Superannuation Guarantee Rate Increases To 10 Percent On 1 July 2021

The rate of compulsory super that your employer pays you will rise to 10% from 1 July 2021.

The Superannuation Guarantee (SG) is the minimum amount that an employer must pay into your super fund if you are an eligible employee.

As of 1 July 2021, the SG will rise from 9.5% to 10% of your ordinary time earnings. Ordinary time earnings salary is generally what you earn for your ordinary hours of work, including commissions, shift loadings and allowances, but not overtime payments.

Under the current legislated timetable, the SG rate rises to 10% on 1 July 2021 and then incrementally by 0.5% each financial year to 12% by 1 July 2025.

As a result, employers need to update their payroll settings to reflect the 0.5% increase in the SG rate. More importantly, employers and employees will be required to consider the future impact of the increased SG costs.

What will the effect be on employers and employees?

The terms of existing and new salary packages will dictate the financial impact of the SG rate increase.

For example:-

1. Will the additional 0.5% SG contribution be added to the existing salary package (Therefore, no change to employee net pay)?
   OR
2. Will the additional 0.5% SG contribution be incorporated into the existing salary package (Reduction to employee net pay)?
   
   Furthermore, it will be important to look into the relevant employee awards for the effect of the increase in the SG rate.