Super Guarantee is Rising to 12% Over the Next 5 Years. What Does This Mean For Your Business?
The budget is scheduled to be delivered on 6 October 2020 and we are now starting to see some leakage into the press of potential changes. Josh Frydenberg is signaling a freeze on superannuation guarantee rises which is being fiercely opposed by some Labor party figures.
Currently the mandatory Superannuation Guarantee rate is 9.5%. The following changes are already legislated and will apply unless the law is amended:
- From 1 July 2021 – 10%
- From 1 July 2022 – 10.5%
- From 1 July 2023 – 11%
- From 1 July 2024 – 11.5%
- From 1 July 2025 – 12.0%
It is important to note that payroll tax is also calculated on super, so payroll tax will also increase. A 2.5% increase over the next five years will definitely have an impact on the profitability of your business. We are concerned about the impact on small business as it is preparing to deal with the economic fallout of the recession over the next 2 to 3 years. Hiring new workers is critical to the economic rebuild and any disincentive, such as additional costs, is likely to have an impact.
It is therefore important to take the following steps:
- For your employees that are on salary contracts, please review these contracts and determine if the contract provides for a salary that is inclusive of super. Carefully wording these contracts may allow for superannuation rises to be offset with reduction in cash wages. For example, does the contract say $100,000 including super or $100,000 plus super? Consider getting advice from an employment law specialist.
- Ensure you take into account the cost of rising super when employing new staff.
- Calculate the estimated increase to your superannuation expense and ensure it is included in your forecasts.
- To maintain profitability, the prices of your goods or services will need to rise over the next five years.
- If you are opposed to the increases to superannuation guarantee, please contact your local federal member to voice your concerns. https://www.aph.gov.au/Senators_and_Members/Guidelines_for_Contacting_Senators_and_Members
If you need assistance understanding what these changes mean for you, don’t hesitate to call us on 07 3844 5555 to discuss with a Macro team member today.
Date published: 7th September 2020.