Here at de Kretser – our team have compiled a simple guide to help your business with it’s Super responsibilities in the new Financial year.
You will have heard by now that business Superannuation contribution in Australia has increased to 10.5%
The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will then steadily increase by 0.5% each year until it reaches 12% on 1 July 2025 – the following numbers tell the story –
| Period | SG rate (%) |
| 1 July 2015 – 30 June 2016 | 9.5% |
| 1 July 2016 – 30 June 2017 | 9.5% |
| 1 July 2017 – 30 June 2018 | 9.5% |
| 1 July 2018 – 30 June 2019 | 9.5% |
| 1 July 2019 – 30 June 2020 | 9.5% |
| 1 July 2020 – 30 June 2021 | 9.5% |
| 1 July 2021 – 30 June 2022 | 10% |
| 1 July 2022 – 30 June 2023 | 10.5% |
| 1 July 2023 – 30 June 2024 | 11% |
| 1 July 2024 – 30 June 2025 | 11.5% |
| 1 July 2025 onwards | 12% |
The increase to the superannuation guarantee (SG) rate begins from 1 July 2022 and will see more employees (and certain contractors) entitled to additional SG contributions on their pay.
If you have employees, what this will mean depends on your employment agreements.
If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund.
For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.
But what happens when income earned before 30 June is paid after 30 June 2022 – will employees be entitled to the higher SG rate of 10.5%?
SG based on when an employee is paid
On 1 July 2022, the SG rate increased from 10% to 10.5%. In some cases, an employee’s pay period will cross over between June and July when the rate changes.
However, the percentage employers are required to apply is determined based on when the employee is paid, not when the income is earned.
The rate of 10.5% will need to be applied for all salary and wages that are paid on and after 1 July 2022, even if some or all of the pay period it relates to is before 1 July 2022.
This means if the pay period ends on or before 30 June, but the pay date falls on or after 1 July, the 10.5% SG rate applies on those salary and wages. The date of the salary and wage payment determines the rate of SG payable, regardless of when the work was performed.
EXAMPLE
Nicholas is an employee of ABC Pty Ltd.
If Nicholas performed work:
- In June (or partly in June and partly in July) but he was paid in July, the SG rate is 10.5% on his entire payment and contributions totalling 10.5% of his ordinary time earnings for the September 2022 quarter must be made to his superannuation fund by 28 October.
- In July but was paid in advance (before 1 July), the SG rate is 10% and contributions totalling 10% of
his ordinary time earnings for the June 2022 quarter must be made to his superannuation fund by 28 July.
Please also note the following changes to the SG Threshold
| $450 super guarantee threshold removed | |
| From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation. | |
| For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week. | |
If you have any questions regarding your Super obligations – de Kretser is here for you.
Need more information?
There are many factors to consider regarding the information shown above. Please contact us if you would like more information, we are happy to explain and action your requirements.
We look forward to working with you.
T: +61 3 9550 6900