The Federal Government has a problem. They realise that people are living longer. And this means people need more money to keep themselves alive.
The Federal Government also know that most people do not have sufficient funds for retirement now so if they live longer, it means more support will be required from Government pockets otherwise, we will have a nation living off cabbage soup. Mind you if you are aged 85, cabbage soup may not be so bad considering you may have no teeth or unable to stand and cook because your knees have become the equivalent of Raspberry jelly.
So, the government has decided that this is a problem that employers should solve by increasing the rate of Superannuation employers should pay.
But that makes employers unhappy so ‘to assist’ the Government will bring increases in over a few years. They have also been quiet about it too.
My inbox is full of emails from the ATO telling me that if my client over-claims on Work Related expenses they will put me in stocks then blow me to smithereens.
But about the increase in Superannuation. Not a squeak. Nil. Zilch. Nothing.
But from 1 July 2021 Superannuation Guarantee (SG) will rise from 9.5 per cent to 10 per cent – an increase of 0.5%.
It keeps going up by 0.5% every year until it reaches 12 per cent on 1 July 2025.
In other words, your employee costs will go up by 2.5% over the next four years. So what are your options?
- You pay the extra 0.5% leaving the employees take home pay the same. You lose out by 05%
- You pay reduced net wages to cover the extra 0.5% which means there is no change.
But for option two you need to check what your employment contract states. If it says ‘$XX,XXX plus Superannuation’ then you cannot use option 2. You can only use option 2 id your contract states ‘$YY,YYY including Superannuation’
Generally, the ATO take Superannuation Guarantee non-payment or late payment seriously. Late superannuation, even if by 1 day means it cannot be deducted for tax even when paid and you need to complete Superannuation Guarantee forms the size of Tasmania and do all kinds of weird and wonderful calculations that only accountants get excited about.
This means you need to ensure that your accounting software will deal with this because there is no guidance from the ATO about any grace period or lenience for employers so we have assumed if you get it wrong they will not be sympathetic.