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Employers: Superannuation Guarantee increased to 10% from 1 July 2021

A Quick Overview

The Superannuation Guarantee (SG) is increased to 10% from 1 July 2021. If you have employees, you need to be ready for this legislated increase.


What is Superannuation Guarantee?

The Superannuation Guarantee is the minimum super an employer must pay to their employees super fund. The previous SG percentage rate was 9.5% of employees Ordinary Time Earnings, but this has changed.

Ordinary Time Earnings or OTE, is generally what your employees earn for their ordinary hours of work. It includes commission, loadings and allowances but does not include overtime or reimbursements. The ATO’s checklist will help you categorise OTE, but you can ask us if you have questions.

What has changed?

The Superannuation Guarantee rate is now 10% from 1 July 2021. It will continue to increase by half a percent each year until it reaches 12% on 1 July 2025.

What do you need to do?

  • Firstly, you should speak to your payroll software provider to make sure they are on top of this rate change. Your accountant or bookkeeper may also be able to help.
  • Review any individual agreements with an SCG rate of more than 9.5%, but less than 10%.
  • Notify your employees as they may need to review their Salary Sacrifice or after-tax contributions arrangements to ensure they don’t exceed the contribution threshold, of $27,500.
  • Update Remuneration Packages as it could mean a pay decrease for some employees. If you have employees with a salary pack that includes superannuation, their taken home pay may go down. For instance, Fred has a salary package contract of $150,000 that includes his SG. Prior to 1 July 2021 his taxable income would have been $135,750 (i.e. $150,000 less SG of $14,250 (9.5%). From 1 July his new taxable income would be $135,000 (i.e. $150,000 less SG of $15,000 (10%).  
  • This is also a good opportunity to do some housekeeping to ensure your super obligations have been met (including super payments and calculations).

Why is this important?

As an employer it’s important to ensure you pay super at the new minimum rate. There are financial penalties applied for not meeting your SG obligations.

 The Superannuation Guarantee Charge (SGC) is the penalty charged when employers don’t pay :

  • the required super guarantee contributions for eligible employees,
  • super contributions by the payment cut off date or
  • super to each employee’s chosen super fund.

More changes expected from the 2021 Budget

Treasurer Josh Frydenberg announced future super changes in the 2021 Federal Budget. Under the current superannuation arrangements, if an employee earns less than $450 per month from the one employer, they are not entitled to receive the superannuation guarantee. The $450 threshold is set to be scrapped so employees will be entitled to employer-paid superannuation, regardless of how much money they earn.

This Government has indicated they expect this to come in before July 2022. We will keep you updated.

Got a question?

Get in touch with us if you need any help or have any questions.