More changes to Superannuation– are you ready?

A couple of years back, the Federal Government announced that it was making changes to Guaranteed Superannuation Contributions - these changes will finally come into effect on 1 July 2013. 

What does this mean for me and my business?

Compulsory superannuation contributions are made by employers of behalf of their employees. At the moment, the SG rate is 9% - this will rise to 9.25% on 1 July, followed by incremental rises each year until 2019, at which time the rate will be 12%. This is an obvious extra expense for SME’s to fork out to their employees and so far it looks as if we have to just cop it on the chin. According to the Cameron Research Group, SME’s are understandably worried about the increased cost of doing business in an environment where there is already pressure to increase wages in the face of a nationwide skills shortage.

To make matters worse, the Federal Government had initially promised a reduction in company tax on small businesses which would have negated the impact of the SG rise, but has since controversially backed out of this commitment leaving company tax at 30% instead of a staggered reduction to 28% as per the initial plan. They argue that the three years since the new super changes were proposed and the staggered rollout should give you enough time to make the necessary financial preparations in time to commence in July.

Hmmmmm... do you feel ready ? I'm sure that not everyone is!

Other changes due to come into effect on 1 July are:

• The age limit of 70 for SG contributions will no longer apply from 1 July 2013. Employers will be required to contribute to complying super funds of eligible mature age employees aged 70 years and older. The Government hopes that doing away with this age limit will encourage mature workers to stay in the workforce.
• Low income earners have an additional benefit – for those on less than $37,000 a year, the government will provide a low income superannuation contribution of up to $500 each

In another interesting move, while giving with one hand the Government has taken away with the other and halved the contributions cap for concessional (before tax) contributions to $25,000 for over-50s (previously $50,000 and had been set to increase to $55,000 before the Federal Government rethought this issue). The concessional contributions cap is now $25,000 for people of all age groups and here we were thinking that older workers were getting a break?!

Employers need to get ready now to implement these changes – so make sure you:

• Update your payroll and accounting systems to reflect the increase to the super guarantee rate.
• Continue to increase the rate you use to work out the super guarantee payments you make for your employees each year until 1 July 2019
• Ensure that you make super guarantee payments for eligible employees aged 70 years or over.

This week's blog was written by Caroline Ross, one of our capable team members.

Natasha Hawker owns Employee Matters Pty Ltd; an HR Consultancy that assists small to medium businesses with their HR functions to make them more efficient and profitable. Their offering includes HR Management, Recruitment, Training, Coaching, and Exit Management – find them at www.employeematters.com.au