Superannuation Guarantee: Employer considerations

Varun Kumar

27 May 2021

The superannuation guarantee rate will increase from 9.5% to 10% from 1 July 2021 and is set to subsequently rise by 0.5% each year, until it reaches 12% by the 2025-26 income year.

In preparation for this change, employers are encouraged to review their employment contracts and ascertain whether the employee’s package is inclusive of, or excluding superannuation guarantee.

By way of example, if an employee’s salary is $90,000 inclusive of superannuation, the following would be the impact of the rate increase on their pay going forward:

Income year	SG rate	Gross	Superannation Guarantee	Salary (before tax)
2020 - 21	9.5%	$90,000	$7,808	$82,192
2021 - 22	10%	$90,000	$8,182	$81,818

Alternatively, if an employee’s salary is $90,000 exclusive of superannuation, the following would be the impact of the rate increase on their pay going forward:

Income year	SG rate	Gross	Superannation Guarantee	Salary (before tax)
2020 - 21	9.5%	$98,550	$8,550	$90,000
2021 - 22	10%	$99,000	$9,000	$90,000

It is critical that businesses consider this change now in preparation to ensure compliance. In the event that superannuation guarantee is underpaid/unpaid by the required dates, businesses will not be entitled to a tax deduction for the amount unpaid/underpaid and superannuation guarantee charge (incl. further penalties) may apply.

Some practical tips for employers to keep in mind:

Review your employment contracts to ensure you will meet the minimum superannuation obligations going forward
Employees who are on a superannuation inclusive contract may be worse off from a “cash in hand” perspective and this should be considered during your annual year end salary reviews.
Review your payroll expense for the year and factor in the increase to determine the cash flow impact and plan accordingly
Consider any impacts of the increased rate on other obligations such as payroll tax, workers compensation, etc.
Remember, this is the first of five proposed increases and as an employer, clear consideration, transparency and communication of your approach will be worthwhile

If you would like to discuss this upcoming change in further detail or would like advice on how this may impact your individual circumstances, please contact your Moore Australia advisor today.