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Major changes to superannuation entitlements have been announced in the latest budget, which will see millions of Australian workers receiving higher compulsory contributions by their employers from 1 July 2021. It isn’t just employees who are set to benefit, though, with some new measures being introduced in an attempt to help both the young and older populations boost their superannuation balances and prepare for retirement.
Here are some of the changes being made to concessional and non-concessional contributions.
What changes are being made to compulsory contributions and who will they affect?
There are two major changes being made to compulsory contributions.
Prior to 1 July 2021, the minimum contribution an employer must pay in superannuation is 9.5% of a worker’s wage. From 1 July 2021, this will rise by .5% each year for four years until the minimum contribution is 12% of the employee’s wage in 2025.
Employers already contributing more than the standard 9.5% are not legally required to increase their contributions. For example, if an employer has been making contributions of 14.5% they will not be required to pay 15% after 1 July 2021.
Workers who are on a salary package that includes superannuation, as opposed to an arrangement where superannuation is paid in addition to the base salary, should be mindful that the extra .5% increase each year may be paid out of their overall package, which could see them take home less cash each payday. It would be prudent for employees in this situation to seek confirmation from their employer about how the updates to superannuation entitlements will affect their salary.
The other major change being made to superannuation is the $450 minimum threshold is being scrapped, meaning employers will soon need to make superannuation contributions for employees earning under $450 per month.
Around 300,000 workers will benefit from the new rules, with more than half of those being women.
Key Notes for Employers
Employers and will need to adjust payroll systems to pay the increased superannuation amount to eligible employees from 1 July 2021. If employers fail to this by the due date, they could face penalties from the Australian Tax Office for late or inaccurate payments.
To avoid penalties, speak to your accountant or bookkeeper as early as possible.