Your Super Contributions Will Increase To 12% – But Who Will Pay For It?

The Government’s Henry Tax Review has had some dramatic changes for Superannuation recently.

For instance, the minimum superannuation contribution from employers will go from 9% to 12% within the next 7-8 years.

With this superannuation guarantee increase to 12%, who will front the costs?

What does this mean for you?

Do you currently get paid a package at work that is inclusive of super? Many people have asked us;

With the changes to superannuation, who will pay the extra 3% superannuation requirement? Will it be taken out of my salary or will my employer have to pay me more (technically).

This means that people are concerned about whether they will have less take home pay when these new rules are introduced.

So who will pay the 12% super guarantee increase?

It appears that employers will be obligated to pay the additional contributions in super (extra 3%). This means that regardless of whether your contract states your pay is inclusive or exclusive of super, the company will pay it for you.

This means you won’t have a cut in take home pay and you will be technically getting a 3% pay rise into forced super savings.

Not bad hey?

When do the super changes take place?

It has been noted that the full 3% increase in forced super savings won’t actually come into play until 2019. In the mean time however, there will be minor increases as follows:

  • 2013 – 2014 = 0.25 per cent super increase
  • 2014 – 2015 = 0.25 per cent super increase
  • 2015 – 2019 = 0.50 per cent super increase until 2019

Why is this change occurring?

Did you know that compulsory superannuation only took place in 1992? This means many people are without any strong superannuation and will have a miserable retirement unless they start to focus on filling that super account.

The changes from 9% to 12% are estimated to create an extra $85 billion in superannuation savings over the next 10 years.

That is a lot of games of bingo in retirement!

Comments

  1. danny hopkins says

    To suggest that an employer will pay the 3% increase in super payments as some sort of kind bonus is misleading and you guys know it. Future wage increases will be rightly affected even though the government doesn’t tell you this. It’s common sense and forced saving. I don’t have a problem with it, but I wish super funds etc would not lie about who eventually pays, one way or another. Your employer is not a fairy god mother!

  2. says

    Hi Danny, we do agree with you – there is no intent to be misleading here, though the fact remains that your employer will be responsible. So many people are worried about losing 3% of their pay we see this article as a way to quickly distinguish who exactly will be liable for the 3%.

    In terms of future wages been affected, this may be true – though within no time, wages will be right as rain. When the 9% super contribution was instated, many thought the same thing – though now days wages are barely connected to having the 9%. Lets watch this space and see how it goes over time!

  3. Gary says

    Another reason for very small businesses to NOT employ anyone. I divested our business of employees altogether. Sure, it took me about 12 months to do it, but I got there in the end. How? Reduced the stock level which reduced the sales which meant I didn’t need employees. End result, still making the same. The 9% SG was a big enough burden on business let alone 12%. At the end of the day the only businesses left that can afford it are the big boys. Say goodbye to good service from your small local supplier.

  4. Jodie says

    Alex, I don’t agree with you. My employer inserts the following clause in our employment agreements: “in the event of an increase in the statutory minimum superannuation contribution, this shall not affect the amount of the total remuneration package agreed but shall result in an appropriate adjustment to other components of the remuneration package so that the total remuneration package amount is not altered”

  5. Mark says

    I thought the government was paying the extra super through the collection of the mining tax??? Or that’s what we’ve been led to believe. No, businesses like mine will have to stump up the extra 3% (over time) with no compensation from the government and certainly no access to the proceeds from the tax!

  6. says

    Hi Jodie,

    Thanks for sharing – that indeed is rather interesting. I wasn’t aware it was possible to have such clauses though does make sense someone has thought of it.

    I would love to know if you intend to discuss this with your employer and what the outcome is. I am sure this kind of situation will be common and in turn create some media heat.

    I will now have to double check my own contract as I am worried!

    Thanks for taking the time to comment.

  7. Jodie says

    Hi Alex,

    I have raised it briefly with my direct manager, who was unaware the clause even existed! (Not surprising given that our contracts are written by the HR boffins at corporate many miles away.) It remains to be seen how it will be handled, but I guess my manager knows that I’ll be pushing for CPI + SGC increases as a minimum in my annual salary review each year until we hit the 12%.

    Hope your contract is not also ‘booby-trapped’. Cheers!

  8. SB_Australia says

    As an employer, I’m furious that I am being made responsible for my employee’s retirement funds to the tune of an additional 3% and yes, as some have suggested, all this means is any future plans to increase wages will be suspended until after the 12% is in effect for a while after.

    The government is quite happy to ‘take take take’ but when it comes to giving something back (like retirement pensions for example) it’s someone else’s responsibility, but not the individual, no, we couldn’t ask people to take responsibility for their own future!

  9. P.F says

    We will pay fort the increase, we all know it. How it comes about is a matter of rethoric.

    What we also know by experience is that taxes will continue to increase with restrictions on the use of ‘saved’ amounts. We learnt at school that there was not going to be enough money from the working class of tomorrow to pay for the baby boomers retirement. No surprise there.

    But let’s face it; with the shrinking economy and the short term (and short sighted) management of ALL issues by the politicians of ALL sides: YOUNGER PEOPLE WON’T SEE A CENT OF IT.

    No government guarantee, no promise or reasurance will change that. We MAY get a pension. then again… we also wil have to work to 75 and pay for our increasing medical bill, unless we manage to get into politics by then to profit from the benefit the present exploiting aristocracy has set in place for themselves.

    If super is so good, why do governments need to force changes in PRIVATE industries?

  10. Anne says

    I am an employer and the Government cuts in Queensland have really effected my business.

    They forgot about the flow on effect of drastic government spending cuts. Now I have to consider the additional payment into others superannuation accounts. I think the best way around this is to just chuck it all and go on the dole.

    There is no incentive any more for people to work hard and try to employ people. Small business is going to be a thing of the past in this country. Taxes, taxes, taxes and no incentive. What is the point – sick of propping others up.

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