What does the SG increase mean for employers?

Super guarantee (SG) is the minimum amount an employer must pay to avoid the super guarantee charge. The rate of SG has been 9.5% since 1 July 2014, and will rise over the next 4 years in the following increments:

Period	Superannuation
Up to 30 June 2021	9.5%
1 July 2021 to 30 June 2022	10%
1 July 2022 to 30 June 2023	10.5%
1 July 2023 to 30 June 2024	11%
1 July 2024 to 30 June 2025	11.5%
From 1 July 2025	12%

The impact of these increases (which remain subject to a cap – the maximum super contribution) on an employer will depend on how its employment contracts are structured. Typically, contracts provide that an employee is either paid:

• a base salary plus super (Category 1); or
• a total remuneration package which includes super (Category 2).

Where a contract falls within Category 1, the employee’s take home pay will not be affected and the employer must pay the increased contribution because super is exclusive of the employee’s salary.

Where Category 2 applies, then it may be possible to absorb the increased contribution into the employee’s total remuneration with a consequential decrease in the employee’s base salary, provided that the employee is paid above the applicable minimum rate of pay under any award, enterprise agreement or the minimum wage. This is dependent on the wording of the contract either not disaggregating the salary and superannuation components of the total remuneration package, or providing that the components that currently make up the total remuneration package cannot change.

An employer cannot unilaterally change an employee’s contract from one arrangement to the other.

Employers must also be mindful of these changes for any contractors (or other categories of “workers”) who are deemed employees for SG purposes.

Choice of fund rules

The reform introduces a number of other changes to super, including amendments to the choice of fund rules in the Superannuation Guarantee (Administration) Act known as ‘stapling’.

From 1 November 2021, where an employee commences employment but has not nominated a super fund, the employer is required to make contributions to the employee’s existing super fund (in circumstances where they have one). Employers will be able to check with the ATO to see if the employee has an existing super account.

The purpose of this change is to prevent employees from having multiple super funds as account fees can significantly erode the amount of super over a period of time. By figuratively ‘stapling’ the employee’s super fund to them, their account follows them from each job and overrides the employer’s nominated default fund.

Enterprise agreement terms

If an enterprise agreement applies to the employee and it includes terms specifying that contributions will be made to the employer’s default fund in the absence of the employee nominating an alternative fund of their choice then:

• if the enterprise agreement was made before 1 January 2021, the employer can continue applying this term until the next time the enterprise agreement is negotiated; but
• if the enterprise agreement was made after 1 January 2021, then effective from 1 November 2021, the stapling rules will override the offending provision in an enterprise agreement and the employer must make contributions to the employee’s existing superannuation fund (in circumstances where they have one).

What should employers do?

Employers should review employment contracts and update all payroll settings and systems to ensure the SG rate is increased appropriately each financial year.

From 1 November 2021, employers should ensure that they ‘staple’ existing funds to new employees by obtaining information about their existing super funds where the new employee does not nominate a super fund (provided the new employee isn’t covered by an enterprise agreement which was made before 1 January 2021).

Employers who are currently negotiating enterprise agreements should prepare clauses which amend their superannuation obligations to reflect the new stapling requirements.

If you would like us to assist you with reviewing your employment contracts for new employees or have any queries, please contact a member of our Employment, Safety and People team.