There are three big changes to superannuation that you should be aware of:
1. The compulsory superannuation payments employers make on their employee’s wages will increase from 9.5% to 10%,;
2. Contributions caps are changing and
3. Superannuation Stapling is coming.
Superannuation Guarantee Increase from 1 July 2021
This will be the first of several increases to the superannuation guarantee (SG) over the next 4 years, which will result in SG rising to 12% from July 1, 2025.
|Year||SG rate %|
|Year starting 1 July 2021||10.00|
|Year starting 1 July 2022||10.50|
|Year starting 1 July 2023||11.00|
|Year starting 1 July 2024||11.50|
|Years starting on or after 1 July 2025||12.00|
Everyone benefits from the increase to the superannuation guarantee in building for their retirement however employment lawyers have reportedly received an influx of enquiries from businesses regarding whether it’s possible to pay the rise in their employees’ super from their pay.
The impact of the SG increase will depend on each employee’s individual employment contract.
People covered under enterprise agreements or minimum pay standards are unlikely to be affected. However, some employment contracts specify that superannuation should be paid on top of a worker’s base salary, while others state that super is included as part of a worker’s entire package.
Employees who fall into the second category above, where super is included as part of their entire package, could find that the extra 0.5% in super contributions comes out of their take-home pay, effectively making them pay for their own superannuation increase.
For someone on the Australian average salary of around $89,000 p.a. before tax that could mean $8.56 less in their pay packet every week.
New contribution caps on 1 July 2021 explained
From 1st July 2021 the thresholds for a number of existing super measures will increase. This includes increases to the amounts that can be voluntarily contributed to super through either salary sacrifice or by making an after-tax contribution.
Key super rates and thresholds for 2021-22:
- Concessional (before-tax) contributions cap to increase from $25,000 to $27,500
- Non-concessional (after-tax) contributions cap to increase from $100,000 to $110,000
- General transfer balance cap to increase from $1.6 million to $1.7 million
To stop the creation of unnecessary super accounts when moving employers, the government intends to introduce a system where you will keep your existing super fund when you change jobs. Your super account will be ‘stapled’ to you unless you elect to have a new fund.
This new system is due to be implemented from 1 November 2021 and is designed to reduce paying duplicate fees and insurance premiums on multiple accounts, thereby eroding the person’s superannuation balance over time.