Remember Stevie Wonder’s classic song from 1984, “I just called to say I love you”? Well, while your superannuation fund does not have a phone, it is time to tell it you love it. Why? Due to the deal done between the Palmer United party and the coalition to remove the Carbon Tax, there is now a freeze on the Super Guarantee (SG) contribution rate, which was previously planned to increase under the previous government.
With the cost of living and property prices in major capital cities staying high, wages flat lining and inflation rising, you need to understand the implications of compulsory superannuation contributions being frozen for the next 5-6 years at 9.5%.
Now for many employees and small business owners, superannuation is forever a pain and confusing. I am sure the government does not mean to make superannuation confusing, but unfortunately that is the way both employees and employers look at it.
Under the previous Labour government, effective the 1st of July 2013, SG contributions increased to 9.25%, with plans to rise to 12% in stages until July 2019. However, changes under the new government now show you what you are entitled to and when.
Superannuation Guarantee rate
SG contribution rate
2015 – 2020
And that’s where the joy ends — the proposed increase in SG contribution rate, is now on hold or frozen. The compulsory increase planned under the previous government would give a 30-year old on average full-time wages an extra $108,000 in retirement savings just by turning up for work.
What now for employers?
With the current government freezing the SGC at 9.5% SGC until 2020, what does it mean for small businesses? There has been, and will continue to be, some resistance from employers — especially small business employers — to this policy. Check out the ATO website to keep abreast of your obligations as an employer. Make sure you’re paying the right amount of SG for your staff.
Meanwhile, employees who are relying on superannuation to retire now need to be aware of the implication, and take Stevie Wonder’s advice! Make sure you plan your financial future wisely.