It was almost a decade ago when the Gillard government legislated an incremental increase of the superannuation guarantee charge up to 12%. After a deferral of superannuation increases by the Abbot government until July 2021 employers are prepping themselves for an increase of the superannuation guarantee charges to 10% from 1 July 2021 of an employee’s ordinary time earnings.
Further proposed superannuation increases include:
- 1 July 2021 to 30 June 2022 – 10.0%
- 1 July 2022 to 30 June 2023 – 10.5%
- 1 July 2023 to 30 June 2024 – 11.0%
- 1 July 2024 to 30 June 2025 – 11.5%
- 1 July 2025 to 30 June 2026 – 12.0%
Federal government response due to COVID-19
In response to the difficult year experienced by Australian employers in 2020, it was anticipated that the current Liberal Government would once again defer the superannuation increase.
Prime Minister Scott Morrison stated, in late 2020, that the Federal Government would carefully consider further delays to the legislated increases to super.
More recently, Minister for Superannuation and Women’s Economic Security Jane Hume stated that the upcoming increase to 10% was still scheduled to occur. This indicates that the Liberal Government is unlikely to delay the increase at the eleventh hour however it remains open to the Liberal Government to make a decision up until the increase is legislated to take place on 1 July 2021.
Impact of superannuation increase
For employers, the effect of an increase to superannuation will increase employment costs in respect to employees paid by the hour, or salaried employees whose annual salaries are exclusive of superannuation.
Considerations for employers
Employers should budget for the upcoming year with the additional 0.5% superannuation contributions in mind. This will again be the case for each year leading to 2025, as the superannuation guarantee charge is set to increase.
We also need to highlight the Treasurer Josh Frydenberg announced in this federal budget that the $450-per-month threshold for entitlement to superannuation will be lifted before the next financial year. This will ultimately mean more employees will likely be eligible for superannuation payments and should be budgeted for.