Superannuation Guarantee Changes on 1 July 2021

Posted 6 Jun '21

On 1 July 2021, the Superannuation Guarantee (SG) rate will rise from 9.5% to 10% – the first rise since 2014. It will then steadily increase each year until it reaches 12% on 1 July 2025.

The 0.5% increase does not mean that everyone gets an automatic pay increase, this will depend on your employment contracts.

If your employment contracts state that you pay your employees a ‘total remuneration’ package (a base plus SG and any other allowances), then the take home pay for your employees may be reduced by 0.5%. That is, a greater percentage of the total remuneration package will be directed to the employee’s superannuation fund.

If your employment contracts state a base rate plus superannuation, the take home pay of your employees will need to remain the same, and an additional 0.5% will need to be contributed to the employee’s superannuation fund.

If you generally provide an annual salary increase to employee’s, the 0.5% increase may simply be absorbed into your remuneration reviews.

Employers will need to ensure that the correct SG amount is paid in the new financial year to avoid the superannuation guarantee charge. Where employee salaries are paid at a point other than the first day of the month, ensure the calculations are correct across the month (i.e., for staff paid on the 15th of the month they are paid the correct SG rate for June and July in their pay and not just the June rate).

Superannuation salary packaging arrangements will also need to be reviewed – employers should ensure that the calculations are correct and the SG rate increase flows through.

What you need to do

– Review your salary packaging and employee agreements. Is the agreement inclusive of super or paid on top of the salary?
– If salary packages are inclusive of super, check the contracts wording to ensure you apply the changes correctly. 
– If your employment agreements are a base salary plus super, ensure your Xero payroll templates are set up so that superannuation is calculated at the statutory rate, so that the process is automatic.
– If you don’t use Xero and need assistance working out the contribution, use the ATO’s SG calculator here
– Communicate the changes with your employees.

If Empire process your super for you

We will be in touch to ensure your Xero pay templates are set up correctly for the changes.

If you need help

If you require assistance with setting up your Xero payroll templates to correctly calculate super, or would like a review of your payroll costs please don’t hesitate to get in touch with us today on 07 3124 0244.