13 June 2024
As we approach EOFY 2024, it is important to be across the upcoming change to the superannuation guarantee (SG) rate.
What is the Superannuation Guarantee?
Under the Superannuation Guarantee (Administration) Act 1992, employers are required to make contributions to employee superannuation funds based on their ‘ordinary time earnings’ (OTE) multiplied by the statutory rate (SG rate).
However, noting that contribution obligations may be limited by the maximum contributions base which is $65,070 per quarter for the 2024/25 financial year.
For more information on what is and is not OTE, please see Superannuation Guarantee Ruling SGR 2009/2.
To be compliant, contributions must be paid at least quarterly by 28 July, 28 October, 28 January and 28 April.
Failure to pay the required amount and/or failure to make payment by the due date will give rise to an obligation to lodge a Superannuation Guarantee Charge (SGC) Statement.
This has the effect of uplifting the superannuation requirement from OTE to total earnings. A ‘nominal interest component’ and ‘administration component’ is also added. The employer is also precluded from claiming a tax deduction for the amount paid.
It is also worth noting that under the Director Penalty Regime, company directors may become personally liable for unpaid superannuation contributions.
Consequently, it is important that employee superannuation contributions are paid in full and on time.
What’s Changing on 1 July?
With effect from 1 July 2024, the SG rate increases from 11% to 11.5%.
This increment is part of a phased plan by the Australian Government to gradually raise the SG rate to 12% from 1 July 2025.
Actions for Employers
Update Payroll Systems:
Ensure your payroll software is updated to reflect the new SG rate of 11.5%. Whilst most payroll systems will automatically reflect the change, it is important to verify that your system is prepared.
Communicate with Your Employees:
Inform your employees about the change. They need to understand how this will affect their superannuation contributions and any salary sacrifice contribution arrangements that are in place.
Reviewing salary sacrifice arrangements is particularly important given that the concessional contribution cap is increasing from $27,500 to $30,000 from the 1st of July.
Review Employment Agreements:
Check employment agreements to see if superannuation contributions are specified as a percentage of salary or if there is a total package inclusive of super. This will affect how the increase in SG is implemented.
Also, where seeking to apply the maximum contribution base, it is important to ensure that this is spelled out clearly in the employment agreement.
Budget Adjustments:
Adjust your 2024/25 budgets to reflect the increase in superannuation contributions to ensure that you understand the impact and can make well informed business decisions.
Final Thoughts
Whilst the SG rate increase is only 0.5%, it can have a significant impact on a business when applied across the entire employee population.
This is particularly the case when the SG rate increase is coupled with salary increases such as those associated with the Fair Work Commission’s Annual Wage Review.
It is important that businesses actively manage the increase to not only ensure ongoing compliance, but to also ensure that profitability is maintained.
If you have any questions, or need assistance, please get in touch
Sky Accountants Ballarat
Phone: 03 5332 8855
Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354
Sky Accountants Gisborne & Macedon Ranges
Phone: 03 5428 1400
Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia
Postal Address: PO Box 270 Gisborne Victoria 3437