Are you ready for the superannuation changes?
From 1 July 2013 the Superannuation Guarantee (SG) charge increases from 9% to 9.25%. Superannuation will incrementally increase each financial year thereafter until it reaches 12% by 1 July 2019.
The first superannuation guarantee (SG) at 9.25% will be required for the September 2013 quarter, with payment due by 28 October to avoid liability to SG charge. (For employees who salary sacrifices to their super refer to later in the bulletin).
Who bears the cost of the increase — employers or employees?
The SGC legislation makes no provision for how this cost increase is to be funded. It does not prescribe whether the employer must pay more remuneration by way of higher super contributions, or whether the employee bears the cost in the form of reduced ‘after-tax’ pay. The answer will depend on the terms of each employee’s employment agreement or any incorporated policies. If you are in doubt contact the Community Management Solutions.
Superannuation Guarantee to continue past 70 years of age from 1 July 2013
Currently, employers do not have to pay SG to employees who are over the age of 70 years of age, unless an industrial award or agreement may impose this obligation onto the employer.
From 1 July 2013, salary and wages will be taken into account regardless of the age of an employee. This means that the age of an employee will generally have no effect on an employer’s SG obligations. The removal of the upper age limit from 1 July 2013 means that some employees who did not benefit from SG contributions previously will now be entitled to benefit of SG contributions under the new law. The employer will need to check their records to see if any employee is affected.
Employees, who are under the age of 18 years and working fewer than 30 hours in a week, will not be entitled to SG contributions from the 1 July 2013.
Changes to Pay Slips
From 1 July 2013, employers will be required to include on the employee’s payslip, information about the superannuation contributions they have made or will be making for their employees. These obligations are required by the employer and who are obliged to make contributions under SG contributions or Industrial Award or Agreement, but also for employers who process salary sacrifice or voluntary employee contributions. This applies to all employers. Software suppliers like MYOB will no doubt update their software to meet these requirements.
Employees who salary sacrifice to super
All employer superannuation contributions are counted against an employee’s concessional contributions cap for the year which, for 2013–14 will be $25,000 for all employees, regardless of the age (this is the same as 2012–13).
Super contributions that exceed the $25,000 cap are taxed at 46.5%. The breakdown of the percentage paid to the super fund is 15% and an additional 31.5% when the Australian Taxation Office assesses the employee to excess concessional contributions tax.
Employer contributions include the SG contributions, contributions that are made under an award and voluntary employer contributions in excess of SG or award requirements but, also, superannuation contributions arising from a salary sacrifice arrangements.
The increase of the minimum SG contribution to 9.25% for 2013–14 year means that employers and employees may need to monitor the level of salary sacrifice contributions to ensure the $25,000 cap is not exceeded. A particular level in 2012–13 of salary sacrifice may not have caused the cap to be exceeded when the SG contribution was 9%, but this needs to be checked as it may not be the case from 2013–14.
Employers need to be aware and plan for the fact that the 30 June 2013 is a Sunday, which means contributions that need to be made by the 30 June 2013, MUST BE MADE (i.e. received by the super fund) by Friday, 28 June 2013. This is not an issue for SG contributions as they have until 28 July 2013 to make contributions payments for the June 2013 quarter. But be mindful it could be an issue for the employee because a contribution not received by a fund until Monday, 1 July 2013 will be counted towards the 2013–14 year and may lead to excess contributions tax liability.
Review your employment arrangements now
Depending on the terms of your employment arrangements (contracts and policies), employers may need to negotiate new terms with employees. Where your arrangements are vague or uncertain this should be immediately addressed (as uncertainty in terms often falls in favour of the employee).
It may also then be an opportune time to do a general health check (audit) of all your employment arrangements. Call Community Management Solutions for advice in relation to HR/IR Audits.
All employers need to be aware of these changes and to make sure they comply with their obligations under the Superannuation Guarantee Scheme (SGC) laws.
In most instances the employer bears the cost of the increases, so please be mindful and start planning now for the additional cost to the operation of the business from 1 July 2013.
The following table outlines the rate at which superannuation guarantee entitlements will increase each year.
For further information contact Community Management Solutions on 1300 007 110 or email firstname.lastname@example.org.