In November 2013, the Federal Government introduced the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013(Cth) (Bill). Although the main objective of this Bill was to repeal the highly contentious mineral resource rent tax (MRRT), one of its other aims was to place a temporary freeze on the proposed increase in superannuation guarantee (SG) contributions.
Under the Bill, SG contributions would be frozen at their current level of 9.25% until 1 July 2016, when they would increase to 9.5%. SG contributions would then increase by increments of 0.5% on 1 July for each successive year until they reach 12% on 1 July 2021.
Given the upcoming Federal Budget and the many issues this is likely to raise for both businesses and individuals, we thought it would be timely to update employers about the current status of the proposed freeze on the increase in SG contributions.
Current status of the Bill
After being introduced in November 2013, the Bill was then rejected by the Senate in March 2014. Opposition to the Bill has largely been attributed to the Labor and Green parties, which hold a majority in the Senate until at least July 2014.
The Bill is now due to reappear in the House of Representatives, where it is anticipated it will be passed quickly and returned to the Senate. If the Bill is rejected by the Senate a second time, there is the risk of a double dissolution election.
In the meantime, there is much debate from both politicians and the mining industry with respect to the Bill and its effects on the MRRT. New figures released by Finance Minister Mathias Cormann demonstrate that the mining tax is costing the Government more than it is raising and is therefore costing taxpayers money. The outcome of this debate will also affect the implementation of any freeze on the proposed increase in SG contributions.
What does this mean for SG contributions?
Until the continuing debate regarding the MRRT is resolved and the Bill is passed through both Houses of Parliament in its current form, the SG increase will continue to take effect as originally implemented by the Superannuation Guarantee (Administration) Amendment Act 2012 (Cth). That is, SG contributions will increase from the current level of 9.25% to 9.5% on 1 July 2014 and will then continue to increase by increments of 0.5% on 1 July of each successive year until they reach 12% on 1 July 2019.
What employers should know
As the Government has not been successful in bringing in legislative change, the SG contributions will increase from the current level of 9.25% to 9.5% on 1 July 2014. Employers need to factor this into payroll and any remuneration review process.