An increase to the superannuation guarantee (SG) is set to go ahead from 1 July which will see the base rate rise from 9.5 per cent to 10 per cent, followed by incremental half percentage point increases each year to 12 per cent on 1 July 2025.
Jane Rennie, general manager of external affairs at CPA Australia, said that practitioners should turn their attention to helping their small business clients establish a plan to manage the SG increase early, and be transparent with employees about how they plan on doing so.
“To help manage the impact of the change, employers should have a discussion with their employees about what it means for them,” Dr Rennie said. “It may come as a nasty surprise to those who do receive less take-home pay. Some employers have committed to absorbing the extra cost of the SG rate rise.”
Dr Rennie said the increase will likely impact employees to different degrees, depending on their contracts. She said those whose superannuation is bundled into their take-home pay may end up shouldering some of the cost.
“The rate rise will affect employees differently depending on their employment arrangements,” she said. “Employees covered under an award, enterprise agreement or by minimum pay standards are unlikely to be affected.
“Many contract employees have total remuneration specified in their contract. If this includes superannuation, they may receive less take-home pay from the 1st of July. A lot depends on how an employee’s employment agreement is worded.
“It’s worth reminding business clients that some contractors are entitled to SG contributions from their employer even if they have an ABN, as are temporary residents including backpackers.”
Dr Rennie also urged practitioners to ensure their small business clients have implemented the change via Single Touch Payroll, and to check whether the increase will push them over the concessional contribution cap.
“Employers should consider checking their payroll software to ensure the correct superannuation reporting from 1 July via Single Touch Payroll (STP),” she said.
“Employees who salary-package their super may need to check if the 0.5 [of a percentage point] increase will tip them over their annual concessional contributions cap of $27,500 from 1 July.”
Dr Rennie’s warnings follow those made by John Jeffreys, tax counsel at Tax & Super Australia, who in May urged businesses who are likely to act in the interest of their bottom lines to do so transparently with their staff.
“While the policy of the legislation is for the employer to contribute the extra half a per cent without impacting take-home wages, this may not be the case across all workplaces,” Mr Jeffreys said.
“As well as considering how much room they have within their profit margins, business products or activities to best cater for this increase, employers should keep in mind that this is not a one-off increase.
“They’ll need to prepare for the SG to go up 0.5 [of a percentage point] annually until it reaches 12 per cent in 2025.”
Mr Jeffreys’ comments followed the release of a survey conducted by consultancy firm Mercer which looked at the steps Australian businesses are taking to prepare for the SG increase.
The results showed that, of the 145 firms surveyed, 46 per cent of respondents were still establishing a position and continue to assess the full cost of the SG increase to their organisation.
Of the businesses currently offering their staff a base-plus-super package, 62 per cent of respondents said they would meet the full cost of the SG increase and maintain their employees’ take-home pay.
Meanwhile, almost two-thirds of the firms surveyed who have a total package arrangement in place — one where superannuation is bundled in with an employee’s salary — said that their staff would be left to bear the brunt of at least some of the cost imposed by the increase.