In line with existing legislation, the Superannuation Guarantee will reach 12 percent on 1 July 2025, going through annual 0.5 percent increases each year on 1 July.
From 1 July 2022, the Superannuation contribution rate will be increased to 10.5 percent.
Apart from the change to the rate of employer Super contribution, there are other changes coming in, to increase the scope of people who are eligible to earn be paid Super.
Up until now, all employees were required to earn at least $450 per month to receive superannuation benefits. This minimum is being removed from 1 July 2022. Therefore, all eligible workers 18 years of age and older will be entitled to superannuation contributions regardless of how much they earn.
However, there is no change to the existing requirement that employees who are under 18 years of age only have an entitlement to employer superannuation contributions where they work over 30 hours per week. If a junior employee works 30 hours per week or less, they will not be entitled to superannuation contributions.
Why were these changes made?
In 2020, the Treasury provided a Retirement Income Review Report where it was found that 300,000 employees (or 3 percent of the workforce) were impacted by the superannuation guarantee exemptions. The demographic of those affected were young, low-income, or part-time workers. Out of this, the majority were women.
These impending changes are designed to improve the coverage of Superannuation and ensure those who were impacted the most wouldn’t be disadvantaged any longer.
What do I need to do?
Prior to 1 July 2022, you should prepare for the increases to the Superannuation rate and other changes where they impact your business or employees.
Firstly, it is important to notify all current employees of these changes to avoid confusion.
Next, it is crucial that your payroll and accounting systems are updated to accommodate this change. Failing to do this could lead to employees being underpaid their Super and your business being non-compliant and potentially exposed to heavy financial penalties.
If you have any questions regarding these changes, or if you are unsure of what to do, we encourage you to call ER Strategies on 1300 55 66 37.