As has been well publicised, negotiations by the Federal Government with Independent Senators culminated in the enactment of the Minerals Resource Rent Tax Repeal and Other Measures Act 2014 (MRRT Repeal Act) which, in addition to repealing the Mineral Resources Rent Tax (MRRT), made a number of other tax related changes including a re-phasing of the superannuation guarantee charge (SGC) in the Superannuation Guarantee (Administration) Act 1992 (SGA Act).
Generally, under the SGA Act, 'employers' will attract a liability to pay the SGC to the Commonwealth where, in respect of any quarter, qualifying contributions to a complying superannuation fund or Retirement Savings Account (RSA) are less than the minimum contribution requirement. The exact quantum of the SGC payable will depend upon the extent to which the qualifying contributions are less than the minimum contribution requirement. The minimum contribution requirement for a quarter is essentially the product of the SGC percentage specified in the SGA Act for the relevant year, multiplied by the lesser of 'employee's' ordinary times earnings for the quarter and the 'maximum contribution base' for the quarter. Special rules apply in relation to defined benefit schemes.
The table below shows the SGC percentages that were specified in the law before the enactment of the MRRT Repeal Act, and the SGC percentages that will now apply as a result of the changes made by that Act. Importantly, the percentage that applies for the year which commenced on 1 July 2014 remains unaltered at 9.5 per cent, and that rate will not increase until 1 July 2021. This percentage, announced by the Government in its 2014-15 Budget (delivered in May 2014), was a change from 9.25 per cent originally proposed in 2013 in the Government's Minerals Resource Rent Tax Repeal and Other Measures Act 2013 which failed to pass both Houses of Parliament. In announcing in the Federal Budget the decision to leave the 9.5 per cent rate in place for the year commencing 1 July 2014, the Treasurer stated that "this change is necessary because the Senate has refused to pass the Government's election commitment to defer the increase scheduled for 1 July 2014". This increase was from 9.25 per cent that applied for the year which commenced on 1 July 2013, to 9.5 per cent as reflected in the table on the following page
Click here to view table.
The good news for 'employers' is that the uncertainty as to the SGC percentage that applies from 1 July 2014, has been resolved in time for 'employers' to calculate the first quarterly qualifying contributions for the 2015 financial year that need to be paid to a complying superannuation fund or Retirement Savings Account (RSA) before 28 October 2014 in respect of each 'employee' so as to ensure that the 'employer' does not attract a liability to pay the SGC to the Commonwealth. Since the SGC payable to the Commonwealth is not tax deductible, paying tax deductible superannuation contributions to a complying superannuation fund or RSA so as to avoid a liability to pay the SGC is clearly a business imperative.