For small business owners and payroll managers, staying up-to-date on the latest superannuation changes is essential. And, with the Australian Superannuation Guarantee increase happening from 1st July 2023, it’s important to understand what this means and how it could affect your business. As an employer, this increase, and subsequent increases, will have an impact on your payroll management and accounting systems.
Here’s what you need to know about the superannuation guarantee increase.
What is Changing with the Australian SG and When?
Effective from 1st July 2023, the SG rate will increase to 11% of an employee’s OTE (Ordinary Time Earnings). This increase is part of a gradual, planned increase that will see the SG rate rise to 12% by 2025.
Who Will be Affected by the SG Increase?
All employers who pay their employees a wage or salary are required to make SG payments on their behalf. Therefore, all businesses employing staff in Australia will be affected by the SG increase.
The extent to which your payroll management is affected will depend on how your employment contracts are structured, most commonly being a base salary plus Super or a total remuneration package that includes Super.
How does the SG Increase Affect Salary Packages?
For payroll to run accurately, salary packages inclusive of superannuation are split out in our system between base salary and super. Xero will automatically apply the superannuation increase. This is an important consideration where you have provided your team members a salary package inclusive of superannuation – so from 1/07/2023 their package may increase by the 0.5% due to the super increase. If you wish for the package to remain the same, we recommend you obtain legal advice to ensure there are no other provisions in the employment agreement or Award which make this option unavailable, and also have a conversation with the affected team members as it may appear to them that their salary is reducing. If you do wish to keep the same annual salary package after the superannuation increase, you will need to make this change with payroll. Otherwise, the base salary will remain the same and the superannuation will increase 0.5%.
When does the SG Increase Affect my Payroll?
It’s important to note that this change takes effect from the payroll payment date, not the period it relates to. Therefore, for pay runs paid up to and including 30/06/2023, the SG rate is 10.5% – even if the super is paid to the fund in July. For pay runs paid on and after 1/07/2023, the SG rate is 11%. If you are contemplating pulling a July pay run forward into June so you can pay super at the lower rate, don’t! This may impact the taxable income of your team members, potentially meaning they will then have not paid enough tax for the year. Pay cycles should remain unchanged.
What Can You Do to Prepare for the Australian SG Increase?
If you’re a small business owner or payroll manager, it’s important to start preparing for the SG increase now. Key steps you can take include:
- Reviewing your payroll systems and software to ensure they are set up correctly to calculate and apply the SG increase
- Budgeting for the increased SG payments and adjusting your cash flow projections accordingly
- Check your specific obligations on the ATO website
The Australian Superannuation Guarantee increase is an important change that will impact all businesses employing staff in Australia. We can help you understand your obligations and make sure you remain compliant so please get in touch if you need advice around this.
