Blogs
Everything Is Just Super - 27th June 2021
Since our recent newsletter on changes
happening from 01 July 2021, our office has received a number of enquiries
around superannuation, so I thought I would send out an update sharing a few of
the questions asked and some of the misunderstandings in the recent
announcements.
A. Abolition of the
$450 monthly low-income threshold.
Since the Superannuation Guarantee (SG) rules were introduced in 1992(!), there
has been a $450 low-income threshold. For those employees who earn less than
$450 in a calendar month, there is no obligation by the employer to pay the SG.
Since 1992, many have argued (including the writer) that this threshold should
have be increased, at least in line with inflation. Despite the recent
introduction of No Fee or Low Fee Superannuation Funds, many Funds seem to
vacuum up employees' small superannuation balances with their fees.
Nevertheless, in the May 2021 budget the Government announced the abolition of
this $450 monthly threshold. However, that rule does not become law until the
first day of the financial year AFTER the Bill receives Royal Assent.
We have had a number of enquiries from clients and bookkeepers on how to update
payroll software to get rid of the threshold, but it is not law yet and it will
not be until at least this time next year.
Keep in mind this is a minimum threshold, so as an employer, if you want to
override this threshold and pay more superannuation for your staff, please
contact our office.
B. Increase to the
Annual Superannuation Contribution amounts
As outlined in our recent newsletter the Government announced an increase to
the annual superannuation contribution amounts. They are:
Type: |
To 30 June 2021 |
From 01 July 2021 |
Concessional (i.e. tax deductible) |
$25,000 per person per annum |
$27,500 pp. pa |
Non-Concessional (i.e. after tax
money) |
$100,000 per person per annum |
$110,000 pp. pa |
If you are an employee who salary sacrifices into superannuation and you want
to take advantage of the increase in the above amount, you will need to speak
to your payroll person to increase the salary-sacrificed amount from your first
pay on or after 01 July 2021.
C. Increase to the SG
percentage
As you should be aware from our previous newsletter, the SG rate is increasing
on 01 July 2021 from 9.5% to 10% of an employee's gross salary. There are many
rules around what is included for the purposes of calculating the SG amount and
if you are not sure please contact our office.
We have had a number of enquiries in respect of updates to the software that
handles the payroll function and if the supplier will be automatically updating
the rate.
Our current understanding is as follows:
1. MYOB Essentials - Manual Update Required. Instructions here.
2. MYOB AccountRight - Manual Update Required. Instructions here.
3. Xero - Automatically updated.
4. Quickbooks Online - Automatically updated.
5. Reckon - Automatically updated.
6. All other software suppliers - please contact them for confirmation.
D. Be careful with...
1. Customised Payroll Categories - Be very careful with the above updates and
making assumptions. If you have created your own payroll categories to deal
with the quirks of your business, then we recommend you check each payroll
category to ensure you pay the correct amount of superannuation. The last thing
you need as an employer is to be accused of Wages Theft.
2. Lump Sum Employment Contracts - also be careful with lump sum employment
contracts, i.e. contracts that specify an employee will be paid an amount
inclusive of superannuation.
For example, Robert has a contract of employment dated 05 April 2021 which
states he will be paid $3,000 per week inclusive of superannuation. This means
he actually incurs a pay cut from 01 July 2021 calculated as follows:
|
Gross Wage |
Super @ 9.5% |
Total |
Pay before 30 June 2021: |
$2,739 |
$261 |
$3,000 |
This changes to:
|
Gross |
Super @ 9.5% |
Total |
Pay after 01 July 2021: |
$2,727 |
$273 |
$3,000 |
I have read some reports that employers in the above example have indicated
they will hold the employees Gross wage at the old rate and apply the new SG
rate effectively giving the employee a pay rise as follows:
|
Gross |
Super @ 10% |
Total |
New pay 01 July 2021: |
$2,739 |
$274 |
$3,013 |
As you can see, it is not a lot of money. Employers need to weigh up the cost
of the potential pay rise, the value of a gesture of goodwill and the negative
impact of sticking to the strict wording of the contract.
E. Timing of the
Increase
Finally, we look at the timing of the increase. We know the SG rate increases
on 01 July 2021. However, what does that mean practically for wages paid this
week? The key is when the employee is paid,
not when the employee worked. For example:
Employee Works: |
Employee is paid |
SG Rate? |
|
From 24 June 2021 |
To 30 June 2021 |
On 30 June 2021 |
9.5% |
From 24 June 2021 |
To 30 June 2021 |
On 01 July 2021 |
10% |
As always, if you have any questions regarding any of the matters raised in this newsletter, please contact our office. In the meantime, we hope everything is super with you all.
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