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As an employer, you should by now be ready to implement the +0.5% superannuation rate increase effect July 1 2021. If not, you need to urgently;
- Review your employee contracts or agreements to determine how the increase in Super will be paid and communicate this to your employees
- Have up-to-date software to report the correct superannuation component via Single Touch Payroll (STP)
- Ensure you are set to meet the quarterly payment deadlines
Given the payment of this increased super is determined by the employment contract you hold with your employees, it’s important to ensure you’re meeting your obligations based on these agreements.
You need to be clear which of the following applies to each of your staff and communicate this to them accordingly. In short, there are two scenarios employees will fall into – one where they are paid a ‘salary package’ and the other where they are paid a wage ‘plus Super’.
It is critically important that you understand the difference and pay the extra super correctly according to your individual employment contracts and that given it could be an in hand wage decrease for some, it’s important to communicate the change early to your staff.
For example;
Scenario 1: Salary Package Including Super
Employees paid a ‘salary package’ including Super will have more funds directed to Super and less into their wage. For example, if you employ someone on an annual salary package of $60,000 currently, this salary package would consist of the following components:
- An annual wage of $54,795
- Superannuation at 9.5% of the salary component, being $5,205
- This gives the total package amount of $60,000
This same employee with the Super Guarantee change, assuming no other pay-rise or change happens before 1 July 2021, is still paid $60,000 although the components will change under the legislated superannuation increase as follows:
- The annual wage decreases to $54,545.
- Superannuation at 10% of the salary component increases to $5,455.
- This means the salary package is maintained at $60,000.
Scenario 2: Salary / Wage plus Super
Employees paid a salary / wage plus Super stand to gain the additional superannuation component, albeit paid into their Super fund as opposed to into their bank account.
- This employee’s contract will state they are paid, for example, $60,000 plus superannuation.
- Currently they are receiving $5,700 into their Super fund over the course of the year, from 1 July 2021 they will be paid $6,000 into Super.
Knowing the contract/employment agreements you have in place with employees is the single most important guide to how your business will pay the super increase.
Just as important is ensuring your software is current and you’re set and ready to pay on time every quarter or else risk paying a superannuation guarantee charge, interest and penalties as well as missing out on a deduction.
Should you require further guidance or assistance with regards to the superannuation guarantee rate increase or any other tax compliance matters, contact your CIB tax adviser and discuss how you may be affected by these changes.
