Changes to the superannuation guarantee (SG) are coming in 2021. From 1 July 2021 the compulsory superannuation guarantee rate will increase from 9.5% to 10%. What does this change mean for you and your employees? Here, we will discuss superannuation, your current obligations and the 2021 Superannuation Guarantee changes.
About the Superannuation Guarantee and 2021 Changes
The Superannuation guarantee is a compulsory system of superannuation support for Australian employees, paid for by employers. It came into full effect in Australia in 1992 and has since gradually increased from 9% of your employee’s ordinary time earnings, to its current 9.5%. So, the 2021 Superannuation Guarantee changes are not unanticipated. On 1 July 2021, the SG will rise to 10%, reaching 12% by 1 July 2027. There are notably, contribution quarters; with the SG needing to be paid to employees at least on a quarterly basis.
So when do you have to pay the SG? Not all workers are entitled to super, for example, independent contractors generally aren’t paid super by their Principal and the same with those under 18 (unless certain conditions are met). Speaking in general terms however, if you pay your employee $450 or more before tax in a calendar month, you have to pay the Superannuation Guarantee on top of their wages.
What happens if you don’t pay the right superannuation?
Vitally, there are penalties if you are not paying the superannuation guarantee correctly or promptly to your employees.
If you as an employer don’t pay your employees’ superannuation guarantee on time and to the right fund by the due date, you must then also pay something known as the Superannuation Guarantee Charge (SGC). You must also lodge an SGC statement to the Australian Taxation Office (ATO).
So what is the SGC all about and how is it paid?
The charge comprises of:
- SG shortfall amounts (including any choice liability calculated on your employee’s salary or wages)
- interest on those amounts (currently 10%)
- an administration fee of $20 per employee, per quarter.
It is clearly in your best interests to keep on top of Superannuation Guarantee payments to your employees. The SGC is non-tax deductible and can amount to being quite a lot to pay!
Get Ready for the 2021 Superannuation Guarantee Changes
The 2021 Superannuation Guarantee changes and the Super guarantee charge are important considerations for you as an employer. Be prepared for 1 July 2021 and aware that you will have to pay 10% to employees for superannuation, up from the current 9.5% rate. To ensure you meet these superannuation obligations to your employees, and any other obligations, it is always best practice to consult with your accountant and tax advisor.
The team at The Quinn Group can help to ensure that you are meeting your current superannuation obligations and help you to prepare for the coming changes to ensure that you continue to remain compliant. We can also offer specialist advice to get you back on track if you are experiencing problems with meeting your superannuation obligations.
If you would like help with respect to the 2021 superannuation guarantee changes, or another other superannuation or employee payment obligations, please contact one of our experienced accountants by submitting an online enquiry form, calling us on 1300 QUINNS or alternatively, +61 2 9223 9166 to arrange a teleconference or appointment.