Budget 2022- SG changes

Changes to superannuation guarantee obligations for employers – Budget 2021-2022 Announcement

Compulsory superannuation payments as part of salary and wage remuneration help build superannuation balances to support individuals into retirement. Currently, not all employees are entitled to superannuation – including those receiving less than $450 per month, and conditions around workers under the age of 18 and domestic/private workers. In the 2021-2022 Budget announcement, the Government announced that the $450 income threshold per month will be removed. As a result, it is expected that over 300,000 part time and casual employees who currently miss out on superannuation will now receive the benefit.

What is superannuation guarantee?

Superannuation guarantee, commonly referred to as SG for short, is the compulsory contribution that is required to be made by employers on base salary paid. The contribution is part of an employee’s salary or wages package and is paid on top of salary as required by the SG legislation.

For the 2021 financial year, the contribution percentage is 9.5%. This increases to 10% in the 2022 financial year. A maximum super contributions base is imposed to limit the liability for employers. For the 2021 financial year, the income per quarter threshold is $57,090. For the 2022 financial year, the income per quarter threshold is $58,920. Employers are not required to pay SG amounts for the earnings above the quarterly threshold.

Who is eligible for superannuation guarantee contributions?

Currently, employers are required to pay SG to employees who meet the following conditions:

• Earn more than $450 per month;
• If the employee is under 18 or a domestic/private worker (such as nanny or housekeeper), they must work more than 30 hours per week to be eligible for SG payments.

Further, SG may be required to be paid to some contractors, even where an Australian Business Number is quoted. Temporary residents are also eligible for SG payments where they meet the above conditions.

When do I need to make superannuation guarantee payments?

Employers are required to pay super at least four times a year, so that contributions are received by employee’s super funds by the following quarterly due dates:

Employers can make payments more regularly than quarterly, as long as your total SG obligation for the quarter is received prior to the quarter’s due date.

If you utilise a Clearing House (which distributes super contributions to employees’ super funds on your behalf), it should be noted that employee’s super contributions are counted as being paid on the date the super fund received it, not the date the clearing house receives it from you. There is an exception to this, where employers use the ATO’s free Small Business Superannuation Clearing House. 

What happens if my superannuation guarantee payments are late?

Where SG payment are paid late or still outstanding following the due date, the employer is liable for superannuation guarantee charge. The employer is required to lodge an Superannuation Guarantee Charge Statement in the approved form. Superannuation guarantee charge becomes non-deductible to the employer – a form of penalising the employer for late or non-payment.

The superannuation guarantee charge is calculated different to SG. The charge is made up of:

• SG shortfall amounts (calculated on full salary including overtime payments)
• Interest on those shortfall amounts (calculated at 10% per annum)
•  An administration fee of $20 per employee, per quarter

A superannuation guarantee charge statement is required to be lodged 28 days after the due date for SG payments:

The ATO’s collection powers for unpaid SG include director penalty notices, garnishee notices and direction to pay SGC. Further, in addition to the Superannuation Guarantee Charge, penalties can be imposed where the Superannuation Guarantee Charge statement is lodged late or fails to include all relevant information. The maximum penalty is up to 200% of the superannuation guarantee charge.

When will the superannuation guarantee changed announced in the Budget start?

The Government has indicated that it expects the $450 threshold will be abolished from 1 July 2022. This is subject to the amending legislation receiving Royal Asset - i.e. the amending legislation being enacted. It should be noted that the budget papers do not make mention of any changes to the age limit imposed by the current SG legislation.

This means that until the law is changed, employers should continue with their current SG processes.

How can Tax Controversy Partners help you?

Government has anticipated that removing the $450 income threshold will not only give access to the superannuation system for more Australian with unsecure work, but also make processes simpler for employers who will no longer have to calculate whether an employee has made over $450 a month. On the flip side, this change may cost employers more cash (however when paid on time, employers will receive a deduction for paid SG). Where SG obligations are not met in time, this will mean that those employers will be subject to further administrative charges where they were not previously exposed.

At Tax Controversy Partners, our experienced lawyers can assist you if you have made SG payments late, have not made payments on time, or are currently under audit. Please contact us using our online contact form, via email at admin@taxcontroverypartners.com.au or by phone at 02 08513 3813.