Employers’ guide to superannuation changes effective 1 July 2023
29 June 2023
All employers have an obligation under the Superannuation Guarantee (Administration) Act 1992 to make superannuation contributions to employees at least every quarter.
Currently, the minimum superannuation contribution employers are required to make in respect of each employee is 10.5 per cent of their ordinary earnings (subject to eligibility requirements).
However, from 1 July 2023, the minimum superannuation contribution will increase to 11 per cent and will continue to increase yearly thereafter by 0.5 per cent until it reaches 12 per cent in July 2025 as noted in the table below:
|Period||Superannuation Guarantee per cent|
|1 July 2022 – 30 June 2023||10.5 per cent|
|1 July 2023 – 30 June 2024||11 per cent|
|1 July 2024 – 30 June 2025||11.5 per cent|
|1 July 2025 – 30 June 2026||12 per cent|
What does this mean for employers?
To prepare your business for the increase to the minimum superannuation guarantee payments, we advise that your business do the following:
1. Adjust your payroll system
You’ll need to make sure that your payroll system has been adjusted to ensure the correct minimum superannuation contribution is paid to all employees. Where payment for wages is made in the July 2023 quarter, albeit for work performed during a previous period, the 10.5 per cent superannuation guarantee contribution will apply.
If you fail to pay the correct rate of the superannuation guarantee into your employees’ super accounts, then you may be liable to pay the superannuation guarantee charge (SGC). The SGC is an Australian Tax Office (ATO) penalty for late or inaccurate superannuation payments which includes all superannuation guarantee amounts owing to employees, plus interest and an administration fee.
2. Review all employment contracts
It’s wise to review your employees’ contracts of employment to determine whether you are required to make the additional increase payment, or whether their contract of employment adequately offsets this.
For example, a contract of employment may state that an employee is paid on a total remuneration basis which includes statutory superannuation under any legislation at any point in time. In this case, then it may be possible for an employer to reduce an employee’s base rate of pay to effectively offset the increase in superannuation such that an employee’s total remuneration remains unchanged.
Naturally, an employer must carefully ensure that the wording of the employment contract enables such an approach to be taken, and an employee’s resulting reduced base rate of pay continues to result in the employee being paid in excess of minimum entitlements.
Even if an employer can take this approach, it remains open for an employer to pass on the superannuation increase while maintaining an employee’s base rate of pay.
If the business’s template contracts of employment are not drafted on this basis, in light of future increases in superannuation up to 12 per cent, consideration should be given as to whether the business wishes to update its employment terms for current and/or future employees.
However, if an employee is paid a minimum award salary or the contract of employment isn’t drafted on a total remuneration basis, the business will be obligated to increase its minimum superannuation contribution to 11 per cent.
Businesses are strongly encouraged to actively engage with and communicate with employees, so they are aware and understand the approach in which the business intends to take.
What else is set to change?
The Government intends to introduce legislation requiring employers to pay their employees superannuation at the same time they pay wages. It is anticipated that this change will come into effect from 1 July 2026. Many businesses currently pay superannuation in a staggered manner, up to quarterly. If you’re one of those businesses, you should prepare to change your payroll; there are only so many quarterly periods left until this may not be a compliant approach.
This change is intended to maximise the amount of interest that an employee earns through their fund. It’s also part of a larger effort to track unpaid superannuation which is more likely when contributions are not made at the same time as wages are paid. The Government also announced $40 million in additional funding for the ATO in the most recent budget to enforce superannuation compliance, with greater targets for the recovery of unpaid superannuation.
How enableHR can help?
You don’t have to spend weeks studying the legislation. Call enableHR today and ask us if your HR platform is set up for you to comply with new requirements.
We believe HR should be simple. Simple enough for you to run your business confidently. Inside enableHR is everything you need to manage the entire employee lifecycle, from recruitment and onboarding to managing your people and termination. If you’d like to see enableHR in action, contact us to learn more about how we can help your business.
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