Changes to Super after 1 July 2021 and what you need to do.

Superannuation Guarantee up to 10%

The Superannuation Guarantee rate is increasing to 10%, effective 1 July 2021 and will then continue to increase in 0.5% increments until it reaches 12% on 1 July 2025.

The Superannuation Guarantee is the minimum percentage of a salary that an employer must contribute to an employee's super fund. The current SG percentage rate is 9.5% of employees “ordinary time earnings” or commonly known as OTE. It does not include overtime or reimbursements.

This is an important change, particularly for employers. Your payroll going up 0.5% year on year could mean reaching the payroll tax threshold and definitely something you need to add to your forecast.

What do you need to do?

• Make sure your software provider is up to date with the rate change.
• Review your employment agreements, especially those with an SG rate of more than 9.5% or Salary Sacrifice arrangements.
• Notify your employees of the change, in particular those with after-tax contributions.
• Review your remuneration packages, it might result in a pay decrease for some employees.
• Keep up to date with changes - current legislation states that the increase is meant to start on 1 July 2021, however, we have seen last minute changes from Government that could mean the increase is delayed again.

Superannuation Contribution Caps to increase.

Another change effective 1 July 2021 is an indexation increase for concessional and non-concessional contributions.

Concessional contributions otherwise known as pre-tax contributions will move up from $25,000 to $27,500 and the non-concessional contributions from $100,000 to $110,000.

What do you need to do?

• Review your personal contributions and salary sacrifice amounts, you could now claim a larger deduction for your contributions. For example: A fund member is under the age of 67 and each year makes a concessional contribution of $25,000 to his super fund so he can claim a tax deduction. From 1 July 2021, the member will be able to increase the amount he contributes to $27,500 and can claim a tax deduction if he wishes. Please note that the increase of age from 65 to 67 is proposed and not yet law.
• Review your fund balances and talk to your financial advisor about your contributions and or balance transfers.

If you are not sure you have the best strategy in place to optimize your tax position or are not sure if you are ready for the changes, contact us today.