Superannuation Guarantee Changes & Personal Superannuation Contributions Deductions

As part of last year’s Federal Budget, two important super guarantee (SG) changes will apply to your business from 1 July 2022.

  • The rate of SG is increasing from 10% to 10.5%;
  • The $450 per month eligibility threshold for when SG is paid is being removed.

In addition to these changes, the ATO are disallowing any deductions for Personal Superannuation Contributions (PSC) in individual’s Income Tax Returns if taxpayers are not receiving an acknowledgement of their Notice of Intent from their superannuation fund.

SG rate increase info

What is Superannuation Guarantee?

The Superannuation Guarantee (SG) is the minimum percentage of each eligible employee’s ‘ordinary time earnings’ that an employer must contribute to an employee’s complying super fund. This percentage is legislated by the Federal Australian Government and is administered by the Australian Taxation Office.

The SG increased from 9.5% to 10% from 1 July 2021 and will rise again to 10.5% from 1 July 2022 for the 2022–23 financial year.

The SG percentage rate is set to increase by 0.5% every year until it reaches 12.0% from 1 July 2025.

The changes

Effective 1 July 2022, the SG rate will increase to 10.5% and will continue to incrementally increase until it reaches 12% in 2025.

The table below sets out the gradual increase applicable:

Period Superannuation Guarantee rate %
Current 10%
1 July 2022 – 30 June 2023 10.5%
1 July 2023 – 30 June 2024 11%
1 July 2024 – 30 June 2025 11.5%
1 July 2025 and onwards 12%

What is OTE?

OTE is generally what an employee earns for their ordinary hours of work. It includes commission, loadings, allowances. Overtime is generally not considered OTE.

The below table sets out come common types of payments and are included and excluded for OTE.

Payment Ordinary Time Earnings (OTE)
Wages / Salary Yes
Overtime hours (where Award stipulates ordinary working hours and employee works additional hours for which they are entitled to overtime rate) No
Allowance by way of unconditional extra payment Yes
Expense allowance expected to be fully expended (e.g., car or phone allowance) No
Reimbursements No
Paid leave taken during employment (annual leave, personal/carer’s leave, long service leave) Yes
Termination payment – in lieu of notice Yes
Termination payment – unused annual leave and long service leave. No
Commissions, and performance bonuses Yes

Employers’ next steps

We recommend employers:

  • Review employee entitlements to determine if payments are inclusive or exclusive of super;
  • Check that your software is updated to correctly calculate your employees’ SG entitlement from 1 July 2022;
  • Review your payroll to ensure that any historical superannuation practices that need to be rectified are addressed.

Removal of the $450 super threshold information

In the 2021 Federal Budget, the Australian Government announced its intention to remove the $450 monthly income threshold for Superannuation Guarantee (SG) contributions.

The threshold meant workers were only entitled to SG contributions if they were over the age of 18 and earned $450 or more from an employer (before tax) per calendar month. Workers under 18 years of age were only entitled to SG contributions if they worked more than 30 hours in a week and earned $450 or more (before tax) per calendar month.

Treasury’s 2020 Retirement Income Review Final Report notes that around 300,000 people, or 3 per cent of the workforce were affected by this exception from SG contributions. They were mainly young, lower income and part-time workers, and almost two-thirds of them were women.

The removal of the threshold has now been legislated and will come into effect on 1 July 2022.

What will change?

From 1 July 2022, all eligible workers aged 18 years or older will be entitled to receive SG contributions regardless of how much they earn.

The rules for workers under the age of 18 will remain generally the same. They will still only be eligible for SG contributions if they work more than 30 hours per week.

Employers’ next steps

  • If the removal of the $450 threshold means you’ll be paying SG for one or more employees for the first time, you’ll need to give them a Standard Choice Form;
  • If your employee does not provide you with a choice of super fund, review the Stapled Super Fund information on the ATO website for guidance on what you need to do next. A stapled super fund is an existing super account linked to an individual employee.

Notice of Intent Information

Superannuation funds report the ‘Notice of Intent’ acknowledgements to the ATO, usually within 10 days of processing.

The law states that a Personal Superannuation Contribution deduction can only be claimed where an individual has received an acknowledged Notice of Intent from their super fund before claiming the deduction in their income tax return. Super funds then report the ‘Notice of Intent’ acknowledgements to the ATO, usually within 10 days of processing.

After 30 June, of the following tax year, the super fund may not be able to provide the acknowledgement to their client, removing their entitlement to this deduction.

Once clients have lodged their ‘Notice of Intent’ and received their acknowledgement, the APRA super fund will report this to the ATO.

The ATO will use this information to confirm the taxpayer’s eligibility to claim a PSC by matching the amount reported by the super fund to the amount claimed as a deduction. If the ATO detects differences, they will remove or adjust the deduction.


Should you have any concerns or questions about the upcoming changes to Super Guarantee or Personal Superannuation Contribution Deductions, please do not hesitate to reach out to our friendly team.