From 1 July 2014, the minimum rate of superannuation contributions (currently 9.25%) will increase to 9.50%. This rate will remain the same until 30 June 2018 when it will increase by 0.5% each year until it reaches 12% in 2022-2023.
What Payments Must be Made
As a minimum, employers must provide the minimum 9.50% superannuation contributions to the employee’s complying funds, calculated against Ordinary Time Earnings, to avoid liability to pay the Superannuation Guarantee (SG) Charge.
The Charge consists of the shortfall in the SG payments, interest on the shortfall, and an administration fee payable for each employee, per quarter. Further penalties could also be imposed depending on the circumstances and at the ATO’s discretion.
Directors should be aware that personal liability for penalties can be imposed personally equal to any unpaid amount.
Must Overall Pay be Increased?
Whether an employee’s overall pay must be increased depends on your employment agreements, and whether they require superannuation to be paid as a component of an overall salary package or TEC, or whether they simply require that superannuation is paid on top of or as a percentage of existing salary.
If the employment agreement requires that superannuation be paid on top of existing salaries, you will generally need to increase the overall level of payments made to employees.
It is therefore important for you to conduct a review of your wage rates, contracts and award classifications, to ensure that your business will continue to meet its obligations, and will not be exposed to claims for backpayments and penalties, and that the business has accounted for future increases in its budgets.
If you are uncertain of your obligations and options, or seek assistance with your agreements, do not hesitate to contact your HR Legal adviser.
This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.