Business Superannuation Changes: An Employer's Guide
As a business owner, your superannuation obligations for employees will soon be changing. This article will review the upcoming changes and highlight the steps you must take to be prepared.
Super Guarantee Rate Changes
In April 2013 the government announced increases to the minimum rate of superannuation (termed Super Guarantee or ‘SG’) which is paid to eligible employees. The plan detailed staged increases which will take the SG rate from 9% (rate as of April 2013) to 12% (target SG rate for July 2019).
The first of these superannuation guarantee rate rises (to 9.25%) is scheduled to occur on 1 July 2013, therefore business owners must ensure now they are ready to comply with these changes. Future SG increases with the date of change are highlighted in the table below.
|Date of Change||Super Guarantee Rate|
|1 July 2013||9.25%|
|1 July 2014||9.5%|
|1 July 2015||10%|
|1 July 2016||10.5%|
|1 July 2017||11%|
|1 July 2018||11.5%|
|1 July 2019||12%|
It is the responsibility of the employer to update payroll and accounting systems to apply the increased SG rate to determine super payments you make for your employees. This must be increased each financial year by the pay period for 1 July until 2019.
Other Important Changes
Reflecting the needs of our changing workforce, the decision was made to remove the upper age limit for compulsory superannuation payments. From 1 July 2013 you will be required to pay superannuation for all employees, including those 70-years-old and over.
Although this may present some additional financial responsibilities for employers initially, there may be dividends down the track. The need for skilled workers has been noted as a major challenge affecting Australian businesses. Continuing superannuation contributions may provide further inducement for mature workers to stay in the workforce, benefiting businesses by their knowledge and experience.
As an employer, you must ensure eligible employees 70-years-old or over have completed a ‘choice of fund’ form, or commence making superannuation contributions to your default fund in the event no preference has been given by the employee.
The last relevant change for employers relates to a new product which will replace existing default superannuation products. As an employer, you currently have a nominated default fund, where SG payments are made for employees who have not completed a ‘choice of fund’ form. From 1 July 2014, employers must make these contributions to a fund that offers a ‘MySuper’ product. For most employers, it is expected that existing default funds will commence offering a ‘MySuper’ product. Super funds are able to start offering MySuper products from 1 July 2013.
What is MySuper?
Essentially MySuper is a simplified and cost-effective default super product. The product features of MySuper will be basic, making it easier to compare funds based on a few key differences. This is designed to benefit employers by reducing your costs in selecting a default fund, and benefit members as they will not pay for unnecessary services they do not utilise.
In most cases, your default fund should contact you to advise if they will be offering a ‘MySuper’ product. This may occur any time between 1 July 2013 and 1 July 2014, as superannuation funds will need to apply to the Australian Prudential Regulation Authority (APRA) to meet requirements to register a MySuper product. If your existing super fund does not offer a MySuper product by 1 July 2014, you will need to switch to a default fund that does.
Superannuation obligations are mandated by law - your business needs to get it right. If you are unsure about any of the changes to the superannuation guarantee and what your responsibilities are as an employer, please seek professional advice specific to your situation.