Super is increasing....BUT you'll want to take a closer look.

From 1 July 2021, employers will be required to increase super to 10% from 9.5% on OTE (ordinary times earnings). Concessional contributions (these are contributions from before tax income such as what your employer pays for you, salary sacrificed super amounts, or contributions you claim a tax deduction for) will also increase to $27,500 from 01 July 2021. This is great news.

Now the reason we are highlighting the super increase is because the increase will impact either the employee or the employer. How? The increase depends on whether the employee salary is inclusive or exclusive of super. Say What?

If you’re an employee and your salary is inclusive of super, you may find that your take home pay will decrease. For example, if you are on a package which is $60K including super, for the 2020/21 financial year this would be broken down into:

$60,000 divided by 1.095 = $54,795 base salary

Super = $60K - $54,795 is $5,205

$54,795 + $5,205 = $60,000

For the 2021/22 financial year:

$60,000 divided by 1.1 = $54,545 base salary

Super = $60K - $54,545 is $5,455

You can see that for the 2021/22 year, the base salary has decreased and the super increased. Whilst this may not be much in the above example, as the salary increases so does the change. Contributing more to super is great as the magic of compound interest comes into play over time however reducing take home pays may make things tighter for some.

If your pay is exclusive of super then this will result in additional super payable for the employer. This may mean for some employees that any wage increases will be absorbed by the additional super cost.

Confused? Well the time to look at this and sort it out is NOW prior to 01 Jul 2021.

As an Employer - You will need to review contracts to work through whether salaries are inclusive or exclusive of super, and also review salary sacrifice arrangements if you have. Also note to review this for any contractors you pay super for.

What to do prior to 30 Jun 2021

• Perform an employee contract/letter of offer review to work through how wages and super are treated;

• Check with software providers, most will have this built in for the new financial year, however double check that this is correct in your system from 01 Jul 2021;

• Chat with your employees, does this affect them, do you need to update contracts;

• Work this through in your cash flow and budgets so that you can see the impact on your business