Superannuation changes: Are you ready?

The Australian Government initiated a series of changes in superannuation entitlements, the first of which came into force in July 2012.

The most recent change will apply from 1 July 2013, at which point the compulsory super rate will rise from 9% to 9.25%.  In seven (7) annual steps, this figure will rise to 12% by 1 July 2019: 

Date of increase

Amount of increase

Super Guarantee Rate

1 July 2013

.25%

9.25%

1 July 2014

.25%

9.50%

1 July 2015

.5%

10.00%

1 July 2016

.5%

10.50%

1 July 2017

.5%

11.00%

1 July 2018

.5%

11.50%

1 July 2019

.5%

12.00%

What is the ‘compulsory super rate’?

The compulsory super rate is the amount the employer contributes to the employee’s nominated superannuation fund.  The rate is calculated as a percentage of the relevant employee’s salary or wages.

Who is liable to pay the increase?

Regardless of the size of their business, the employer must make the minimum compulsory superannuation contributions to the employee.

Who is eligible?

With a few exceptions, the superannuation guarantee scheme applies to all individuals who receive payment in return for their labour or services. 

 This definition includes both employees and contractors, provided at least half of the value of the contract for services relates to labour.

 There are a handful of exceptions to this rule.  For example, an employer is not required to provide superannuation contributions to an employee who is:

  • under eighteen (18) years of age working less than thirty (30) hours a week; or
  • receiving a salary / wage of less than $450 per month; or
  • not an Australian resident, performing work outside of Australia; or
  • employed in a domestic or private capacity for not more than thirty (30) hours a week (for example, a part-time nanny).

Can an employer deduct the additional amount from salaries?

For businesses already burdened with significant compliance costs, the question of whether the extra .25% can be deducted from employee’s salaries has been raised on several occasions.  The answer can be found in the wording of the employment contract, applicable award or enterprise agreement. 

If the contract notes that employees are paid a salary plus the minimum superannuation guarantee, then the employer is obliged to pay the employee their agreed salary plus the increased super contribution. 

If the contract specifically references the original nine per cent (9%) super rate, then that clause is invalidated.  The employer is obliged to pay the increased super contribution, regardless of what is expressly written in the contract.

However, if the terms clearly state that the employees are paid a fixed total remuneration package, inclusive of superannuation, then it may be possible for the employer to reduce the payable wage to account for the increased superannuation guarantee.  This action may only be taken provided the decrease in the employee’s wage does not render the salary below the requisite award, minimum wage threshold or otherwise breach the contract of employment.

 An employer considering taking this action should note that while the Superannuation Guarantee (Administration) Act 1992 (Cth) does not expressly prohibit this behaviour, other legal and HR issues may be triggered.

Why change?

The Federal Government has calculated that the legislative changes will have significant financial implications for employees expecting to remain in the work force for more than seven (7) years.  It is anticipated that the increase in the superannuation guarantee rate will give a 30 year old on average, full-time wages an extra $108,000 in retirement savings.

What do employers need to do?

Employers need to:

  • review their current arrangements with their employees;
  • progressively increase their superannuation guarantee payments in accordance with the relevant legislation;
  • update their payroll and accounting systems;
  • ensure that the default fund is registered by Australian Prudential Regulation Authority to offer a MySuper product; and
  • follow the data and e-commerce standard when making super contributions.

Further information

If you need assistance in complying with your superannuation obligations, contact us for an obligation free and confidential discussion.

Article by Morgan Tanswell LL.B.,GDLP.,MQLS.

Links to further references

Superannuation Guarantee (Administration) Act 1992 (Cth)

Australian Taxation Office – Super for individuals

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.

Legal Practice Director
Malcolm Burrows Lawyer Brisbane
Telephone: (07) 3221 0013
Facsimile: (07) 3221 0031
Mobile 0419 726 535
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Dundas Lawyers
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