Understanding the super guarantee
Posted by Northadvisory on July 6, 2021
You may have heard some discussion about the super guarantee (SG) in the media recently, as changes rolled out from 1 July 2021. These details are important for both employers and employees to make sure you are paying and receiving the correct amount of super.
Here we take a closer look at the SG. We review eligibility guidelines and outline how the amount is calculated and contributed to a super account. We also highlight the specific details of changes so that you can have the most up to date information.
What is the super guarantee?
The super guarantee indicates how much super an employer needs to contribute to their employees’ superannuation funds. The rate is set out by the Government and the super payment is a mandatory requirement. The ATO’s guidelines for employers states:
“Superannuation is money you pay eligible workers to provide for their retirement. Super guarantee is the minimum amount you must pay to avoid the super guarantee charge.”
From 1 July 2021 the SG rate increased for the first time since 2014. The new rate is 10% and employers are required to contribute this amount of an employee’s pre-tax income into their super account.
This chart outlines the increases in the SG Rate since 2002 through to 2026. There will be additional increases across the next four financial years until the rate reaches 12%.
|Date||Super Guarantee Rate|
|1 July 2002 – 30 June 2013||9.00%|
|1 July 2013 – 30 June 2014||9.25%|
|1 July 2014 – 30 June 2021||9.5%|
|1 July 2021 – 30 June 2022||10.00%|
|1 July 2022 – 30 June 2023||10.50%|
|1 July 2023 – 30 June 2024||11.00%|
|1 July 2024 – 30 June 2025||11.50%|
|1 July 2025 – 30 June 2026 and on||12.00%|
Super guarantee eligibility
Eligibility for the SG is based on monthly pre-tax earnings. Currently, an employee needs to earn at least $450 before tax a month to be eligible. The ATO states:
“Generally, all employees are eligible for super. It doesn’t matter if the employee is:
- full-time, part-time or casual
- receiving a super pension or annuity while working (this includes employees on transition to retirement)
- a temporary resident, such as a backpacker
- a company director
- a family member working in your business.”
It is also noted that employees under 18 years of age must receive super payments if they work more than 30 hours per week or they are paid $450 or more (before tax) in a calendar month.
We must highlight that these are the existing eligibility requirements for SG; however, in the May 2021 Federal Budget, the Government announced the removal of the $450 monthly minimum income threshold for employees to receive SG contributions from their employer. This measure is not yet law, but we anticipate it will apply from 1 July 2022, after Royal Assent.
For self-employed people, whether a sole trader or in a partnership, there are no mandatory SG contributions. However, we recommended that voluntary contributions are made regularly to make sure adequate funds are available upon retirement.
If the business structure is as a company or trust, then SG rates could be applicable. It would be beneficial to discuss this with a professional accountant or business advisor.
Calculations and contributions
The SG is calculated as a percentage of an employee’s ordinary hours of work. This includes commissions, shift loading, annual leave and sick leave. It does not include overtime, unused annual leave or long service leave that is paid upon termination or employment. It also does not include any payments made while an employee is on parental leave – although this is at the discretion of the employer.
The ATO has a super estimator online tool to help with calculations.
An employer must pay the eligible employee’s SG contributions directly into their super fund at least four times a year. These contribution dates are set by the ATO and can be viewed on their website; however, an employer can choose to make these payments more regularly if they choose.
If an employer fails to pay the SG by the due date, they might be subject to a super guarantee charge, so it is important to make sure contributions are paid in accordance with ATO’s guidelines.
Ask a professional
We understand that superannuation can be complex, and when it comes to effective superannuation management, there are many factors that need to be considered.
It can often be helpful to seek professional advice.
The team here at North Advisory can analyse your circumstances and guide you through your obligations as an employer or your entitlements as an employee.
Contact us today to discuss your personal situation in more detail.
Read more Superannuation articles.