Employers need to start planning now for the change in the superannuation contributions.

Total remuneration package

Where employees are structured on a total remuneration model, employers will need to communicate to staff before 1 July 2021 that their cash salary will decrease to give them time to plan for the change.

For example, if an employee is currently on a total remuneration package of $150,000 (excluding any allowances and non-cash benefits), the current split is:

• Cash gross wages – $136,987
• Super – $13,013

Where the remuneration package is unaltered from 1 July 2021, the split will be amended as follows:

• Cash gross wages – $136,364
• Super – $13,633

Based on the example, the employee will have a reduction in cash gross salary of $623 per annum or $52 per month.

To avoid negative impact to employees, it may be an opportune time to complete salary reviews before 30 June 2021 to ensure the pay increments at least cover the hit to the employee’s cash salary component, provided the business can support the cost and cashflow.

Gross salary plus super

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, WorkCover.

Maximum Contribution Base (MCB)

The minimum SG superannuation contribution of 10% from 1 July 2021 is also capped to the MCB. The MCB will increase to $58,920 per quarter (FY 2021 $57,090 per quarter). This means the maximum superannuation contribution for an employee earnings more than $235,680 will be $23,568, ($58,920 x 4 = $235,680 x 10%). An employee’s contribution will be limited to the MCB of $23,568 unless the employer chooses to override the MCB cap.

The concessional superannuation cap will also increase from $25,000 to $27,500 for contributions received in FY 2022. This is the first increase in the concessional cap since FY 2017. The concessional superannuation cap covers both employer contributions (including salary sacrificed contributions) and personal contributions claimed as a tax deduction by the member.

How SW can assist

Contact one of our experts below to discuss how the changes to the SG rate may affect your business’ superannuation contributions.

Get in touch

Sharon Burke

E sburke@sw-au.com

Janelle McPhee

E jmcphee@sw-au.com

The post SG minimum to increase 10% from 1 July 2021 – are you ready? appeared first on SW Accountants & Advisors.

Contribution caps

The concessional contributions cap is set to increase to $27,500 (up from $25,000 since 2017-18). As the concessional cap is now only indexed in $2,500 increments, the AWOTE index was (finally) sufficient to trigger an increase for 2021-22.

The non-concessional contributions cap (which is set at 4 times the concessional cap) has increased $110,000 for 2021-22. Under the bring-forward rule you can contribute up to 3 years of NCC i.e. $330,000 (subject to the other eligibility requirements).

The Capital Gains Tax cap amount for non-concessional contributions is $1.615m for 2021-22 (up from $1.565m).

Co-contributions

The government co-contribution “lower income threshold” is $41,112 for 2021-22 (up from $39,837 for 2020-21); “higher income threshold” is $56,112 (up from $54,837).

Super guarantee

While the current super guarantee (SG) rate is already legislated to increase from 9.5% to 10% from 1 July 2021, the “maximum contribution base” will rise to $58,920 per quarter for 2021-22 (up from $57,090 for 2020-21).

An employer is not required to provide the minimum super guarantee support for that part of an employee’s ordinary time earnings (OTE) above the quarterly maximum contribution base (ie $58,920 for 2021-22). This quarterly maximum represents a per annum equivalent of $235,680 for 2021-22).

Super benefits

The following indexed thresholds apply for 2021-22:

• Superannuation lump sum low rate cap – $225,000 (up from $215,000);
• Untaxed plan cap – $1.615m (up from $1.565m);
• ETP cap amount – $225,000 (up from $215,000);
• Genuine redundancy and early retirement payments – tax-free amounts: base amount – $11,341 (up from $10,989); service amount – $5,672 (up from $5,496).

If you have any questions about the above superannuation rates and thresholds for 2021-22, then please contact our office and speak to Iggy Moro.

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