The superannuation guarantee (SG) rate is set to increase from 10.5% to 11% on 1 July 2023. Employers will need to update their payroll systems to ensure the updated rate is applied to payments made to employees on or after 1 July 2023.
There is also an increase to the total amount of super you can transfer into a tax-free pension account. The transfer balance cap (TBC) will increase to $1.9 million on 1 July 2023.
SG rate increase
In July 2023, the superannuation guarantee statutory rate will rise to 11%. Annually, the rate is increasing by 0.5% until July 2025 when it will reach the legislated 12%.
What can you do to prepare?
Here are some of our tips on preparing for these increases.
- Review your current superannuation costs for all employees, both hourly and salaried.
- Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
- For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
- Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
- Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
- Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.
Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.
Superannuation transfer balance cap (TBC) increase
The TBC will increase by $200,000 to $1.9 million on 1 July 2023. The TBC is a limit on the amount of super that can be transferred to a tax-free pension account.
If you are planning to start pension soon, it may be beneficial to defer until 1 July 2023 to take advantage of the extra $200,000 in TBC.
Please speak to us if you have any questions or would like to discuss any tax planning opportunities.