Understanding the superannuation rate for 2024

The superannuation guarantee (SG) rate recently increased to 11.5%, a move designed to bolster the retirement savings of employees across the country. For business owners and HR managers, understanding this new rate is essential, as it affects payroll calculations and has significant implications for financial planning and budgeting. 

In this article, we unpack the 2024 superannuation rate, discuss its impact on employers, and offer strategies to streamline superannuation compliance, ensuring your business stays ahead of the curve.

All information contained in this article is accurate as of 25.08.2024. For the most up-to-date information, please refer to the Australian Taxation Office.

Overview of the superannuation rate 2024

As of 1 July 2024, the superannuation guarantee rate in Australia rose from 11% to 11.5%. As an employer, there's a legal requirement for you to contribute this percentage of an employee’s ordinary time earnings (OTE) into their superannuation fund. This increase is a vital part of Australia's broader strategy to ensure its workforce is financially prepared for retirement.

For every $100 earned, you must now contribute $11.50 to the employee’s superannuation fund, demonstrating the government's commitment to enhancing retirement savings. Understanding how to handle both concessional contributions and after-tax contributions is essential for effectively managing superannuation obligations.

Context on why the rate increased and its objectives

The Australian government raised the superannuation rate to 11.5% to boost retirement savings, recognising the challenges posed by an ageing population and rising life expectancy. With Australians now living an average of over 82 years, ensuring sufficient retirement funds is key to reducing the pressure on the public pension system. The increased rate directly affects financial security, as it mandates higher super contributions, which accumulate over time, leading to larger retirement savings for individuals. 

By setting the superannuation guarantee at 11.5%, the government aims to secure the financial well-being of retirees while also encouraging economic stability. The superannuation system currently manages around $3.9 trillion in assets, making it a significant component of Australia's financial landscape. Higher SG contributions mean a larger pool of capital, which superannuation funds can invest in infrastructure, real estate, and other economic projects. These investments offer returns that benefit individual superannuation accounts while stimulating broader economic growth, creating jobs and supporting industries.

Statistics from the Australian Institute of Superannuation Trustees (AIST) suggest that without incremental increases to the super guarantee, many Australians would face a significant shortfall in their retirement savings, with some projections indicating that over 50% of retirees could outlive their savings. By mandating higher super contributions, the government helps build a safety net that reduces the likelihood of financial hardship in retirement.

Learn more about how superannuation works

The impact on employers

The increase in the superannuation guarantee rate brings significant implications for employers, affecting the way they manage payroll and how they plan their finances.

How the new SG rate affects payroll calculations

The increase in the superannuation guarantee rate to 11.5% requires you to adjust your payroll software and systems to accurately calculate contributions for each pay cycle. Now, you must contribute $11.50 for every $100 of an employee's ordinary time earnings, compared to the previous $11.00. This adjustment may seem minor but carries significant implications, especially if your business has a large workforce.

It's important to review your payroll processes and update your systems to reflect the new rate. Non-compliance with the updated superannuation requirements may lead to penalties and fines from the Australian Taxation Office (ATO). You could also face audits to verify compliance, which might result in additional administrative burdens and costs if discrepancies arise. If your business manages payroll manually or uses outdated software, it faces a higher risk of errors, making it essential to consider adopting accurate, automated and reliable payroll solutions.

Implications for financial planning and budgeting

The impacts of the increase to an 11.5% super guarantee rate extends beyond payroll processes, affecting overall financial planning and budgeting for businesses. This increase represents an additional expense that you must factor into your operating costs. For example, if your business has a payroll of $1 million annually, it'll now have to contribute an extra $5,000 to superannuation funds compared to the previous financial year. While this may seem manageable on a small scale, the costs can add up significantly if you have a larger company or one with high employee turnover.

You need to account for this increased financial obligation in your annual budgets and forecasts. It may require reallocating funds from other areas, reducing profit margins, or finding ways to optimise operational efficiency to absorb the added cost. Strategic planning becomes more urgent, particularly if you're a small and medium-sized enterprise (SME) that may have a tighter cash flow. You must carefully consider how these additional contributions will affect the business's financial health and plan accordingly.

Looking ahead

With the SG contributions rate scheduled to increase again, it's important to anticipate the potential impacts on your operations and financial planning. Understanding the timeline for these changes and their broader implications can help you effectively prepare and adapt.

When to expect the next superannuation rate change

The current plan is for the mandatory super contributions rate to continue increasing incrementally until it reaches 12%. According to the Australian government’s schedule, you can expect the next rate change to take place on 1 July 2025, when the SG rate will increase from 11.5% to 12%. This upcoming change represents the final step in the phased approach introduced as part of the Superannuation Guarantee (Administration) Act 1992 amendments, aimed at enhancing retirement savings for Australian employees.

Potential impacts of future changes on business planning and employee benefits

These upcoming changes will have significant effects on various aspects of business operations, from financial planning to employee compensation. Understanding these impacts is key to making informed decisions and maintaining compliance with superannuation regulations.

1. Financial forecasting and budgeting

You need to prepare for higher payroll expenses, as an additional 0.5% contribution to employee superannuation will be required at the start of the next financial year. To manage these costs, you may need to adjust your financial forecasts, potentially reallocate funds, or look for efficiencies elsewhere in their operations to maintain profitability.

It's a good idea to start incorporating this future superannuation rate increase into your long-term financial planning now. By forecasting the impact of the rate reaching 12%, you can avoid last-minute budgetary surprises and ensure you have the necessary resources to cover increased contributions without affecting other critical areas of your operations.

2. Impact on employee compensation and salary packaging

The future rise in the superannuation rate could also influence how your business approaches employee compensation and salary packaging. For instance, if your business includes superannuation as part of total remuneration packages, the increase to 12% may require adjustments to gross salaries to maintain the same overall cost to the business. This could lead to a re-evaluation of compensation structures, and you may need to communicate these changes clearly to your employees to maintain transparency and avoid confusion.

Additionally, if your business offers salary sacrifice options for concessional contributions, you need to ensure that these arrangements comply with the higher superannuation rate and adjust the offerings accordingly. Effective communication with employees about how these changes impact their take-home pay and superannuation benefits will be central to maintaining employee satisfaction and trust.

3. Strategic workforce planning

The increase in superannuation rates may lead you to rethink your workforce planning strategies. While all eligible employees, including part-time and casual staff, earn superannuation, the higher overall costs may influence decisions on the balance between full-time, part-time, and casual roles. You might consider optimising workforce structures to manage increased costs while maintaining flexibility. However, you should weigh any shift in workforce composition carefully against potential impacts on employee engagement, retention, and productivity. 

Ensuring a supportive work environment and competitive benefits will remain pivotal for attracting and retaining talent, regardless of employment type.

4. Automation and payroll system updates

When the superannuation rate changes again, you’ll need to ensure your payroll systems remain up-to-date and capable of handling the super contributions requirement. Investing in automated payroll solutions that can seamlessly adjust to rate changes can help reduce the risk of errors, ensure compliance, and minimise administrative burdens. If you fail to update your systems, you risk non-compliance penalties and additional costs related to correcting mistakes.

Streamline superannuation compliance with Rippling

With automation and integrated solutions, Rippling’s all-in-one HR platform helps ensure superannuation compliance, reduce the associated administrative burdens, and keeps your business focused on strategic growth.

• Standard Choice Form facilitation: Rippling integrates the distribution and collection of the Standard Choice Form into its onboarding process, making it easy for new employees to select their preferred superannuation fund. This saves time and ensures you maintain compliance from day one.
• Automated updates: Rippling’s system continuously updates to accommodate changes in superannuation rates and contribution caps, keeping your business aligned with the latest regulations without the need for manual updates.
• Effortless superannuation calculations: Rippling automatically calculates and submits superannuation contribution data to the super clearing house (SuperChoice) with each pay run. This process ensures contributions are accurate and timely, reducing errors and minimising the need for manual intervention.
• Efficient handling of errors and reprocessing of payments: If superannuation contributions are rejected, Rippling automates the refund process, returning funds to a designated Australian bank account and enabling prompt re-attempts. This approach minimises disruptions and streamlines the allocation process.
• Support for quarterly payments: Rippling facilitates quarterly superannuation payments through the ABA file option and synchronises with the ATO’s reporting deadlines, ensuring that compliance is straightforward and payment processes are simplified.
• Seamless reporting and record-keeping: Rippling integrates with the ATO’s SuperStream system to reduce the burden of reporting and maintaining accurate records, helping you stay prepared for audits and effortlessly meet compliance requirements.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.