A rise of super contributions from 9% – 12% is on its way!
Australia’s aging population is set to be a little more comfortable in retirement with mandatory superannuation increases kicking in July 1 2013. Over the next 7 years the standard superannuation contribution will increase from 9% to 12%.
When you make super payments on behalf of your employees based on the minimum 9% super guarantee rate, you will need to increase this rate on which you base your calculations to 9.25% on 1 July 2013 (ATO).
The Nuts and Bolts of the Change:
For pays actually paid before 30th June calculate the super at 9%. If the pay is paid after 30th June then the super amount is calculated at 9.25%
Background: As you are aware, the MRRT package of reforms included the increasing of the Superannuation Guarantee Rates from 9% for before 30 June 2013 to 9.25% from 1 July 2013.
The question is: To what amounts is the 9.25% applied? Is it only to salary and wages (OTE) accrued after 30th June 2013? Is it only to all payments for salary and wages (OTE) paid after 30th June, irrespective of when they are accrued? One (incorrect) thought was that the 9.25% applies to any “payments” of the super made after 30th June. This would have been really complicating for business who have accrued at 9%.
Another thought has been that: in terms in the SG Administration Act of “paid for the quarter” could be read in a number of manners with the emphasis being on “paid” as in date of payment of the super, or the emphasis being on “for the quarter” which means when it was accrued.
The Correct Answers
9% applies to all pay physically paide before 30th June
9.25% applies to all pays physically paid after 30th June
How Super Will Increase:
| Year | Rate |
| Current rate | 9.00% |
| 1 July 2013 | 9.25% |
| 1 July 2014 | 9.50% |
| 1 July 2015 | 10.00% |
| 1 July 2016 | 10.50% |
| 1 July 2017 | 11.00% |
| 1 July 2018 | 11.50% |
| 1 July 2019 and onwards | 12.00% |
Practical Examples
1. If on the 2nd July 2013 a payment of wages (OTE) is being made for the previous month, which rate applies? Is it 9% as it was for the quarter before the change or does 9.25% apply as it was paid after the date of change?
Answer: On 2 July 2013 the wages are paid to an employee for June 2013. The SG contribution is to be calculated at the 9.25% rate. If the wage was PAID in June but on 2 July 2013 the SG contributions are made on, the SG contribution is to be calculated at the 9% rate.
2. Alternatively if the payment was on the 2nd July for the week so that 5 days was pre 30 June and 2 days after 30 June is the rate different i.e. 9% for the 5 days pre 30 June and 9.25% for the 2 days after?
Answer: On 2 July 2013 OTE is paid to an employee that relates partly to unpaid wages accrued up to 30 June 2013 and partly to work performed after 30 June 2013. The SG contribution is to be calculated at the new rate of 9.25% on the full amount of OTE which is paid on 2 July 2013.
3. If the employer pays the superannuation LATE ie after 28th July then the Super Guarantee Charge calculations come into play and it would assess the charge at the new rate of 9.25% against the OTE for the previous quarter. Is this correct?
Answer: Superannuation guarantee (SG) contributions are payable as a percentage (9% or 9.25%) of ordinary time earnings (OTE) paid. Contributions are required to be paid by the 28th day after each quarter end. For the quarter end 30 June 2013, SG contributions should be paid to employee super accounts by 28 July 2013. The ATO advises “When an employer does not meet the quarterly contribution cut-off date, they are liable for the SG charge (SGC) which is payable to the ATO. The SGC is calculated as a percentage (9% or 9.25%) of salary or wages paid. For both SG contributions payable to funds and SGC payable to the ATO, the rate to apply (9% or 9.25%) is determined by the date on which the OTE/salary amount was paid to the employee”.
4. If an employee is paid on Thursday 4th July, 2013 for fortnight commenced Friday 21st June, 2013; do they get 9.25% SGC based on whole fortnight’s pay or 9.00% to 30/6/13 pay portion and then 9.25% on remainder?
Answer: Should be clear from the above that it is related to the date of payment so it would all be at 9.25%
5. Is this Employer allowed to pay them part pay on Friday 28/6/13 with 9.00% SGC and then remainder of fortnight on Thursday 4/7/13 with 9.25% SGC?
Answer: Good question, we expect in a general sense the answer is NO. As you would be varying the terms of employment for the purpose of paying them less remuneration. We expect it becomes subject to the employment agreement etc etc. We would strongly recommend that any such actions were with total communication and then agreement by the employee before such action was taken.
THE ANSWER
The new 9.25% rate is applied to salary/OTE amounts paid after 30 June 2013, irrespective of when those amounts accrued.
The 9% rate applies to OTE/salary paid up to 30 June 2013. The new 9.25% rate will apply to OTE/salary amounts paid from 1 July 2013 onwards (2013-14 year).
Tools for the Change:
The ATO provides some great online tools, such as an online superannuation calculator and information to assist with the up and coming changes. Check out their website for more information.
Getting Help for the Change:
Any major business change can be daunting. Why not give the crew at SJ Bookkeeping a call and we will implement all the necessary changes for you so you before July 1st.