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Upcoming Changes to Superannuation

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Author:  Jennifer Sung, Lawyer

On 1 July 2021, the superannuation guarantee rate will increase from 9.5% to 10%.

This is part of the previously legislated staged increases to the superannuation guarantee which has been maintained by the Federal Government in its 2021 Federal Budget.

If an employee’s employment contract specifies a total remuneration package or salary that is “inclusive of superannuation”, employers may offset the 0.5% increase in the superannuation guarantee by reducing the employee’s base salary and increasing the superannuation contribution amount. The employee’s total remuneration package will therefore remain unchanged. This is subject to any contrary terms in the agreement.

If an employee’s employment contract specifies a salary that is “exclusive of superannuation” (i.e. superannuation is paid on top of the specified salary), employers must maintain the employee’s agreed salary and increase the superannuation contributions made on behalf of the employee.

Subject to any further legislative changes, the superannuation guarantee is scheduled to increase by 0.5% every year before reaching the final figure of 12% on 1 July 2025.

Period Superannuation Guarantee
1 July 2021 to 30 June 2022 10%
1 July 2022 to 30 June 2023 10.5%
1 July 2023 to  30 June 2024 11%
1 July 2024 to 30 June 2025 11.5%
After 1 July 2025 12%

To ensure that businesses are not adversely impacted by the annually increasing costs relating to minimum superannuation contributions, employers should consider revising its employees’ employment agreements so that their remuneration package or salary is expressed as an amount inclusive of superannuation. 

There are also a number of superannuation measures proposed in last year’s Federal Budget which are scheduled to come into effect on 1 July 2021. The proposed measures include increasing the voluntary superannuation contributions threshold as follows:

  • 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

The above measures are still being debated in the Federal Parliament and have not yet been legislated. Further announcements are expected once the legislation is passed by the Federal Parliament.

If you would like MST Lawyers’ Employment Law team to assist you in reviewing and/or updating your employment agreement templates in order to reduce your future wage liabilities in relation to superannuation payments, please contact us today by email or by phone +61 3 8540 0200.