What is Superannuation Guarantee?
The Superannuation Guarantee (SG) is the minimum percentage of each eligible employee’s ‘ordinary time earnings’ that an employer must contribute to an employee’s complying super fund. This percentage is legislated by the Federal Australian Government and is administered by the Australian Taxation Office.
The current SG percentage rate is 9.5% of employees ‘ordinary time earnings’ (OTE).
Effective 1 July 2021, the SG rate will increase to 10% and will continue to increase until it reaches 12% in 2025.
The table below sets out the gradual increase applicable:
|Period||Superannuation Guarantee rate %|
|1 July 2021 – 30 June 2022||10%|
|1 July 2022 – 30 June 2023||10.5%|
|1 July 2023 – 30 June 2024||11%|
|1 July 2024 – 30 June 2025||11.5%|
|1 July 2025 and onwards||12%|
What is OTE?
OTE is generally what your employees earn for their ordinary hours of work. It includes commission, loadings, allowances. Overtime is generally not considered OTE. The below table sets out come common types of payments and are included and excluded for OTE.
|Payment||Ordinary Time Earnings (OTE)|
|Wages / Salary||Yes|
|Overtime hours (where Award stipulates ordinary working hours and employee works additional hours for which they are entitled to overtime rate)||No|
|Allowance by way of unconditional extra payment||Yes|
|Expense allowance expected to be fully expended (e.g. car or phone allowance)||No|
|Paid leave taken during employment (annual leave, personal/carer’s leave, long service leave)||Yes|
|Termination payment – in lieu of notice||Yes|
|Termination payment – unused annual leave and long service leave.||No|
|Commissions, and performance bonuses||Yes|
Who is eligible for Superannuation Guarantee payments?
SG contributions MUST be paid for:
- an employee aged 18 or over who earns $450 or more (before tax) in a calendar month;
- an employee under age 18 working over 30 hours per week, who earns $450 or more (before tax) in a calendar month.
You are NOT required to make SG payments if:
- An employee is paid less than $450 (before tax) in a calendar month;
- An employee aged under 18 years of age and working 30 hours or less per week;
- A non-resident employee paid for work done outside Australia.
Employers’ next steps
We recommend employers:
- Review employee entitlements to determine if payments are inclusive or exclusive of super;
- Ensure your payroll systems are prepared to apply the 10% increase effective 1 July 2021;
- Review your payroll to ensure that any historical superannuation practices that need to be rectified are addressed.
The information contained within this article is not legal advice and is for general advice only, contact us to obtain specific advice for your business.