Superannuation guarantee: On Tuesday 1st June, the Treasury secretary announced that 80 percent of future superannuation guarantee increases are predicted to come at the cost of workers’ wage growth.

The Treasury secretary said that as each 0.5 percentage point increase takes hold of the superannuation guarantee, wages growth would fall 0.4 percentage points every year.

“Increases in the super guarantee get reflected into our wages forecasts. Obviously, they’re still people’s earnings but they go into super and they lower the wages forecasts,” says the Treasury secretary.

The superannuation guarantee is set to rise from 9.5 percent of gross wages to 12 percent between July 2021 and July 2025.

Furthermore, inflation is expected to exceed nominal wages growth through the 2020-21 and 2021-22 financial years before they’re forecast to equal inflation in 2022-23 and 2023-24. Positive real wages growth isn’t predicted to return until the 2024-25 financial year.

Impending Increase for The Superannuation Guarantee Starting On 1st July 2021

On 1st July 2021, the superannuation guarantee rate will increase from 9.5% to 10%. Employers across the country will need to make sure that their payroll and accounting systems are updated to incorporate the increase to the super rate.

The superannuation rules specify that an employee’s earnings base must be the amount on which minimum superannuation contributions are payable to avoid the superannuation guarantee charge (SGC). This earnings base is determined as “ordinary time earnings” (OTE).

In general terms, this may seem self-explanatory — that is, OTE is what an employee earns for their day-to-day hours of work. However, it is the extra elements to remuneration that can trip up an employer. For example, shift loadings and allowances are included in OTE, but not overtime payments.

Payments that are included in ordinary time earnings for each employee

  • Earnings for “ordinary” hours of work. In the case of casual workers, use actual hours worked (not minimum hours stipulated in employment contracts).
  • Bonuses that relate to good performance (includes Christmas bonuses).
  • Piece-rates where no ordinary hours of work stipulated.
  • Over-award payments.
  • Payments in lieu of notice.
  • Shift loading.
  • Casual loading.
  • Annual leave, sick leave, or long service leave.
  • Allowances (excluding expense allowances and reimbursements and items that are fringe benefits such as a living away from home allowance).
  • Commission or bonuses that relate to specific performance criteria.
  • Government subsidies.
  • Directors’ fees.
  • Workers’ compensation and top-up payments paid in relation to hours worked.
  • The labour portion only of payments to a contractor who is an employee (that is, contract is wholly or principally for labour of that person).
  • Payments for performance in, or provision of services relating to entertainment, sport, promotions, films, discs, tapes, TV or radio, and
  • Remuneration of people in the service of the Commonwealth, the States or Territories, and local government councillors who are members of eligible local governing bodies (excludes payments to elected local government officials (unless they are effectively full time employees)).

Payments that are not included in ordinary time earnings

  • Overtime payments for work performed during hours outside an employee’s ordinary hours of work.
  • Top-up payments when serving on jury duty, or with reserve forces, etc.
  • Remuneration while on parental leave.
  • Annual leave loading that is clearly compensation for missed overtime while on leave.
  • Accrued annual leave on termination of employment.
  • Long service leave and sick leave paid as a lump sum on termination of employment.
  • Redundancy and employment termination payments.
  • Fringe benefits subject to fringe benefits tax.
  • Workers’ compensation and top-up payments paid where no work is performed.
  • Pensions and social security benefits.
  • Dividends.
  • Partnership and trust distributions.
  • Payments for entering into a restraint of trade agreement.
  • Payments for domestic or private work for the employment of a person for less than 30 hours a week.
  • Allowances paid to local government councillors, unless they are effectively full-time employees, and
  • Unused flex leave to non-ongoing employees covered by a certified agreement.