Superannuation is one of the more complex aspects of the tax system, and from 1 July 2022, two important super guarantee (SG) changes will apply to your business.
The rate of SG is increasing from 10% to 10.5%, and the $450 per month eligibility threshold for when SG is paid is being removed.
This increase follows the 0.5% raise from 9.5% to 10% in July 2021 and will continue to increase by another 0.5% each year until it reaches 12.0% on 1 July 2025.
The Government designed these changes to ensure a greater number of Australians will have more funds for retirement and the rate rise is just one component in creating a more transparent and accountable Superannuation Industry.
What this means for your business
From 1 July 2022, you will need to start making SG contributions to your employees at the new rate of 10.5%. Because of the removal of the minimum payment threshold, all employees are now eligible for SG, regardless of how much they earn. You may have to pay SG for the first time for some, or all of your employees.
As the burden of the increased payments will fall on the employer, these changes might have significant financial implications for your business. For example, if your business employed part-time or casual staff who previously earnt less than the minimum threshold, your outgoing costs in SG will increase. Employers will need to consider whether this additional 0.5% SG guarantee contribution is made on top of, or included in employees’ take-home pay, and whether adjustments to salaries are needed.
The Falanga & Co team is here to assist you if you have any questions about the changes and particularly in relation to managing your business’ financial planning.
Check your payroll software, and employee eligibility
As we approach the 1 July 2022 deadline, now is the time to make sure that your software is updated to correctly calculate your employees’ SG entitlement.
The Tax Office is working with digital service providers (DSPs) to make sure payroll software is updated in time and will automatically apply the correct rates for existing employees. Updated ATO online tools and calculators will also be available.
The removal of the $450 threshold may also mean you’ll need to pay employees’ SG for the first time, provided they meet the other eligibility requirements. This includes the need to work more than 30 hours per week if they’re under 18.
If you need to pay the compulsory SG for employees for the first time, you’ll need to give them a Standard Choice Form or direct them to the ATO online service via myGov, so they can nominate their super fund.
And where an employee hasn’t notified you with their choice of super fund, the ATO’s Stapled Super Fund information page provides guidance on existing super accounts which are ‘stapled’ to individual employees so that it follows them when they change jobs.
The ATO website provides employees with an SG contributions calculator, a useful tool to determine whether the correct amount has been paid.
Consequences of non-compliance
Paying compulsory employee superannuation guarantee contributions is your legal obligation as an employer. To make sure you’re fulfilling this obligation, you need to make sure that payments are made at the correct rate, to the right fund and in line with the payment deadlines. Penalties for employers who do not meet these superannuation obligations can be severe.
If you have any questions about how the upcoming changes may apply to your business or for any other super or payroll related matters, please don’t hesitate to get in touch with the team at F&Co, or visit the ATO’s Super for employers page for more information.
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