Superannuation: The Changes

From 1 July 2021, the superannuation guarantee rate will increase from 9.5% to 10%.

What does this mean for your Practice?

In short, it means that Practices will now have to pay 10% superannuation for your employees instead of 9.5%. Most practices can expect to pay this increased rate on top of your employees’ base salary. However, there is a possibility that some employers will be able to offset the increased rate by reducing the employees base salary (so that the employees ‘absorb’ the increase).

Whether employers can offset the increase depends on the contract of employment. Basically, if your employee’s salary is exclusive of superannuation, you won’t be able to offset. If your employee’s salary is inclusive of superannuation, you may be able to offset.

  1. Salary exclusive of superannuation (more common): If your employment contracts are expressed in this way, it generally means that the increase in the Contribution Rate will come at a cost to employers i.e. the additional 0.5% will need to be added to the contribution amount, on top of the base salary
  2. Salary inclusive of superannuation (less common): If your employment contracts are expressed in this way, you may be able to “offset” the increase in the Contribution Rate by decreasing an employee’s base salary, with no overall increase in remuneration. However, the base salary (excluding super) must still meet the minimum award amount, provided by the Health Professionals and Support Services Award 2020.

Advice for Practices

We suggest that you review your employment contracts for new hires and update your processes to ensure you’re paying the correct rate into the correct fund.

You should also review your contracts for existing employees to determine whether they allow the base salary to be reduced to accommodate for the increased rate. If you are a ClinLegal member, all our contracts have already been updated (in our contract app) to reflect the change.

If you want to offset the increase, and your employment contracts allow it, you should still seek legal advice before deciding on a course of action and make sure to clearly communicate any changes to staff since forcing employees to bear the cost of the increase may lead to a backlash.