Should I express my employee’s salary as exclusive or inclusive of superannuation?

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30 years of SG – Superannuation Guarantee

The SG was first announced in the 1992 federal budget. The rate payable by employers was 3% or 4% depending upon the payroll amount.

Rates have steadily increased over the years, gradually heading towards the stated target rate of 12%, as follows:

  •         1 July 2022 – 30 June 2023                               10.5%
  •         1 July 2023 – 30 June 2024                               11.0%
  •         1 July 2024 – 30 June 2025                               11.5%
  •         1 July 2025 – 30 June 2026 and beyond 12.0%

Who is eligible to receive SG payments?

Prior to June 2022, employees receiving less than $450 per month were not entitled to SG, however, the 2022 budget changed this so that all employees, whether full-time, part-time, or casual, all received payments. However, employees under 18, or those classed as private or domestic workers – for example, a nanny – must work more than 30 hours per week for an employer to be eligible. 

There are certain exceptions, for example, for non-Australian residents contracted to do work outside Australia. Specific rules apply to contractors and depend on various factors, and it is best to check the Australian Tax Office site to determine applicability in these various individual circumstances.

How is it paid?

Employers are required to make payments every 3 months into the employee’s nominated superannuation account. This can be made via a clearing house, although it should be noted that an amount is not considered to be paid until received by the fund. Protocols are in place for accidental failure to comply, but deliberate or continued breaches may result in hefty fines and even prison time.

Is there an upper limit to SG payments?

Employees receiving very high salaries, and perhaps those working for multiple employers, may find themselves in a situation of exceeding the maximum super contribution base (MSCB). In the 2022–2023 year, this is $60,220 per quarter ($240,880 per year), equivalent to an SG contribution by the employer of $6,323 per quarter ($25,292 per year).

Arrangements can be made to opt out of the SG payment with one employer or reduce the amount paid where there is only one employer.

Should I bundle SG into a salary package or not?

A SG payment, as with base salary amounts, fringe benefits, and various perks, is regarded as payment to an employee, and are therefore all included when totaling up what a business is liable for in terms of payroll, and by extension, payroll tax. As such, whether the SG amounts are or are not included in a salary package or notified separately makes no difference to payroll tax liability.

Other considerations are more related to how the remuneration parcel is wrapped up and presented. Including various add-ons, such as SG, into an overall package may well make the total bundle look more attractive for a job advertisement. It is important to have clear arrangements in place for dealing with how the annual SG rate increase will be handled to avoid unnecessary employee difficulties. Does the extra 0.5% get added to the current package or not? Communication is vital.

Whether such things as SG amounts are included in a package, or advised individually, will largely depend upon what is normal in any given industry. At the end of the day, the amount an employer pays will end up being the same.

ATO compliance is certainly not an optional add-on, and quality employees who are clear and comfortable with their total remuneration, no matter how it is presented, are worth gold.

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