Superannuation Guarantee Contributions (SGC)

When introduced in 1992, compulsory superannuation contributions were to increase over time between 1992 to 2002 from 3% to 9%. The Henry Review in 2010 proposed the rate be raised and legislation was passed to enable the continued increase of the rate over time to 12% by 2025.

What are the changes?

1. The compulsory superannuation guarantee contribution (SGC) rate will increase on 1 July 2021 to 10% (up from the current rate of 9.5%) for all eligible employees.*

2. Under the recent Federal Budget, the Government announced its intention to remove the $450 threshold from 1 July 2022 to benefit low-income earners. This measure has not yet been legislated.

* Generally, all employees earning $450 or more per month (under the current rules) are eligible for SGC. Note that there are some additional eligibility rules for some employees such as those aged under 18 years. Employers should refer to the information available on the Tax Office website and their online decision tool to determine if an employee is eligible for the SGC.

How will the SGC rate change impact you?

Employers need to ensure their payroll systems are updated so that all eligible employees are receiving contributions at the increased rate of 10% from 1 July 2021.

If you have an up-to-date payroll system that complies with Single Touch Payroll (STP) these changes should be relatively simple to comply with as new employees engaged on or after 1 July 2021 will automatically be registered under these new changes.

Employers will need to ensure these changes are promptly implemented in order to avoid penalties for underpayments and/or late payments.

Note: For existing employees, employers need to check with their payroll system provider to ensure that the necessary steps are followed to update the existing employees’ details to ensure these changes are also applied to them. If your payroll is not STP compliant or you are unsure about how to make the necessary changes to your payroll system, please make a booking with our office and ask to speak to one of our business advisors.

Superannuation Contribution Caps

Indexation will be applied to the superannuation contribution caps for the first time since 1 July 2017. The new contribution caps will apply from 1 July 2021 as follows:

· Concessional contribution cap – up from $25,000 to $27,500 per annum from 1 July 2021
· Non-concessional contribution cap – up from $100,000 to $110,000 per annum from 1 July 2021

These changes will also have ‘flow-on’ effects on other superannuation contribution measures such as the three-year bring-forward rule (for both concessional and non-concessional contributions) and the carry-forward unused concessional contributions rule.

Note: It is important to note these new caps as exceeding them will result in employees having to pay additional tax.

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If you have any questions or would like to speak to one of our professional business and tax advisors, please contact our office on (08) 9392 7600 to make a booking.

With three offices across Western Australia and over 20 years of experience, Muntz Partners is a dynamic team of highly trained and skilled individuals committed to providing innovative and effective advice, excellent service and maintaining only the highest standards in ethical professional practice.