How you can be ready for a possible Super Guarantee rate rise
11 November 2020
5
min read
The 6 October 2020 Federal Budget did not address scheduled increases to the rate of compulsory super that employers pay workers, so arguments are still swirling on whether the rises will go ahead, or again be put on hold. What will happen next?
Arguments for and against increasing the rate of compulsory super contributions, called the Super Guarantee (SG), are continuing.
The Super Guarantee is currently legislated to increase to 10% from 1 July 2021 and rise 0.5% a year until reaching 12% in 2025.
However, conjecture remains over whether scheduled rises will go ahead in the coronavirus health emergency-impacted economy.
Before a decision is made, the Australian Government is digesting a review of how the Australian retirement income system is operating and how it will respond to an ageing society.
The Retirement Income Review was delivered to Federal Treasurer Josh Frydenberg in July 2020 and he released the final report on 20 November 2020.
Ahead of any government announcement, there are a few steps you could take now to make sure your business is prepared for the increase if it goes ahead.
QSuper is committed to making it easy for employers to meet your superannuation obligations and will keep you updated with the latest news that may affect you and any changes.
We aim to help employers understand how to meet superannuation requirements, so you can get on with running your business.
Super Guarantee
The Superannuation Guarantee (SG) is the minimum amount that an employer must pay into an eligible employee’s super fund. It is currently 9.5% of gross salary.1
The SG is currently 9.5% of an employee’s ordinary time earnings.
According to the Australian Taxation Office, you must pay the SG at least four times a year, by the quarterly due dates.
Employers must pay and report super electronically in a standard format, ensuring you meet SuperStream requirements, and your super payments must go to a complying super fund.
If you don’t pay the SG on time, you may have to pay the super guarantee charge.
Increases to the SG have already been delayed twice, which means the SG rate has been frozen at 9.5% since 2014.
If the original timetable for SG rises had been maintained and not frozen in 2014, SG rates would have increased by increments of 0.5% annually starting in 2015 and would have reached 12% by July 2019.
Under the current timetable, the SG rate is now scheduled to rise to 10% from 1 July 2021 and then incrementally by 0.5% each financial year to 12% by 1 July 2025.
Why is the rise in question now?
While the rise in compulsory SG is already in legislation, it may be reversed by an Act of Parliament.
The history of SG rise freezes imposed by a Coalition government in 2014, resistance to SG rises from within the current Australian Government’s own ranks, the economic climate caused by the coronavirus pandemic, and the impending timetable for the first 2021 SG rate increase means the scheduled SG rate rises have continued to be debated.
The Australian Government made no announcement regarding SG rises in delivering the 2020-21 Budget on 6 October.
What will happen next?
The Australian Government’s Assistant Minister for Superannuation, Senator Jane Hume, said in an online interview that the Government was currently maintaining its position that the SG increase would proceed as scheduled.
Underlining that position, the ATO’s October 2020 edition of its Digital Service Providers newsletter highlighted that the superannuation guarantee rate was slated to increase from 9.5% to 10% on 1 July 2021 and that employers’ payroll programs and systems would need to be updated to incorporate the change.2
However, Senator Hume said a decision on possible changes to the scheduled 2021 increase would be made on the circumstances at the time.
1. If an eligible employee earns $450 or more (before-tax) in a calendar month, your employer must pay super guarantee (SG) on top of your wage or salary. The standard SG rate is 9.5% of your ordinary time earnings (OTE) salary. Ordinary time earnings (OTE) salary is generally what you earn for your ordinary hours of work, including commissions, shift loadings and allowances, but not overtime payments. For more information, see ato.gov.au/super
2. https://intermediaries.news.ato.gov.au/link/id/zzzz5f8e7e807d3b2346pzzzz5f1779306870a762/page.html