Superannuation changes from 1 July – what do you need to know?
The following provides an overview of the changes, as well as the actions you will need to take within your organisation.
Removal of $450 minimum threshold for Superannuation Guarantee
Previously employers did not have to pay superannuation on wages when the employee had earned less than $450 in a month. The removal of this means you’ll need to pay super for all employees over the age of 18, no matter how many hours they have worked in a month.
It’s important to note too that from 1 July 2022, super will be payable to employees under the age of 18 if they work more than 30 hours per week, regardless of how much they earn.
Superannuation Guarantee rate increase to 10.5%
Effective 1 July 2022, the superannuation guarantee rate will increase to 10.5%. It will continue to increase to 12% over the coming years as summarised in the table below.
|1 July 2022 – 30 June 2023||10.5%|
|1 July 2023 – 30 June 2024||11%|
|1 July 2024 – 30 June 2025||11.5%|
|1 July 2025 onwards||12%|
What action do you need to take?
As an employer you will need to ensure that your payroll software is prepared for the incoming changes. The process for this varies across different payroll software providers. We’ve provided a summary of the more common small to medium sized accounting packages below:
For Xero customers, other than ensuring all your employees’ super details are up to date, there is nothing else you will need to do in Xero.
- From 1 July, the removal of the $450 threshold will be automatically applied to the total super liability on selecting pay-runs to facilitate payments. If you have selected the statutory rate as your calculation option for super payments, Xero will automatically apply 10.5% for pay periods from July 1.
- It’s a good idea to ensure details and super information are up to date in Xero for all employees before the end of the financial year.
If you’re using the latest AccountRight version (version 2022.4 or later), there’s a new calculation basis in your superannuation guarantee payroll category called Minimum Required Rate to address the change in the superannuation rate. This option caters for the 1 July rate increase and any future rate increases.
- The Minimum Required Rate option might be automatically selected for you, depending on how your super is currently calculating. You will need to check whether this option has been selected automatically otherwise you will need to change to this new category yourself.
- You will see this new option in all super payroll categories where the Contribution Type is set to Superannuation Guarantee (expense). For example, you’ll see it in your default super guarantee payroll category (Payroll > Payroll Categories > Superannuation tab > Superannuation Guarantee).
- 30 June 2022 or earlier, the $450 minimum earnings threshold will apply
- 1 July 2022 or later, the threshold will not apply automatically and super will calculate on the pay regardless of how much the employee has earned that month (subject to any wage payments that are exempt from super). This means any value in the threshold field in the super guarantee payroll category will be ignored for pays dated 1 July 2022 onwards.
- If an employee’s superannuation guarantee rate is set to 10% as at 30 June 2022, it will automatically update to 10.5% from 1 July onwards.
- If the employee’s rate is not set to 10% as at June 30, you will need to manually update it.
There is nothing you need to do in MYOB Essentials to cater for the removal of the $450 threshold. The right amount of super will be calculated each pay based on payment date.
- As long as you have selected the option ‘Automatically update super rates’ on your payroll settings, super rates will be automatically calculated to 10.5% on your pay run and future updates will occur automatically.
- Where an employee’s super threshold in their pay run defaults has not been overridden and shows $450, QuickBooks will automatically update the employee’s super setting to have no threshold from 1 July 2022.
Minimal information has been distributed from Reckon, however last year when the rates increased from 9.5% to 10%, Reckon included an automatic change in the upgrade version, or upgrade in tax tables depending on the type of file you are using.
Guidance in the community support pages from the ‘Reckon Community Manager’ suggests that the updates to tax tables and versions should also update the threshold to $0, however this is subject to change and is not official yet.
We recommend you keep watch for more information from Reckon regarding this and ensure you are using the latest version of their products/tax tables.
Software health check
If you would like more information regarding any of the changes outlined here, or what you need to do to ensure compliance, please do not hesitate to contact your WLF Advisor for assistance.