Get up to speed on changes to the Superannuation Guarantee

by Zilla Efrat – journalist

Two key changes to the Superannuation Guarantee (SG) came into effect on July 1 and require action from your business. Firstly, the SG rate rose from 10.0% to 10.5% and is scheduled to increase by 0.5% each year to 12% from 1 July 2025. Secondly, the $450 minimum monthly earnings threshold to be eligible for SG contributions will cease to apply.

The exception to this change is if employees are under 18 years of age, in which case they will need to have worked for at least 30 hours in the week to be eligible.

Before July 1, this threshold meant that up to 300,000 Australians missed out on super, putting them at a disadvantage when it comes to saving for retirement.

The Association of Superannuation Funds of Australia (ASFA) describes its removal as an important step towards improving the retirement savings for low-income earners, particularly women and younger Australians who work part-time.

This change means that some of your younger employees may be receiving super for the first time in their lives and should be informed of this. They may also ask questions about super and whether your business has a default super fund.

As an employer, you must select a default super fund that you will pay your employee’s super into if they have not chosen a fund and do not have a stapled super fund. You can visit APRA’s MySuper heatmap to compare different super funds’ performance and administration charges.

The changes also mean that you will need to update your payroll and accounting systems so that you continue to pay the right amount of super to your employees.

You should have the correct nominated super fund details for employees receiving the SG for the first time. Also, many contractors are “employees” for SG purposes and some may be eligible for SG payments because of the abolition of the $450 threshold.

“Increasing the SG, along with the removal of the $450 threshold, will see Australians retire with higher balances, and for some will allow them to retire earlier,” says AustralianSuper group executive strategy, reputation and corporate affairs, Sarah Adams.

The SG was legislated in 1992. It is seen as critical in helping Australians to achieve a dignified retirement while at the same time improving the sustainability of the Age Pension and taking pressure off future federal government budgets as the population ages.

The rise in the minimum SG may add extra costs to your business, but it also comes at a time when employees are facing rising costs of living and worry about their futures.

Indeed, a new report by superannuation and workforce consultants Mercer reveals that 43% of Australian employees have a fear about their future financial wealth.

The rise in the SG also takes place at a time when Australia is facing a critical skills shortage and retaining staff is more important than ever.

That is considered a factor about why research has found that 81% of participants in Mercer’s 2022 SG survey have increased the amount of super paid by the full 0.5% and have not affected employees’ take-home salaries.

In the past, a greater number of employees have passed on some or all of the costs of SG increases to staff.

Looking ahead, it’s worth noting that the new Labor government has flagged plans to raise the SG to 15% over time and possibly force employers to make the super contributions at the same time as they pay their employees. Currently, many businesses pay their employees their super quarterly to better manage their cash flow.

The SG changes may create cash flow problems and it’s worth contacting your broker to discuss how you can manage this.

Feel free to contact us for anything that relates to your business finances so we can help with your success.

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