The Abbott Government will change the schedule for increasing the superannuation guarantee (SG) rate to 12 per cent to provide businesses with certainty.
The Government will continue to increase the SG rate to 12 per cent from 9.25, but the changes will take place over a different timeframe.
Instead of pausing at 9.25 per cent as we had previously announced, the SG rate will now increase to 9.5 per cent on 1 July 2014 and remain at this level until 30 June 2018.
It will then increase by 0.5 per cent each year until it reaches 12 per cent in 2022-23, one year later than previously proposed. This delay will avoid the fiscal cost of the earlier increase to 9.5 per cent.
This change is necessary because the Senate has refused to pass the Government’s election commitment to defer the increase scheduled for 1 July 2014.
This will build confidence in the retirement system and is part of an Economic Action Strategy to build a strong, prosperous economy and a safe and secure Australia.
The Government is making the right decisions to repair the Budget, strengthen the economy and prepare Australia for the long term challenges before us.
The rescheduling will make it clear to businesses that are currently uncertain whether they should pay superannuation at 9.25 per cent (as announced) or at 9.5 per cent (as legislated) from 1 July 2014.
This uncertainty is not desirable, particularly given the heavy penalties that apply to employers for underpaying SG contributions.
By announcing this change now, business will be able to meet their superannuation guarantee obligations from 1 July 2014 in the knowledge that they will be paying at the rate set out in the law.