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Changes to Super Coming 1 July - Make sure you know your obligations

Recent announcements on changes to the taxation of super in the pension phase caused quite a stir. However, before these changes even come into effect employers need to take note of amendments coming on 1 July that will impact your super obligations for employees over the long term.

In last year’s budget it was announced that the minimum compulsory superannuation rate – the super guarantee – would gradually increase from 9% to 12% beginning in 2013, along with several other changes. We discuss these in more detail below.

Employers – get ready for these changes to super on 1 July

The most important change you need to be aware of is that on 1 July 2013 the super guarantee you pay your employees will increase from 9% to 9.25%. There will be further annual increases until the rate reaches 12% for the 2019-2020 financial year, as follows:

Financial year 


Super guarantee rate

2012-13 
9.00% 
2013-14 
9.25%
2014-15 
9.50% 
2015-16
10.00% 
2016-17
10.50%
2017-18
11.00%
2018-19
11.50%
2019-20 
12.00%
 

Also on 1 July, the upper age limit for paying superannuation for eligible employees (currently 70) will be removed, meaning employers will need to start making superannuation contributions on behalf of these employees. And finally, from 1 July super funds will start offering what is termed a ‘MySuper’ product, which has some standardised features such as no entry fees or exit fees. From 1 January 2014 MySuper will replace your current default fund where an employee doesn’t select a preferred fund type.

A further administrative change will begin to take effect in 2014. In July 2014 a new data and payment standard will be introduced for businesses with 20 or more employees. The new standard means even if your employees have different super funds, you will be able to send contributions in one standard electronic format. For small businesses (19 or fewer employees) this will apply on 1 July 2015.

Considerations for employers and employees

As an employer you will need to ensure your payroll and accounting systems can cater for the increasing super payments and the removal of the upper age limit.

The most significant change is obviously the increase to the super guarantee, and while this increase is good for employees we’re aware of the pain it may cause some small businesses as they cope with increasing payments over the next six years. Planning for these increases could be vital for some small businesses and we are happy to talk to you about your business budgeting if you are concerned about the impact on your bottom line.

In addition, consideration may also need to be given to whether these changes impact existing or new employment contracts.

As an employee if you are currently paying the maximum $25,000 concessional contribution to your super, take care that that this increase to the super guarantee does not inadvertently push you over the cap.

If you are concerned about the impact of any of these changes will have on your business, don’t hesitate to get in touch with bTa Vantage. There is still time to get ready for 1 July.

Disclaimer: This information is generic in nature and provided on a discretionary basis only. You must always seek professional advice regarding its applicability to your own circumstance.

 


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