There are important changes to superannuation – effective from 01 July 2022 – that will have implications for employers, their payroll management and (potentially) their cash flow. The two key changes, announced as part of last year’s Federal Budget, may also entice some employers to rethink their hiring strategies.
Increase of the Superannuation Guarantee to 10.5%
From 01 July 2022, the Superannuation Guarantee (SG) – the amount of super you have to pay an employee – increases from 10% to 10.5% of their eligible earnings (ordinary time earnings).
The Superannuation Guarantee is legislated to increase by 0.5% each year until it reaches 12% in 2025.
When Superannuation Guarantee legislation was introduced to super 30 years ago, it expanded coverage of super to 72% of workers in Australia at a rate of 3%.
The Government has continued to expand coverage and increase the rate so that by 2003 the super guarantee rate had increased to nine percent and super covered 90 percent of Australian workers.
With SG reaching 10.5% for the next 12 months, the previous Government also set in motion a change that will further expand coverage of super among Australia’s workforce.
Removal of the $450 superannuation contributions cap
Currently, employers don’t have to pay superannuation for most workers who earn less than $450 per month. However, from the start of the 2022-2023 financial year, this cap is being removed – meaning employers will need to pay super for all employees over the age of 18, no matter how much they worked or earned in a month.
It’s important to note too that from 01 July 2022, super will be payable to employees under 18 years of age if they work more than 30 hours per week – regardless of how much they earn.
What these payroll changes could mean for your business
How much these changes affect you will depend on the unique nature of your business and your employees.
However, the updates to superannuation likely mean you’ll need to set aside a little more each quarter, accounting for an extra 0.5% on ordinary earnings for those employees who regularly receive super and to start paying 10.5% superannuation for those staff who were previously earning below the $450 threshold.
You’ll also need to confirm you have the correct super information on file for all employees so payments are made to the correct fund and don’t bounce back. You need to offer all eligible employees a choice of a super fund, via a choice form.
Last year’s Your Future Your Super (YFYS) reforms mean you may have to check for an employee’s ‘stapled’ super account if they haven’t provide these details, rather than setting them up in your default fund. Here is a handy reference guide for more information about stapled super funds.
It's important to understand your business' latest obligations regarding Superannuation Guarantee contributions, particularly whether the business needs to fund the additional SG rate or simply take the new super amount from employees' existing salaries.
The changes are especially critical for employers with part-time and low-wage workers – these businesses will need to price in both the requirement to pay superannuation for staff where previously they haven’t needed to, as well as the 0.5 percent increase on SG across the board.
If you want to know more about your SG obligations from 01 July 2022, contact one of our Accounting and Business Advisers at The Peak Partnership.