Superannuation to increase from 1 July 2021, is your business prepared?

Superannuation to increase from 1 July 2021, is your business prepared?

As you are aware, Superannuation contributions by employers will increase on 1 July 2021 from 9.5 percent of “Ordinary Time Earnings” (OTE) to 10 percent. This can be a little more complex to decipher than one would expect. The laws governing superannuation can be quite technical. This blog outlines some key considerations for you when reviewing your business’ superannuation arrangements.

Depending on whether an employee’s salary is expressed as inclusive or exclusive of superannuation will determine whether the employee’s take home pay is decreased or increased costs for the business – e.g. does the employment agreement say:

–      ‘wage per hour/week/annum plus superannuation’ or

–      ‘wagers per hour/week/annum including superannuation’.

If it is the first option, their wage does not change and, as the employer, you pay the 10% superannuation applicable from 1 July.

However, if it is the second option, the employee’s wage will reduce by the amount that the superannuation increases – e.g.

  • $80,000 package including superannuation at 9.5%, the wage is $73,059.36 and the superannuation is $6,940.64;
  • $80,000 package including superannuation at 10%, the wage is $72,727.27 and the superannuation is $7,272.73;

You should carefully consider the entitlements owed to your employees and whether adjustments must or should be made; and then communicate any changes clearly to your employee.

It is important to get superannuation right because there is no statute of limitations on superannuation if you get it wrong...

When superannuation is underpaid, it is not a simple matter of making an additional payment to the employee’s super account.

If this happens in your business, you are required to pay the money to the ATO, together with an administration penalty (75 percent of the liability) and a penalty under Part 7 of the Superannuation Guarantee (Administration) Act 1992 (Cth), which is up to 200 percent of the underpaid superannuation. As in other areas of regulation, self-reporting may reduce the penalty imposed.

The top 5 recommendations all employers should consider:

  1. Review worker entitlements to determine if wages are inclusive or exclusive of super;
  2. If workers are currently paid 9.5 percent super, it will need to increase to 10 percent;
  3. Have discussions with employees; particularly if the changes will impact their take-home pay;
  4. Whether there are any historical superannuation practices that need to be rectified;
  5. Whether employees should have addendums to their employment agreements/contracts to ensure compliance with legislation.

 3 major queries Akyra is asked by clients in relation to Superannuation changes:

1.    Is remuneration inclusive or exclusive of superannuation?

Superannuation is often framed as being in addition to wages – e.g. wages are $60,000 plus super. That means the wages are exclusive of superannuation.

The benefit of structuring wages as exclusive of superannuation is the ease of comparison of wage rates against award and/or enterprise agreement rates as those industrial instruments are always exclusive of superannuation.

Executives and professionals often have their wages expressed inclusive of superannuation – e.g. salary is $100,000 inclusive of super (i.e. $91,324.20 + $8,675.80 (9.5% superannuation). If your employees fall in this group of employees, their take-home pay will reduce on 1 July 2021.

It is not recommended you assume your business’ overall wage costs will consistently increase on 1 July 2021 when minimum superannuation contribution rate increases. It will depend how employment agreements / contracts have evolved over time. Now is a good time to review your employment documents to assess whether employees have their remuneration expressed as inclusive or exclusive of superannuation.

 2.    More super than the legal minimum may impact your employees;

Some employees receive more than the legal requirement for superannuation contribution, either because they salary sacrifice superannuation or their employment contracts say they are entitled to more superannuation than the minimum requirement which increased to 10 percent on 1 July 2021.

The 0.5 percent increase in the minimum superannuation contribution does not automatically mean that all superannuation contributions in your organisation must increase by 0.5 percent.

It is a good time to revisit your salary sacrifice and employment documentation to consider what the impact is, if any, of the increase in superannuation contributions.

3.    A brief explanation of how to interrupt the Superannuation legislation for your business:

Superannuation is paid on “Ordinary Time Earnings”. This is a list of common payment types which the ATO has referred to in its key superannuation ruling SGR 2009/2:

From time to time, it can be difficult to determine whether a particular payment is subject to superannuation. When that happens, it can be helpful to consider the intent of the legislation.

Helpfully, the Full Court in Bluescope Steel v AWU said superannuation legislation aims to provide a simple and efficient way of securing a minimum level of superannuation for workers based on “self-assessment by employers and administration by employers and the Australian Tax Office”.

So... we need to apply a different lens to superannuation when we look at employment entitlements.

Superannuation legislation is not beneficial legislation (beneficial legislation like the Long Service Leave Act is interpreted so the benefit of the doubt goes automatically in favour of the employee).

Superannuation legislation needs to be interpreted with this question in mind: what makes sense given that the system is meant to be simple and easy to administer?

When difficult questions arise in relation to superannuation, it might even be appropriate to approach the ATO for an administratively binding advice and Akyra can assist with supporting you through this process.

With the increase to the minimum superannuation contribution, it is worth making sure your superannuation arrangements comply with legislation. It pays to be proactive in this space, particularly as there is no statute of limitations.

If you need assistance to prepare for the superannuation changes or a review to ensure your business complies with relevant legislation, Akyra can assist you. Contact us on 07 3204 8830, for an obligation-free conversation or to discuss any queries you may have.

If you require advice or assistance with compliance, any people management circumstances or managing your workforce, contact Akyra on 07 3204 8830, for an obligation-free conversation or to discuss any queries you may have.

Contact us now to book a time to discuss your areas of potential concern and we will then provide a way forward where it might be needed.


Disclaimer – Reliance on Content

The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.




Tags: Superannuation, Award Wages, Award Wage Increase, Salaries, Redundancy, Workplace Damages, Work Claim, Work From Home, Remote Working, Manage Employees, Fair Work Audit, Payroll, Wage Theft, Recruitment, Upskill, Reskill, Learning And Development, Unfair Dismissal Claim, Modern Award Entitlements, Annualised Salary Review, Return To Work, Hybrid Workplace, Flexible Workplace Policy, Work From Home Policy, Workplace Planning, Workplace Trends, HR Trends, Workplace Policy, Policy And Procedures, Miscellaneous Award, Award Changes, Wages, Shut Down, Annual Leave, Modern Award, Small Business Fair Dismissal Code, Redundancy, Entitlements, Award Wages, Wage Compliance, Wage Theft, Wage Underpayments, Qld Legislation, Employer Branding, Employee Engagement, Entitlements, WH&S, WH&S Legislation, Personal Leave, Carers Leave, Sick Leave, Annual Leave, Stand Down, Fair Work Commission, FWC, Fair Work Act, Disputes, Annual Wage Increase, Wage Underpayments, Underpayment Of Staff, Covid Safe Plan, Return To Work Plan, Post Pandemic Workplace, Employee Engagement, Human Resource, HR, HRM, Human Resource Management, Employee Handbook, Policy And Procedures, Employee Management, Termination, Trust In Your Organisation, Full Time, Part Time, Casual, HR Consultant, HR Advice, Employment Agreement, Stand Down, ATO, Australian Taxation Office, Redundancies, Retrenched, Retrenchment, Covid-19, Covid19, Job Keeper, Jobmaker, Jobkeeper, Job Seeker, Jobseeker, Employment, Employment Relations, Employee, Staff, Policy And Procedures, Workplace, OH&S, Work From Home, Employment, HR Advice, HR Consultant, HR Support

Related Articles

Back to Articles

Free 30 Minute Consultation

For further information on any of the consulting services, or to organise your free 30 minute consultation, please feel free to email us and one of our friendly team members will be in contact with you shortly.

More Questions