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What are the new changes?
The superannuation guarantee
legislation has been amended to simplify an employees’ earnings
base for the purpose of calculating the superannuation
guarantee.
From 1 July 2008, all employers
must use “ordinary time earnings” to
calculate their superannuation contributions provided
for the benefit of their employees.
These amendments will standardise
the earnings base to attempt to ensure that all
employees will be treated the same for superannuation
guarantee purposes.
If employers are using an earnings
base other than ordinary time earnings (see below)
to calculate superannuation contributions, they
must start using ordinary time earnings for all
employees from 1 July 2008.
What are “Ordinary
Time Earnings”?
The earnings base for most employees
is their ordinary time earnings.
Ordinary time earnings are an
employee’s earnings in respect of ordinary
hours of work (including over-award payments, commissions,
shift allowances and paid leave).
Ordinary time earnings are however
subject to the maximum contribution base.
The “maximum contribution
base" is the maximum limit that an employer
is expected to provide superannuation for the benefit
of an employee. It is subject to annual indexation.
The maximum contribution base for a quarter in
the 2006-2007 year is $35,240. What this means
is employers do not currently have to contribute
more than 9% of $35,240 for any employee for a
particular quarter.
Superannuation Guarantee
The superannuation guarantee
requires employers to provide superannuation support
for their employees. To avoid a superannuation
guarantee charge, the minimum support required
is 9% of an employee’s notional earnings
base.
The earnings base is usually stated in an industrial award, superannuation
fund's trust deed or an existing agreement made with the employee.
If there is no acceptable earnings
base relevant to a particular employee, or if the
award does not prescribe a definition of ordinary
earnings, then a default earnings base equivalent
to “ordinary time earnings” of the
employee will apply (subject to the maximum contribution
base).
When does the new law
apply?
The new law will come into effect
from 1 July 2008.
What this means for
your business?
From 1 July 2008, employers
must calculate the basis of their superannuation
contributions on behalf of their employees against
ordinary time earnings.
This may, in some cases, increase
the superannuation contributions from those currently
being made. For example, if the super contributions
percentage in an industrial award is below the
minimum 9%, you will have to pay extra to meet
the minimum amount of 9% and avoid superannuation
guarantee penalties.
Employers have just over 12
months to adjust new employment arrangements and
build, if necessary, the increased superannuation
contributions into their workplace bargaining processes.
You will need to consider the impact these changes
make to your organisational systems and how to
communicate these changes to your employees.
To find out more about these
changes or discuss the implementation of these
changes to your business, please contact Andrew
Bland at abland@blandslaw.com.au.
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