Don’t get caught out by upcoming superannuation changes
From 1 July 2022, there will be several changes to superannuation designed to make it easier for people to grow retirement savings and create opportunities for those who are younger, older and low-income earners.
A number of changes are being implemented that will affect who is required to be paid superannuation, the Super Guarantee (SG) rate and who needs to meet the work test for voluntary contributions. For individuals working casually or working part-time across multiple jobs, they currently may not receive any superannuation contributions at all from employment.
What is changing?
Currently employers are not required to make superannuation contributions under the superannuation guarantee legislation for employees in receipt of salary and wages of less than $450 in any calendar month.
From 1 July 2022, the $450 Super Guarantee (SG) threshold will be removed.
Superannuation support must be provided to employees regardless of the level of income they receive in any one month.
Who is excluded from the changes?
Contributions are not required for employees under age 18 who work less than 30 hours per week, regardless of their monthly income, unless they are covered by a workplace agreement that states otherwise.
There is no change for minors from 1 July 2022.
What should employers do prior to 30 June 2022?
Most payroll procedures and systems are currently configured to exclude superannuation payments for those who earn less than $450 per month.
- Employers should ensure their processes and reporting are robust and capable of meeting Superannuation Guarantee (SG) obligations from the first SG payment cycle after 1 July 2022.
- Employers will need to work with their payroll software provider to update their systems for the changes to ensure they do not inadvertently underpay employee superannuation entitlements from 1 July 2022.
- Employers should ensure that details of each employee’s fund of choice is documented and recorded in the payroll system.
- Ensure you are also able to request stapled super fund details from the ATO. Check and update your access levels of your authorised representatives in your ATO online service (Business Portal). This will ensure you can request employee’s ‘stapled super fund’ details from the ATO.
Other superannuation changes
With effect from 1 July 2022, the SG rate will rise to 10.5%.
The SG rate is legislated to continue to increase as follows:
|1 July 2023 to 30 June 2024||11.0%|
|1 July 2024 to 30 June 2025||11.5%|
|1 July 2025 to 30 June 2026, and onwards||12.0%|
To avoid any negative impact to employees, complete salary reviews before 30 June 2022. Provided the business can support the cost and cashflow, this will ensure the pay increments at least cover the hit to the employee’s cash salary component.
Employees who are packaged on a gross salary plus super arrangement will have no impact on their cash salary, although employers need to factor in the additional wages cost for the superannuation increment of 0.5%. This will mean the total wages costs will increase for other on-costs such as payroll tax and WorkCover.
Removing the work test
The work test will be removed for those aged 67 to 74 for voluntary (member) contributions.
From July 1 2022, individuals aged 67 to 74 will no longer have to meet the work test to make member non-concessional contributions (NCC).
If an individual wants to make a member taxable contribution for those aged 67 to 74, they will need to continue to meet the work test. The work test is working 40 hours for remuneration over a 30-day period, at least once during the year.
What are the penalties for underpaying employees?
An employer who has underpaid the superannuation guarantee for a quarter will be liable for a superannuation guarantee charge (SGC) amount (i.e., the shortfall amount, nominal interest and an administration charge). The ATO can also assess a penalty amount of up to 200% of the SGC.
If there is a possibility that the SG has been underpaid or late payments made, employers should seek to undertake a review and lodge superannuation guarantee charge statements (if necessary) to avoid the possibility of excessive penalties.
How can SW help
- SW has an experienced outsourcing team to assist with your payroll function. We assist employers in understanding and becoming familiar with the new requirements to make this change as easy as possible, while also ensuring employers are meeting compliance requirements
- Our efficient teams are able to quickly review and lodge superannuation guarantee charge statements
- As a registered tax agent, SW can request the stapled super fund details for employees on your behalf
- Our teams regularly assist employers in budgeting for these increases