In addition, from 1 July 2022 the $450 minimum monthly earning threshold will be removed. This means all salaries are subjected to superannuation unless they exceed the maximum superannuation contribution base.

Businesses should also be aware of an increase in the National Minimum Wage which applies to employees not covered by an award or registered agreement. From 1 July 2022, the National Minimum Wage will increase by $40 per week, which amounts to an increase of 5.2%. The new National Minimum Wage will be $812.60 per week or $21.38 per hour. For further information on this refer to the website here.

Accordingly, from 1 July 2022 not only will employers need to update their payroll settings to reflect the increase in rates but also consider the increased costs of these changes and the upcoming increases over the next few years.

It is important to note that the new SG rate will apply to wages that are paid on or after 1 July 2022, even if some or all of the pay period is for work performed before 1 July.

Impact on employers and employees

The financial impact of the 0.5% increase in the SG rate will depend on the terms of existing and new salary and wage packages.

The effect of the increase on particular salary packages needs to be carefully considered to determine whether the additional 0.5% SG contribution needs to be added on top of the existing salary package (i.e. no change to the employee’s take home pay) or incorporated into the existing salary package amount (i.e. resulting in a reduction of the employee’s take home pay). In addition, employers will need to consider the effect of the increase in the SG rate on relevant employee awards.

The 0.5% increase cannot be accounted for using an employee’s salary sacrifice contributions. It is also imperative to take into account that the ordinary time earnings (OTE) base for Superannuation Guarantee purposes now specifically includes any sacrificed OTE amounts. This means that contributions made on behalf of an employee under a salary sacrifice arrangement are not treated as employer contributions which reduce an employer’s charge percentage.

Each year, the Federal Government sets a maximum limit on an employee’s income on which employers need to pay SG contributions, called the maximum superannuation contribution base. Due to the 0.5% increase, the maximum super contribution base will also be increasing to $240,880 per annum from $235,680 per annum.

The annual concessional contributions cap remains at $27,500 for 2022-23. Any contributions made beyond this amount may attract a higher tax rate and an excess contributions charge.

Please contact your Ruddicks adviser if you have any questions in relation to your superannuation obligations and complying with the SG rate increases from 1 July 2022.

Clients using Xero accounting packages

Xero may handle the superannuation guarantee (SG) contribution rate increases and update them for you, if your settings are correct. We recommend reviewing your payroll settings in Xero before 1 July 2022.

If an employee has the Statutory Rate option selected in Xero, the new rate is automatically applied in pay runs with a payment date of 1 July 2022 onwards. If your employee doesn’t have the Statutory Rate option selected, you can review this in their Pay Template and manually update the rate if needed.

The Statutory Rate option automatically applies to your existing employees' pay templates and superannuation lines if the:

• Contribution type is SG Contribution.
• Calculation type is Statutory Rate.
• Percentage applied on the employee's pay template is 10.5%.

Any superannuation lines you add default to the statutory rate option for new employee pay templates.

Xero doesn't automatically cap super contributions. If you have an employee whose earnings are in excess of the maximum superannuation contribution base, you'll need to update their pay template manually, subject to any contractual agreements with your employees.

For further information and instructions, refer to the following website here.

Clients using MYOB accounting packages

A manual change to your payroll settings in MYOB is required before completing a pay run after the 1 July 2022 changes come into effect. This change will result in MYOB automatically updating the superannuation guarantee (SG) contribution rate for increases in future years. To ensure MYOB calculates superannuation for staff correctly, close attention to the changes required by the different MYOB versions will be important.

We recommend reviewing your payroll settings in MYOB before 1 July 2022.

MYOB AccountRight

MYOB AccountRight version 2022.4 or later has a new setting for superannuation within Payroll Categories called Minimum Required Rate. This setting needs to be selected in Payroll Categories manually for each “superannuation guarantee” payroll category. Updating this setting ensures that the current rate of 10% will apply to pay runs with a payment date before 1 July 2022 and the rate will automatically change to 10.5% from 1 July 2022. It is a once-off change that will apply for future years.

MYOB AccountRight doesn't automatically cap super contributions. If you have an employee whose earnings are in excess of the maximum superannuation contribution base, you'll need to update the limit in the payroll category, subject to any contractual agreements with your employees.

For further information and instructions, refer to the following website here.

If you are using MYOB AccountRight version 2022.3 or earlier we recommend upgrading your software as soon as possible before reviewing the settings as described above.

MYOB Essentials

A manual change to your payroll settings in MYOB Essentials may be required by 1 July 2022. The SG rate is recorded against each employee in MYOB Essentials. If the employee’s SG rate is set to 10% as at 30 June 2022, it will automatically update to 10.5% from 1 July onwards.

If their rate is not set to 10%, it will need to be manually updated.

Before processing any pays for the new payroll year, we recommend checking each employee's superannuation guarantee rate to make sure it's set correctly.

MYOB Essentials doesn't automatically cap super contributions. If you have an employee whose earnings are in excess of the maximum superannuation contribution base, you'll need to update the limit in the pay item, subject to any contractual agreements with your employees.

For further information and instructions, refer to the following website here.

Please contact your Ruddicks adviser if you require assistance with ensuring that your payroll software is complying with the SG rate increases from 1 July 2022.

DISCLAIMER:

Liability limited by a scheme approved under Professional Standards Legislation.

The content of this newsletter is general in nature. It does not constitute specific advice and readers are encouraged to consult their Ruddicks adviser on any matters of interest. Ruddicks accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. This information is current as at 27 June 2022, and was published around that time. Ruddicks particularly accepts no obligation or responsibility for updating this publication for events, including changes to the law, the Australian Taxation Office’s interpretation of the law, or Government announcements arising after that time.

Any advice provided is not ‘financial product advice’ as defined by the Corporations Act. Ruddicks is not licensed to provide financial product advice and taxation is only one of the matters that you need to consider when making a decision on a financial product. You should consider seeking advice from an Australian Financial Services licensee before making any decisions in relation to a financial product. © Ruddicks 2022