Employers are reminded that the superannuation guarantee (SG) rate will increase from 10.5% to 11% as of 1 July 2023.
Employers who provide superannuation under the SG rules should consider the impact of the rate increase and make plans to implement the change.
Depending on how employee remuneration is structured (i.e., inclusive or exclusive of superannuation), the rate rise may result in a decrease to an employee’s net wages, or increased costs for an employer. Additionally, for employees who are adversely affected, employers may decide to increase an employee’s pay to compensate for the rate increase.
Any change should be properly communicated to employees, and documented.
Payroll software should also be updated by 1 July 2023 to ensure correct reporting of the superannuation component via Single Touch Payroll.
It is important that employers continue to meet all their SG obligations including the 0.5% increase from 1 July 2023. Failure to pay adequate superannuation support (including by the due dates) exposes employers to a range of issues, not the least of which are the administrative resources required to implement corrective action, reputational damage with employees, and potential penalties up to 200% of the SG charge.
Contractor arrangements
Now is also a good time for employers to review and assess the SG requirements for existing contractor arrangements. In the context of superannuation legislation, a contractor may be held to be an employee within the extended meaning of that term, which includes a worker who is engaged under a contract wholly or principle for their labour, and in such circumstances SG will apply.
TaxEd has published various articles on this subject matter, available for members via our articles page.
At this stage the concessional contribution cap remains at $27,500 for FY 2023/24 subject to any changes in the Federal Budget in May 2023. Employees who salary package additional superannuation should therefore be mindful of the impact of any SG rate increase given the concessional contribution cap rules (noting that the SG rate percentage will continue to rise by 0.5% every year unit it reaches 12% in July 2025).
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