From 1 July 2023, the required amount of superannuation support you provide your employees increases from 10.5% to 11%.
We know it’s only 0.5% of an increase but for some businesses this will not be insignificant.
Given historically the ATO has come down much harder on employers who do not meet their superannuation guarantee obligations, it’s not the time to risk getting this wrong.
Remember this increase is part of the planned increase of super guarantee contributions[SGC] employers are required to pay, going up in 0.5% increments each year until it reaches 12% on 1 July 2025.
future increases are scheduled as follows:
|Financial year||Super guarantee rate|
The increase to the super guarantee rate will impact employees differently depending on their remuneration package.
For those with salary packages inclusive of superannuation, their net income may be offset by the increase in superannuation, resulting in an equal reduction in their salary.
what do I need to do?
Review your employment agreements to understand whether your employment arrangements are either:
- inclusive of super, or
- plus super.
If your arrangements are plus super, you must pass on the increase. If your arrangements are inclusive of super then the salary component of the remuneration package may decrease by the same amount that the super needs to go up.
Of course, irrespective of your legal obligations under employment contracts and/or awards, think about how to convey your message to the team and your strategy to manage this additional cost of employing people. Some employers [not all], are opting to pay the additional amount without reducing the base salaries paid.
One of the strategies to consider is to align your pay reviews with the increase. This means that as the SGC rates increase in the next few years, you can absorb it into the salary package.
Review your agreement and be clear on your position now because employees will not appreciate a surprise when they get their first pay in July!
To prepare for this increase, check that your payroll systems will automatically update the super guarantee to the new rate of 11%. This increase takes effect [from wages paid to employees] from 1 July 2023 onwards. For example, if a payroll fortnight ends after 1 July the employer is obliged to pay 11% on ordinary earnings for the entire fortnight.
not sure where to start?
If you are unsure how best to approach the super guarantee rate changes, have a chat to our people + culture team on 1300BDEPOT or email firstname.lastname@example.org and they can guide you on the best way to approach this for your specific business.
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