Superannuation Changes in FY 2023

One of the main goals of the Australian Taxation Office over the past few years has been improving the Superannuation scheme originally designed in 1992 and providing better financial support to retired Australians.

The ATO found a number of gaps in the original legislation. As a consequence of these findings, they set out to streamline and improve the Superannuation scheme by introducing a number of significant changes that impact Employers, Employees and Superfunds.

In the past few years the following legislative changes have been introduced:

• Single Touch Payroll – Phase 1 implemented from 1 July 2018, was developed to increase the ATO visibility on employers paying superannuation contributions and to ensure such contributions were paid on time;
• Your Future, your Super implemented from 1 July 2021 was introduced to ensure non-performing Superfunds are taken to task when failing to provide the correct investment outcomes for their members;
• Superannuation Stapling implemented from 1 November 2021 was designed to help Australian workers avoid dispersing superannuation contributions to multiple funds;
• Single Touch Payroll – Phase 2 implemented from 1 January 2022, expanded the information available to individuals in their myGov accounts to display the date Superannuation contributions are paid  into their Superfund by their employers;
• Superannuation Annual Increase – Finally the ATO approved an increase of the Statutory Rate of superannuation by 0.5% each year until reaching 12% in 2025

Additional Superannuation changes, originally announced during the Federal Budget in 2021, will start on 1 July 2022.

This blog provides key information about these changes and includes recommendations for Australian Businesses to remain compliant with their Super obligations.

Superannuation Statutory Rate increase

​The most significant change with Superannuation is the increase of the Superannuation Guarantee’s Statutory Rate from 10% to 10.5%.

This increase is part of an ongoing plan which will result in raising the SG Statutory Rate to 12% from 1 July 2025.

The increase applies to all Employees and Sub-Contractors deemed as Employees under the Superannuation Guarantee Ruling (SGR 2009/2) from the first pay period paid in July 2022 (even if the period worked is in June).

Employee Types and Remuneration Packages

The increased rate will have a different impact on Australian Employees and Employers, based on the type of Salary Packages stipulated in their Employment Agreements.

1. For employees whose annual salaries (or hourly rates) are stipulated in their Employment Agreements as exclusive of super, the increase must be passed on.  This means these employees will receive an increase in their Superannuation whilst their gross pay rate / annual salary will be unaffected.
2. ​For employees whose annual salaries (or hourly rates) are stipulated in their Employment Agreements as inclusive of super, Employers have the choice to either increase the Superannuation Rate without decreasing the pay rate / annual salary or to keep the Remuneration Package the same by shifting the additional 0.5% from the Gross Wages into the Superannuation Guarantee.
   Note: unless the decrease of 0.5% from their Hourly Rate will set their pay below the pay rate classified under their Award.
3. Finally, Employers who already offer the same or a higher percentage of Superannuation than the increased Statutory Rate as part of their Salary Packages have no obligation to apply the increase.

Removal of the $450 Monthly Eligibility Threshold

The 2021 Federal Budget also proposed the removal of the $450 Superannuation monthly eligibility threshold as part of the initiative: ‘Supporting the Economic Security for Women“.

The proposed changes passed into legislation a few months after the Federal Budget and are set to take effect from 1 July 2022.

This means that from the start of the 2023 Financial Year, Superannuation must be paid to all employees over 18 years old, regardless of their monthly wages.

Employees under 18 years old are still required to work 30 hours or more per week before receiving Superannuation.

The standard Superannuation Choice process will apply to those Casual / Part-Time employees that regularly earned less than $450 per month prior to the 1st July 2022, and were never required to make a Superannuation Choice.

Superannuation Limits and Thresholds

Maximum Superannuation Quarterly Limit

The maximum super contribution is used to determine the highest amount of Superannuation Employers are required to pay on their employees’ earnings over a quarter.

This threshold is indexed every year and the reviewed amount is applicable from the 1st of July.

From 1 July 2022, the maximum quarterly super contribution base is set to increase from $58,920 to $60,220. This means that, after taking into consideration the new Superannuation Statutory Rate, the maximum SG contribution an

employee can receive from their Employer over a Financial Quarter is $6,323.10.

Concessional and Non-Concessional Contribution Caps

The Concessional and Non-Concessional Annual Contribution caps will remain at:

• Concessional Contributions > $27,500 per annum;
• Non-Concessional Contributions > $110,000 per annum;

Any leftover concessional contributions from previous Financial Years starting from 1 July 2018 can be carried over to the 2023 Financial Year.

Changes to the SG opt-out for high-income earners with multiple employers

Since 1 January 2020, eligible individuals with multiple employers can apply to the ATO and opt-out of receiving Superannuation Guarantee from one or more of their employers. The purpose of this option is to avoid unintentionally exceeding the annual Concessional Contributions cap.

From 1 July 2022, the SG opt-out income threshold is set to decrease from $275,000 to $261,905, as the Statutory Rate is increasing to 10.5%.

For more Key Payroll Rates and Thresholds, refer to our other blog recently published on our website.

Superannuation Audit Activities to reprise in FY 2023

In a recent report, the Auditor General’s Office has announced that the ATO will shift back their focus on unpaid Superannuation.

The ATO took a gentle approach towards both the audit and recovery action of unpaid Superannuation during the past few years whilst businesses dealt with COVID, bushfires and floods.

As a consequence of this relaxed approach and the tragedies that impacted Australian Businesses over the last two years, the amount of unpaid Superannuation has once again boosted after an initial decrease due to the rollout of the first phase of Single Touch Payroll.

Now the ATO is set to ramp up their audit activity and penalty regime, with even stricter guidelines than before. One of the key changes is the requirement to submit a Superannuation Charge Statement no later than 28 days from the missed superannuation payment deadline to avoid the Penalty 7 surcharge.

SGC Statements lodged after 28 days from the missed Super payment deadline will have an automatic Part 7 penalty surcharge equal to 100% of the value of the SGC Statement lodged.

The implementation of STP Phase 2 soon to be rolled out to all Australian Businesses, will leave businesses even more exposed than before, as Employees will also have visibility of their Superannuation payments through myGov. This will give them the opportunity to promptly report their employers who do not pay Superannuation to the ATO and trigger an immediate audit.

What Employers should do

The main objective for Employers is to ensure they maintain their Superannuation compliance in the new Financial Year.

The first step is to gain the correct understanding and knowledge of the new requirements. Employers who are time-poor should seriously consider delegating this task to a knowledgeable professional.

The second step is to review their Payroll System settings, including:

• Make sure the Super Statutory Rate is set to 10.5% from the first July 2022 pay run;
• Update the Quarterly Limit to either $60,220 (Quarterly Gross Earnings) or $6,323.10 Quarterly Super Guarantee (depending on the Payroll Settings);
• Ensure the $450 monthly eligibility threshold is removed;

The final task is to review their Employment Agreements and communicate these changes to their employees, including:

• Review of the wording on the Employment Agreement for Employees on a Total Remuneration Package if they plan to shift the 0.5% from the Pay Rate into the Superannuation. It is also advisable they review the classified Award and the increased pay rates and seek legal advice prior to making any decision;
• Notify their employees of the changes to the Superannuation rates and thresholds and detail how these changes will impact them;
• Review and re-negotiate the pay agreements with their Subcontractors to determine how the new Superannuation rate will be calculated on their invoices after the 1st July 2022.​

References

​https://www.ato.gov.au/Business/Super-for-employers/?=redirected_superforemployers

https://archive.budget.gov.au/2021-22/womens-statement/download/womens_budget_statement_2021-22.pdf

Disclaimer

This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.

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