10% Super Guarantee from 1st July 2021

Business leaders should turn their attention to how they plan on managing the government’s increase to the superannuation guarantee, set to come into effect from 1 July, to avoid penalties, says one tax expert.

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.

John Jeffreys, tax counsel at Tax & Super Australia, warns that businesses should establish their approaches to the increase early, because non-payment, underpayment and late payments of as little as 24 hours are likely to attract the attention and penalty from the ATO.

“We haven’t had guidance from the ATO about any grace period or lenience for employers who don’t meet this new SG obligation,” Mr Jeffreys said.

He said that businesses are likely to act in the interest of their bottomline, but warned that regardless of how they approach the change, they should do so with transparency and clearly communicate how their approach will impact their employees’ payslips. 

“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.”

The warnings follow 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’d 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. 

Australian Council of Trade Unions secretary Sally McManus told a panel discussion at an Australian Institute of Superannuation Trustees conference on Tuesday that the changes would offer employers a legal opportunity to cut the take-home salaries of their staff. 

However, she expects the cohort of employees to suffer a pay cut to be small.

“There would only be some very discrete circumstances where employers could unilaterally cut people’s take-home pay on 1 July,” Ms McManus said. “That would be a very small circumstance where employers could do that, just straight out legally do that.

“The issue of low wage growth is a big structural problem unrelated to the super issue, and it would be if super was going up or if it was not going up.”

While the increase has been legislated for some time, Minister for Superannuation, Financial Services and the Digital Economy Jane Hume wavered on whether the increase could be held back by further delays as recently as March. 

Speaking to ABC News Breakfast in March, Ms Hume said the SG would come “at a cost” and could result in slowed wage growth. 

“Money doesn’t grow on trees and there is a good chance that if there is an additional cost to employers when they pay that extra 0.5 [of a percentage point] that it will come at the expense of potentially wage rises in the future,” Ms Hume said.

“The Prime Minister has said that he will assess the situation closer to the time based on the best information available to him at the time, the best economic information available to him at the time.”

The Morrison government’s 2021–22 federal budget didn’t include any changes to the legislated SG increase, which is set to come into effect from 1 July.

John Buckley 
20 May 2021 
accountantsdaily.com.au