Employers must be ready for super guarantee increase or risk penalties

Tax & Super Australia (TSA) says employers need to give immediate attention to how they will manage the superannuation guarantee (SG) increase — from 9.5% to 10% by 1 July — and ensure they clearly communicate their approach to employees.

TSA’s tax counsel John Jeffreys said non-payment, underpayment and late payment – even one day late — of the required SG amount will attract ATO charges and penalties. “We haven’t had guidance from the ATO about any grace period or lenience for employers who don’t meet this new SG obligation.”

The warning comes in light of a May report from consultancy Mercer, which surveyed 145 firms about their preparedness for the SG increase. Some 46% of respondents said they were still assessing the full cost of the SG increase to their organisation.

The report also asked firms how they would manage the increase. It found of those using a “base plus” super remuneration model, 62% said they would maintain their employees’ take-home pay and the employer would meet the full cost of the SG increase.

Yet almost two-thirds of organisations with a “total package” approach — where super is bundled in with the salary — plan to pass on at least some of the cost of the increase to employees.

Mr Jeffreys said how employers manage the increase may depend on how it will impact their bottom line. Regardless of their approach, Mr Jeffreys said employers should communicate clearly with employees so they know what to expect on their payslip.

“While the policy of the legislation is for the employer to contribute the extra half a percent without impacting take home wages, this may not be the case across all workplaces.”

“As well as considering how much room they have within their profit margins, business products or activities to best cater for this increase, employers should keep in mind that this is not a one-off increase. They’ll need to prepare for the SG to go up 0.5% annually until it reaches 12% in 2025.”

He added that employers might find it helpful to examine their employment contracts and see if they need to be amended to reflect the increase.

For further comment, please contact TSA tax counsel John Jeffreys:
Mobile: 0416 250 461   Email: jjeffreys@taxandsuperaustralia.com.au

Tax & Super Australia (TSA) is a not-for-profit organisation that provides practical tax, super and accounting information for more than 4,000 members and a tax community of more than 15,000.

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