Compulsory Super Guarantee (SG) Increase from 1st July 2022– it’s now 10.5%
For all payments made to employees on and after 1st July 2022 the SG rate will be 10.5% (increased from the current rate of 10%).
This increase will require employers to contribute an additional 0.5% to meet their SG obligations under the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGAA).
You should start planning how this SG increase will be implemented and communicated to employees, and in particular those employees renumerated through superannuation-inclusive packages.
Employees - superannuation-inclusive package
Where an employee is remunerated through a superannuation-inclusive package, in the absence of a remuneration review, their take-home cash payments will likely reduce from 1st July 2022. As such, we recommend employers consider communicating the potential decrease with their employees as early as possible to avoid any queries or complaints arising.
Alternatively, where employers are considering implementing a pay increase to ensure consistency in take-home cash payments, this will need to be appropriately structured, budgeted and communicated.
We may be in a position to assist you in seeking professional HR Advice if you have more complex needs or concerns.
Employees – Award rates
A person on minimum or award wage cannot be paid less than the minimum so the increase to 10.5% must be an increase in their superannuation contribution and therefore the cost of employment.
Employees – paid above minimum or above Award rates
A person who is paid above the minimum or award wage could, subject to your employment agreement or industrial conditions, have their rates reduced so that their total remuneration including the increased superannuation amount does not change. Accordingly their gross wage and net wage could reduce by the full increase in super or in part. Note any change to rates cannot result in the employee being paid less than the minimum or award rate.
Employees – Salary Sacrifice
You may not use salary sacrificed super to meet your SG obligations
Increase in SG rate
The minimum SG rate is currently legislated to gradually rise from 10.5% to 12% per cent over the next
Year starting 1st July 2022: 10.5%
Year starting 1st July 2023: 11%
Year starting 1st July 2024: 11.5%
Year starting on or after 1st July 2025: 12%
The cashflow impact upon your business should be considered.
A start point is to plan for a 0.5% increase in your cost of employment.
We note that your workers compensation and if applicable your payroll tax obligations will also increase as a result of this change.
You should be cognisant of this increase when considering any other increases to remuneration for your employees.
Source: Institute of Certified Bookkeepers (ICB)