Millions of Australians are set to benefit from an increase to superannuation payments which came into effect on Thursday 1st July.
The superannuation guarantee (SG) has been bumped up from 9.5 percent to 10 percent. This means workers set to receive more pay towards their retirement nest eggs.
Industry Super Australia (ISA) says 6.7 million Australians are likely to benefit from the increase, which will mostly assist low to middle income workers.
The average worker is expected to receive $233 a year, while the total superannuation system is expected to see an additional injection of $1.5bn.
SG payments are scheduled to incrementally rise to 12 percent by July 2025 and the small rise will make a positive difference in the long run.
The changes mean that on average, a 30-year-old worker on a median wage is set to have $19,000 extra at retirement, after the 0.5 per cent increase.
This means that young Australians will be the big winners from these increases and help those that raided their super last year, during the downturn, make up some of the lost ground.
This is the first of a number of increases the government has promised and locked in law for the coming few years.
At the May 2021 federal budget, the Morrison government pledged to the timeline of the rise in SG contributions, despite a chorus of coalition backbenchers calling for it to be scrapped in the wake of the coronavirus pandemic.
Industry Super Australia (ISA) says the increase in SG to 12 per cent will provide an additional $12bn to GDP, increase real wages and generate more than 10,000 jobs.
It also flagged the increase in contributions will assist younger Australians recoup funds lost through the economic downturn and the sapping of savings sparked by the early-release super scheme.
The increase will also assist more women, who usually have a smaller amount of super savings in comparison to their male counterparts.
These increases will give women more financial independence and that means a better shot at a dignified life in retirement, not one marked by poverty.
Important Information About The Superannuation Guarantee (SG)
For Australian workers the most common type of contribution regularly going into your super account is likely to be the Superannuation Guarantee – or SG for short – which is the contribution your employer is required to make into a super fund on your behalf.
The SG is part of the remuneration you receive from your employer. The amount is a percentage of your salary or wages, with the percentage set by the Australian Government and changing over time.
The percentage rate for SG payments by your employer increased from 9.5% in 2020/21 to 10% for 2021/22. This rate is currently set to continue until 1 July 2022, when it is due to increase to 10.5%.
Previously, the SG rate was originally set to increase to 10% in July 2015, however the government legislated to slow the gradual increases in the rate, delaying the increase to this amount by 7 years until 1st July 2021.
If your employer fails to pay the required rate of SG into your super account by the quarterly due date, they may have to pay a Superannuation Guarantee Charge (SGC) to the ATO. The SGC includes all the SG amounts owing to an employee, plus interest and an administration fee.
Employers who don’t pay the SG into the correct super fund by the due date must report and rectify the missed payment by lodging an SG Statement and paying the SGC.
If your employer is paying you $450 or more (before tax) in a calendar month, you must receive super contributions in addition to your wages. Employees aged under 18 or those classified as a private or domestic worker (like a nanny) must work for more than 30 hours per week to qualify for SG payments.
You are eligible for SG payments whether you are a full-time, part-time or casual employee.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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