Superannuation Guarantee (SG)

As part of the Australian government’s long-term plan to ensure adequate retirement savings for employees, the SG rate has continued to rise. The most notable recent change occurred on 1 July 2024, when the SG rate increased from 11% to 11.5%. This increase is part of a phased plan to reach a 12% contribution rate by 1 July 2025.

Employers

Employers are legally obligated to adhere to the SG rates and ensure contributions are made on time. Key considerations include:

1. Budgeting for Increased Contributions: The incremental rises in SG rates require careful financial planning to accommodate the additional costs.
2. Payroll Adjustments: Employers must update their payroll systems to reflect the changes in the SG rate accurately. Most payroll systems reflect the updates to the rate however employers are encouraged to review and confirm the rate the payroll system is using.

Failure to adhere to using the correct rate could result in penalties, interest charges and further action from the ATO.

Employees

For employees, these changes mean a higher percentage of their earnings will be directed towards their superannuation accounts. It is essential for employees to:

1. Monitor their Contributions: Ensure that their employer is complying with the increased SG rate.
2. Understand the Impact on Take-Home Pay: Employees that have a salary package including super should review the impact on their take home pay and discuss any issues with their employer. Employees that engage in salary sacrifice should review the amount sacrificed to ensure no contribution limits get breached unintentionally.

Concessional Contributions

Concessional contributions are before-tax contributions made to an individual’s superannuation fund. These contributions consist of:

• Employer Contributions: The SG contributions made by employers.
• Salary Sacrifice Contributions: Additional contributions that an employee elects to make from their pre-tax income.
• Personal Deductible Contributions: Contributions made by an individual that they can claim as a tax deduction.

Concessional contributions are taxed at a reduced rate of 15% within the superannuation fund, which is more often than not lower than an individual’s marginal tax rate, making them a tax-effective way to save for retirement. The increase in the concessional contribution cap as of 1 July 2024 from $27,500 to $30,000 allows people to contribute more into their superfund to take advantage of the lower tax rate in the superannuation fund.

If you require any assistance in understanding the information above, please contact your Hall Chadwick QLD advisor.

Hall Chadwick QLD is not a financial advisor. This article should not be taken as financial or investment advice and is general in nature. You should consider seeking independent financial and legal advice to see how the information provided relates to your unique circumstances.