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Summary
- In a recent government superannuation act, the superannuation Guarantee (SG) rate has been increased by 0.5% to 10% from July 1.
- The SG Rate is impacting the existing and new compensation and wage packages of many Aussie employees.
- The rise in SG rate, however, may provide a tax relief as less tax is levied on the money that goes to super.
Superannuation, or 'super,' is a portion of income set aside to help Australians pay for their retirement. Every month from the start of an Australian’s career, a minimum percentage of an employee’s wages is sent to super, known as the superannuation guarantee. The person who is earning over AU$450 per month before tax should get superannuation benefits.
In a recent government superannuation act, the superannuation Guarantee (SG) rate has increased by 0.5%, from 9.5% to 10%, w.e.f. 1 July 2021. This means that employers will have to pay 10% of employees' salary to the super fund. The employees can also increase this amount by contributing some amount to it.
The release further highlighted that the super rate is slated to gradually increase to 12% by July 2025.
Also Read: What is Superannuation Fund and how it is different from KiwiSaver?
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How will the increased SG Rate impact Aussie employers and employees?
The impact of the newly implemented 0.5% SG rate increase will be determined by the parameters of existing and new compensation and wage packages. Therefore, it needs to be carefully considered that the SG rate increase will be added on top of the existing salary or incorporated in the existing remuneration of the employees.
- Employers cannot use the money sacrificed by the employees from their salary, with the SG rate getting increased by 0.5% this year. For SG purposes, the ordinary time earnings (OTE) basis now includes any sacrificed OTE amounts. This means that the donations made on an employee's behalf under a salary sacrifice plan are not recognised as employer contributions that reduce the employer's charge percentage.
- From 1 July 2021 onwards, the SG rate has increased to 10%, taking Maximum super contribution base to $58,920 per quarter ($235,680 per annum), up from $57,090 per quarter ($228,360 per annum). This means the employers need not to pay SG over this limit.
- This also means that starting 1 July 2021, the SG opt-out income threshold is $275,000 (up from $263,157). This enables high-income employees with numerous jobs to opt out of the SG system for one of their employers, avoiding an unintended infringement of the concessional contributions cap.
- The annual concessional contributions rate has also increased from $25,000 to $27,500. A hike in concessional contribution beyond this will make employees pay more tax and other charges.
Which are the leading Superannuation funds in FY21-22
According to Chant West, a leading superannuation research and rating agency, AustralianSuper was named the 2021 Super Fund of the Year. AustralianSuper is on top because of its exceptional returns and investment management during such a tumultuous period in the market, AustralianSuper is at the top.
AustralianSuper
With nearly one in every 10 Australian workers as members, AustralianSuper is the largest superannuation and pension fund in Australia.
AustralianSuper and LUCRF Super announced plans to merge their superannuation funds next year to establish an AU$232-billion investor. This will make the duo the second and the third Australian allocators respectively to do so this year.
Also Read: Australian Minister says superannuation funds should uphold new coal projects
The other notable Super Funds are Aware Super, Cbus, HESTA, QSuper, UniSuper, CareSuper, Equip, Hostplus and Sunsuper.
