From 1st July 2021, Superannuation Guarantee increased by 0.5% per year. This means employers will now need to adjust their payroll settings to reflect this increase and while many STP digital solutions will automatically update their processes to accommodate these changes, it is the responsibility of the employer to ensure that the rates have been applied.
Impact on employers and employees
Though this change was notably foreseen with Superannuation Guarantee to further increase to 12% by 2025, this undoubtedly will change many labour relationships moving forward. The pivotal question is whether employers will seek to include these additional amounts as part of existing salary packages resulting in reduced take-home pays for their employees or make contributions on top resulting in no change whatsoever.
Furthermore, contributions made under salary sacrifice arrangements will not be included as part of this increase.
On the other hand, the increase in Superannuation Guarantees also led to an increase in the concessional contributions cap. From 1 July 2021 the annual concessional contributions cap (which effectively limited the annual concessional super contributions for employees) will increase from $25,000 to $27,500. This means that employees and employers can contribute an additional $2,500 in concessional contributions as a tax-saving measure for the 2022 financial year. It is important to note though, that contributions higher than $27,500 will disqualify the application of the low tax rate of 15%.
It is now more important than ever for employers and employees to review their employment agreements in anticipation of expected future employee costs.