.5% of employees Ordinary Time Earnings, but this is increasing.
Ordinary Time Earnings, or OTE, is what your employees earn for their ordinary hours of work. It includes loadings, commissions, and allowances but does not include any overtime or reimbursements. The ATO’s checklist can help you categorise OTE, but you can ask us if you have questions.
What is changing?
The Superannuation Guarantee rate is going to increase to 10% from 1 July 2021. It will continue to increase by half a per cent every year until it reaches the final amount of 12% on 1 July 2025.
What do you need to do?
- The first thing you should do is speak to your payroll software provider to make sure they are ready for this rate change. Your bookkeeper or accountant may also be able to help.
- Review all individual employee agreements with an SCG rate of less than 10% but more than 9.5%.
- Notify your employees of the changes as they may need to review their Salary Sacrifice or after-tax contributions arrangements.
- Update Remuneration Packages as it may mean a pay decrease for employees.
- This is also an excellent opportunity to do some housekeeping to ensure your super obligations are being met (including super payments and calculations).
Why is this important?
As an employer, it’s essential to ensure you pay all super at the updated minimum rate. There will be financial penalties for not meeting your SG obligations.
The Superannuation Guarantee Charge (SGC) is the penalty that will be charged when employers don’t pay :
- the required super guarantee contributions for all eligible employees,
- super contributions due by the payment cut off date or
- super to every employee’s chosen super fund.
Got a question?
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