The superannuation industry is currently going through many significant changes. These changes not only impact superannuation funds and its service providers but also employers. They must prepared and be ready to adopt the new rules when implemented to meet various superannuation guarantee (SG) obligations. While some changes have already taken place, others will be completed in the next few years.
In this article, we will take a look at the following changes that employers are required comply with:
- Gradual increases to SG rate;
- Removal of SG age limit;
- New data and e-commerce payment standard;
- New payslip reporting obligations;
- New employer default fund – MySuper; and
- Company directors are now liable for SG obligations
Increases to SG rate
From 1 July 2013, the SG rate will gradually increase from 9% to 12% by 2019. Over the next six years, the compulsory superannuation will be increased as follows:
1 July 2013 – 9.25%
1 July 2014 – 9.5%
1 July 2015 – 10%
1 July 2016 – 10.5%
1 July 2017 – 11%
1 July 2018 – 11.5%
1 July 2019 – 12%
Employers must make superannuation contributions on behalf of their employees at the rates listed above over the next six year in order to meet their superannuation guarantee obligations. Failure to do so will mean that they will have to pay a superannuation guarantee charge on top of the SG.
The SG rate has not increased since 1992, sitting at 9% until now. Since the introduction of compulsory superannuation in 1992 by the former Labor treasurer Paul Keating, the SG rate has been increased as follow:
1992 – 3%
1994 – 4%
1995 – 5%
1996 – 6%
1998 – 7%
2000 – 8%
2002 – 9%
Removal of SG age limit
Under current legislation, employers are only required to pay SG to employees up to the age of 70. From 1 July 2013, this upper age limit will be removed and employers must pay SG to all employees regardless of their age. This also means employers can claim a tax deduction on SG contributions past age 75. Given more and more people are delaying their retirement, the removal of the age limit not only remove the age discrimination against older workers but also provide incentives for them to work longer.
New data and e-commerce payment standard
From 1 July 2014, medium to large employers with 20 or more employees must use the new data and e-commerce standard when paying superannuation contributions to a super fund on behalf of their employees. Smaller employers with less than 20 employees must comply with the new rule from 1 July 2015.
The new standard requires all employers to send superannuation contributions to superannuation funds electronically (via EFT BPAY). Cheques will no longer be excepted. Employers will need to work with superannuation funds and ensure that they’ve appropriate payroll system to process superannuation payments which includes giving superannuation funds employee’s personal details such as name, address, date of birth and tax file number. Small employers can use Department of Human Service (clearing house) to meet their SG obligations.
New payslip reporting obligations
From 1 July 2013, employers will be required to report on payslips the amount of superannuation contributions they’ve actually made for an employee during the payroll period. Currently, employers are only reporting on payslips the employee’s entitlements to superannuation accrued during the pay period.
New employer default fund – MySuper
Currently, if an employee chooses his/ her own superannuation fund, the employer must pay SG contributions to the employee’s chosen fund. If an employee doesn’t choose a fund; the employer pays SG contributions to their default fund – a fund of their choice.
From 1 January 2014, the employer default fund will change. A new superannuation product – MySuper, has been introduced to replace the employer default fund. Employees will still be able to choose their own fund and product but if they don’t choose their own fund; the employer must pay their SG contributions to a fund that offers MySuper product in order to satisfy superannuation guarantee obligations.
MySuper is a simple and low cost superannuation product that will replace an existing default fund. All current superannuation funds will be able to apply for a MySuper product but it is not compulsory for them to offer MySuper. If the employer’s current default fund decides not to offer MySuper, then they must find a fund that does in order to send SG contributions to, by 1 January 2014.
Company directors are now liable for SG obligations
Since 30 June 2012, company directors have been personally liable to pay superannuation guarantee charge if their company fails to meet the SG obligations the director penalty regime. Directors cannot discharge their director penalties by placing their company into administration or liquidation.
We welcome any comments or questions you may have.