House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

Changes to the superannuation guarantee

Schedule 1 to this Bill amends the Superannuation Guarantee (Administration) Act 1992 to increase the age of an employee at which the superannuation guarantee (SG) no longer needs to be provided from 70 to 75, and to gradually increase the SG charge percentage from 9 per cent to 12 per cent.

Date of effect: These amendments commence on 1 July 2013. These provisions are dependent on the passing of the Minerals Resource Rent Tax package.

Proposal announced: These amendments were announced in the Stronger, Fairer, Simpler package of reforms, including the Treasurer's and the Minister for Financial Services, Superannuation and Corporate Law's joint Media Release No. 027 of 2 May 2010 and the Treasurer's and then Prime Minister's joint Media Release No. 028 of 2 May 2010. These amendments were also announced in the 2010-11 Budget.

Financial impact:

Increasing the superannuation guarantee charge percentage to 12 per cent

The financial cost rises as the SG percentage gradually increases.

Raising the superannuation guarantee age limit from 70 to 75

In the 2013-14 income year, the first year for this measure, employers are required to pay additional SG amounts for their workers aged up to 75, on which superannuation funds will be subject to income tax at a 15 per cent rate.

However, in the 2014-15 income year, at the time employers lodge their tax returns for the 2013-14 income year, employers will be able to claim a deduction for the superannuation amounts paid to workers aged up to 75, which will be an ongoing cost to revenue.

Compliance cost impact: Low.