In March 2012, the Federal Government enacted legislation, the Superannuation Guarantee (Administration) Amendment Act 2012 (Act).
The Act introduces important changes to employer superannuation obligations, effective 1 July 2013.
Further changes will flow through in subsequent years. These are outlined below.
1 July 2013 increase to the minimum rate of superannuation guarantee (SG) contributions for all employees
The Act increases the amount of minimum SG contribution an employer is required to make in relation to each employee.
At present, the minimum SG contribution required is 9% of the relevant employee’s salary or wages, up to the “maximum SG contribution base”.
From 1 July 2013, the minimum SG contribution required will be 9.25% of the relevant employee’s salary or wages, up to the “maximum SG contribution base”.
The “maximum SG contribution base” is revised annually. Where an employee earns greater than the maximum SG contribution base, the employer is only required to make SG contributions on the maximum SG contribution base amount. For the 2012-13 financial year, the maximum SG contribution base is $45,470 per quarter or $181,880 per year.
1 July 2013 increase to the range of employees entitled to superannuation
At present, employers are not legally required to make minimum SG contributions with respect to employees aged 70 plus.
However, from 1 July 2013, minimum SG contributions will be required for all employees under the age of 75.
What do employers need to do to be compliant as of 1 July 2013?
Employers should take steps to ensure that, from 1 July 2013, they are making the required SG contributions:
- for all relevant employees, at 9.25%, rather than 9%; and
- for any 70 to 75 year old employees who have not previously received contributions.
These changes will increase the cost of superannuation for employers. It may, in some cases, be possible to offset SG contribution increases by reducing the salary component of remuneration, or offsetting them against personal employee superannuation contributions. However, this will depend on the specific circumstances, including the terms of the relevant employment contract. Specific advice should be sought. We would be happy to assist you in this regard.
What further changes are on the horizon?
The SG rate will increase steadily from 9.25% in July 2013, to a maximum 12% in July 2019. Accordingly, SG contributions will need to increase annually during this period:
Click here to view table.