Super Guarantee Rate Rises in July to 10.5%

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now, to increase the rate to 12% incrementally.

In July 2022, the rate will rise to 10.5%. From then on, the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prepare Now for the July Rate Rise

  • Review your current superannuation costs for all employees, both hourly and salaried.
  • Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
  • For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
  • Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2022. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
  • Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
  • Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy.

Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

What is the Government Super Co-Contribution?

How would you like up to $500 tax-free paid into your super fund by the Government.

To help you save for retirement, the Government has an incentive program that rewards you for making eligible personal contributions to your superannuation fund.

If your total income for the year does not exceed $41,112 in 2021-22 ($39,837 for 2020-21), the government will match your eligible superannuation contributions by 50 cents per dollar up to a maximum of $500 pa.

The superannuation co-contribution phases down for eligible individuals with total income between the lower and higher income thresholds. The superannuation co-contribution is tapered by a rate of 3.333 cents for each dollar of total income for the year that exceeds the lower income threshold.

The superannuation co-contribution ceases once the upper threshold is reached. The upper threshold is $15,000 above the lower threshold, making it $56,112 for the 2021-22 year ($54,837 for 2020-21).

You may be eligible for the Government superannuation co-contribution if:

  • you make an eligible personal superannuation contribution to a qualifying superannuation fund during the financial year,
  • an eligible personal superannuation contribution is a non-concessional (after tax) contribution made to a superannuation fund. It does not include contributions that attract an income tax deduction.
  • your total income is less than $56,112 for 2021-22 ($54,837 for 2020-21).
  • you are under 71 years old at the end of that tax year,
  • you lodged an income tax return for that financial year,
  • you have not held a temporary resident visa at any time during the financial year,
  • you earned 10 per cent or more of your total income from running a business, being self-employed or from eligible employment or a combination of both.
  • your total superannuation balance at the 30th June of the previous financial year was less than $1.6 million ($1.7 million from 1 July 2021)
  • your non-concessional contributions have not exceeded the non-concessional contributions cap for the year

What do you have to do?

  1. 1. Assuming you earn less than $56,112 (‘total income’) for the 2021-22 year ($54,837 for the 2020-21 year), you then make a non-concessional (after-tax) contribution to your superannuation fund.
  2. You lodge your tax return.
  3. Within 60 days, the Government pays the co-contribution into your superannuation fund.

NOTE: Your superannuation fund cannot accept after-tax contributions, or receive co-contributions on your behalf, if you have not provided your Tax File Number (TFN) to your fund.

How much will you be entitled to (2021-22)?

See our graph below:  

Your total incomeYour paymentThe benefit
$41,112 or less$1,000$500
$56,112 or more$1,000$0

New Stapled Superannuation Rules

Superannuation stapling’ is a new measure that was introduced as part of a package of reforms to the superannuation system announced in the 2020/21 Federal Budget.

Under this measure, an existing superannuation account is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs. This avoids the creation of a new superannuation account each time a person changes their employment.
Broadly, the new rules require employers to use the ‘stapled super fund’ details (instead of the employer’s default fund) for new employees who do not choose a fund. These changes only apply to new employees who commence work on or after 1 November 2021 (i.e., existing employees are not affected by the new rules).

Employers must generally provide new employees with a superannuation Standard Choice Form within 28 days of commencing work. From 1 November 2021, if a new employee does not choose a fund, then the employer will need to check if the employee has an existing stapled fund by logging into ATO online services and accessing the ‘stapled super fund request service’. The ATO has advised that once all the required information is provided and the request is made, the result of the stapled super fund request should be available on-screen within minutes.

Where the employee has a stapled fund, the employer will be required to contribute to the employee’s stapled fund. If an employer makes contributions into their default fund for a new employee rather than checking with the ATO to see if the employee has a stapled super fund, then they may be subject to the choice shortfall penalty.

Importantly, there is no need to request stapled super fund details from the ATO for:

• existing employees (i.e., those who commenced work before 1 November 2021); or
• new employees (who commence work on or after 1 November 2021) and have chosen a superannuation fund.

Employees will also be notified by the ATO of the stapled super fund request made in relation to them and will be advised of the details provided by the ATO to the employer. The ATO will be monitoring the ‘stapled super fund request service’ to ensure that employers are using it appropriately and making genuine requests for stapled super fund details. Employers who use the service incorrectly (e.g., to request information for employees who started work before 1 November 2021) may have their access to the service removed.