As of July 1st, 2013, the superannuation rules have changed in Australia with a .25% increase in the superannuation guarantee - but the real question is, how these changes affect you and your superannuation contributions?
What is superannuation?
Firstly, a quick recap: superannuation is a union-initiated long-term savings plan designed to help people in their retirement. You cannot access your superannuation funds until you are at least 55 (except in very special circumstances), meaning that it keeps growing over the years for you to enjoy later. For a number of years employers have been required to make compulsory superannuation contributions on behalf of eligible employees at the minimum rate of 9% of that employee’s ordinary time earnings, up to a maximum superannuation guarantee contribution base.
However, thanks to recent changes, the minimum compulsory superannuation contribution rate has increased from 9% to 9.25%. This change is the first in a series of annual increases to the minimum rate and is expected to reach 12% by the 2019 – 2020 financial year.
Sounds good? Any increase in the minimum super contribution can’t be a bad thing, can it? Well, it all depends on the answer to the next question…
So who actually pays this extra .25% - my employer, or me?
The answer is not clear-cut and depends on your existing employment contract. If, for instance, if you are paid a base salary plus superannuation, this means your employer must pay the .25% increase in their contributions to your superannuation fund.
However, if your employment contract stipulates you have a fixed remuneration package that is inclusive of super, the cost to your employer has stayed the same. This may mean that while your super contributions will rise from 9% to 9.25%, your employer could choose to offset this cost by reducing your actual take home pay by .25%.
In effect, if your employer takes this approach, you are the one who is paying the extra quarter per cent into your super fund because under a fixed remuneration package inclusive of super, your employer is under no obligation to increase your pay to ensure you receive the same amount of take home pay as you did prior to the increase.
Of course, this is presuming you do not have an existing industrial award or agreement that specifies your employer must absorb any and all increases in super.
How do I find out who is responsible for paying the increase?
Firstly, you should read your employment contract and talk to your employer or Human Resources department about the changes to superannuation, and whether you are affected.
Then you should check your first pay packet post changes to ensure the figures look right, taking into account the super changes. Finally, you should review your salary sacrifice arrangements, as the amount that is now going into super may exceed your superannuation contribution caps.
With these new changes being introduced this year, why not take some extra time to ensure that you understand how these changes are affecting you? And with even further increases to the minimum superannuation contribution rate proposed over the next few years, now is a good time to find out more about superannuation and other important factors related to superannuation including income protection cover – whether it should be held within or outside your super fund.