24 June, 2013
Legal News & Analysis – Asia Pacific – Australia – Labour & Employment
On 29 March 2012, the Superannuation Guarantee (Administration) Amendment Act 2012 (Cth) received assent. The amendment provides for increases to the prescribed minimum amount of compulsory superannuation contributions payable by employers.
With these changes set to take effect from 1 July this year, employers should be considering what options they have for funding the increased liability.
What are the changes?
Between July 2013 and July 2020, compulsory employer superannuation contributions will rise by a total of 3%, from the current rate 9% to a total of 12% of an employee’s ordinary time earnings. The increases will be staggered as follows:
| Year | Rate | Starting |
|---|---|---|
| 2012-13 |
9.00%
|
Current
|
| 2013-14 |
9.25%
|
1 July 2013
|
| 2014-15 |
9.50%
|
1 July 2014
|
| 2015-16 |
10.00%
|
1 July 2015
|
| 2016-17 |
10.50%
|
1 July 2016
|
| 2017-18 |
11.00%
|
1 July 2017
|
| 2018-19 |
11.50%
|
1 July 2018
|
| 2019-onwards |
12.00%
|
1 July 2019
|
Can the increases be “absorbed”?
An employer’s ability to “absorb” the additional superannuation contributions from an employee’s package will turn on the specific terms of any applicable employment contract, Modern Award or Enterprise Agreement.
A total package inclusive of superannuation
Where an employee is employed by reference to a Total Remuneration Package (TRP) inclusive of superannuation, an employer will generally be able to “absorb” the increased superannuation contribution, by effectively decreasing the take home pay component of the fixed amount.
Employers adopting such an approach, should be cautious that they don’t breach minimum wage requirements under the Fair Work Act 2009 or applicable Modern Awards.
Where a base salary or fixed wage is plus superannuation
In the case of remuneration packages expressed as a base salary (or hourly rate or wage) plus superannuation, employers will not generally be able to “absorb” the increases and will instead be obliged to fund the extra contribution themselves. This may leave employers with an additional superannuation liability on top of current wage or salaries.
Importantly, generally nothing prevents an employer, where conducting a discretionary salary review, from making an increase that is inclusive of a changing superannuation rate. However, employers will need to be prepared to manage likely resistance from their employees in taking such an approach.
The 2013/14 Opposition Budget Reply
Opposition Leader Tony Abbott has signalled, in his Budget reply speech that, if elected, a coalition government would delay the legislated superannuation increases by two years. Notwithstanding this, the first increase is scheduled for 1 July 2013, over 2 months before the election.
Further Considerations
Employers are currently not legally required to make minimum superannuation contributions to employees over the age of 70. From 1 July 2013, that upper age limit will be removed, leaving employers with an uncapped liability to pay superannuation.
For further information, please contact:
Anne MacNamara, Partner, Henry Davis York
Tony Woods, Partner, Henry Davis York
Bronwyn Maynard, Henry Davis York
Jane Favretto, Henry Davis York
Tom Reaburn, Henry Davis York
Corinne Shalala, Henry Davis York
Henry Davis York Labour & Employment Practice Profile in Australia
Homegrown Labour & Employment Law Firms in Australia
International Labour & Employment Law Firms in Australia