Coming into the 2022-23 financial year, there are a few changes to be mindful of in relation to superannuation and wages.
Superannuation constribution increases to 10.5%
The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will then steadily increase by 0.5% each year until it reaches 12% on 1 July 2025. If you have employees, what this will mean depends on your employment agreements. If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.
$450 super guarantee threshold removed
From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation. For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week.
Now is the time that you should check which employee's will now be eligible to receive superannuation contributions. For these employees, provide them with a standard super choice form to gather their superannuation details ready for the first super payment calculated on wages paid after 1 July 2022. Also, remember for any new employees starting in your business, if they don't choose a super fund, you may have an extra step to take to comply with choice of fund rule, to request their ‘stapled super fund’ details from the ATO.
Remind employees to keep their super fund details up to date
Employees may receive a notice from their super fund that their details are changing, such as because their fund is merging with another retail or industry fund or they may decide to roll their benefits to another super fund, which means their current fund has closed. If you attempt to make payments through your superannuation clearing house, if the employees old fund details are used, your payment will be rejected and if you find out too late, you risk making your superannuation payment for all employees late. So before making your monthly or quarterly contributions, regularly check with your employees that they have provided you with their current fund details, including member number and USI, unique superannuation identifier.
Removal of the work test requirement for personal non-concessional and salary sacrificed contributions.
From 1 July 2022, the work test has been removed completely for non-concessional contributions, meaning this type of contribution can still be made until turning 75.
You will still need to have a total superannuation balance below the $1.7million threshold as at the previous 30 June to be able to make a non-concessional contribution.
The work test has also been removed for salary sacrificed contributions so if you don’t meet the old work test requirement of 40 hours of gainful employment within a 30 consecutive day period, you can still make salary sacrificed superannuation contributions.
Work test still required to be met for personal deductible contributions
Where you are over age 67 and wish to claim a tax deduction for a personal super contribution made from 1 July 2022, you will still be required to meet the work test requirements. This means you will need to have been gainfully employed (which includes being self-employed) for at least 40 hours within any consecutive 30 day period in the financial year. Alternatively, you may meet a work test exemption in certain limited circumstances.
Eligibility for bring forward non-concessional contributions also extended
With the ability to make non-concessional contributions having been extended to age 75 from 1 July 2022, the ability to use the bring forward provisions to make up to three years of contributions in one year has also been lifted.
From 1 July 2022, you meet the age based criteria to trigger a bring forward contribution if you are less than 75 at any time in the financial year. This means a non-concessional contribution of up to $330,000 (based on the current limits) could be made. However, it is important that whilst the bring forward contribution is available in the financial year you turn 75, you would need to make the contribution before you turn 75, as non-concessional contributions cannot be made after that time.
The maximum amount that can be contributed under the bring forward rule can be found here.
Reduced minimum payment requirements from account based income streams
The 50% temporary reduction in the minimum payment required from account based pensions will be extended from 1 July 2022 for another 12 months. This means if you do not require the standard minimum payment from an account based pension for the next 12 months, as has been the case for the past three financial years, you can reduce the minimum payment requirements.
Details of the minimum drawdown requirements can be found here.
Eligibility for downsizer contributions from an earlier age
From 1 July 2022, the age requirement to make a downsize contribution has been reduced from at least 65 years of age at the time of making the downsizer contribution to age 60. The downsizer contribution allows many older Australians to make additional contribution to their super when they sell their main residence, with the contribution not counting to their annual non-concessional cap.
The maximum that can be contributed is $300,000 per member of a couple, and they need to have owned their house for at least ten years and they cannot have used the downsizer contribution before.
It is worth noting that during the course of the 2022 federal election campaign, the Labor party announced that this would be further lowered to a minimum age of 55, but this has not yet been legislated.
It is important to remember that you need to tell the super fund that the contribution is a downsizer contribution at the time of (or before) making the contribution. If this is not done, it will be regarded as a non-concessional contribution and assessed to the non-concessional contribution cap.
Get set for a minimum wage increase
Following its Annual Wage Review 2021-22, the Fair Work Commission (FWC) has made 2 announcements:
the National Minimum Wage will increase by $40 per week, which amounts to an increase of 5.2%. This applies to employees not covered by an award or registered agreement. The new National Minimum Wage will be $812.60 per week or $21.38 per hour.
award minimum wages will increase by 4.6%, which is subject to a minimum increase for award classifications of $40 per week and based on a 38-hour week for a full-time employee. This applies to employees are covered by an award - a legal document that outlines the minimum pay rates and conditions of employment. This means minimum award wages:
above $869.60 per week, will get a 4.6% increase
below $869.60 per week, will get a $40 increase.
When the increase starts:
the new National Minimum Wage will apply from the first full pay period on or after 1 July 2022. This means if you have a weekly pay period that starts on Mondays, the new rates will apply from Monday 4 July 2022.
the award increase will happen in 2 stages, with most awards increasing from the first full pay period on or after 1 July 2022. For some awards, the changes will occur from 1 October 2022.
Check the applicable award agreement for your industry by searching for it on the Fair Work Commission website: Find an agreement for further details.