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From 1 July 2021, the standard Superannuation Guarantee (SG) rate will increase from 9.5% up to 10%. It’s part of the government’s commitment to increase the SG by half a percent each year until 2025, when the SG rate will reach 12%.
If you run a business with employees, you should already be planning how this increase, and future annual increases, will be implemented and communicated to your employees.
In most cases, the SG increase will not affect your employees’ base salary, as Superannuation guarantee (SG) is paid in addition to your employees’ base income.
For example, if you have an employee on a $60,000 annual salary, you will currently by paying an additional $5,700 into their superannuation fund each year. From 1 July 2021, this amount will increase to $6,000 while the employee will continue to be paid their $60,000 base salary.
If you have employees on a superannuation-inclusive salary package, their take-home cash payments will be affected by the Super Guarantee increase.
For example, an employee on a $60,000 superannuation-inclusive salary package will currently have $5,700 going into their superannuation fund each year. When this increases to $6,000 from 1 July, their take-home pay will reduce by $300 per annum.
If you are considering a pay increase, you’ll need to ensure your business has appropriately structured, budgeted and communicated this roll out.
If you are not considering a pay increase to ensure consistency in take-home cash payments, you should communicate this to your employees well in advance to avoid queries or complaints.
Smith Shearer have created a letter template for you to communicate these changes to your employees. Simply click on the links below to download a copy of the template for your use.
If you have planned a pay increase for employees on superannuation-inclusive salary packages, it’s important to run a cashflow impact analysis to plan for a 0.5% increase in your cost of employment. This increase may also affect your workers compensation insurance, and your payroll tax obligations.
Contact us if you’d like assistance with planning for cashflow impact.
As always, the Smith Shearer team are here to help you navigate these changes. If you have any questions about how this might impact your business, complete the form below and we'll be in contact.