Superannuation Guarantee and rate changes

If you’re an employee and meet the Australian Government’s eligibility criteria, then you’re entitled to receive regular superannuation contributions from your employer.

The minimum amount your employer is required to contribute to your superannuation is based on rules and legislation, and is known as the Superannuation Guarantee.

What is the Superannuation Guarantee?

The Superannuation Guarantee, commonly known as the Super Guarantee or SG for short, is the contribution that’s regularly made into your super fund by your employer to help bolster retirement savings and supplement the Age Pension.

This contribution is tied in with your salary or remuneration package and is paid on top of your salary, with compliance governed by the Superannuation Guarantee (Administration) Act 1992.

The minimum percentage employers are required to pay is set to increase over time. Here are the past and present Super Guarantee rates, as well as the currently legislated future changes to the rate from the Australian Government.

Super Guarantee rate

← Mobile/tablet users, scroll sideways to view full table →

Source: Australian Taxation Office

Who is eligible for Super Guarantee contributions?

As an employee, your employer generally has to pay you Super Guarantee contributions, regardless of whether you’re full-time, part-time or casual.

If you’re under 18 or a domestic or private worker (such as a nanny or housekeeper), you must also work more than 30 hours per week to be eligible for Super Guarantee payments.

Employers must pay super to some contractors as well, even if they quote an Australian Business Number (ABN). Temporary residents, such as those on visas, are also typically eligible for Super Guarantee payments.

The Australian Taxation Office (ATO) has an online tool that can help you figure out whether or not you’re entitled to Super Guarantee contributions.

How much super should I be paid?

The Super Guarantee contribution is calculated based on a legislated percentage of what’s known as your ordinary time earnings (OTE). This must be paid at least quarterly, on top of your salary or wages.

Ordinary time earnings refers to the amount you’re paid for ordinary hours of work (pre-tax), which may include shift loadings, allowances, bonuses and commissions, but it doesn’t include overtime payments.

For example, if your OTE is $50,000 per year, your employer would be required to pay the required Super Guarantee percentage of that amount (see table above) into your super fund.

The ATO has an OTE checklist that shows classifications between salary or wages and ordinary time earnings. You can calculate your SG contributions using the ATO’s calculator.

→ Related article: How much super should I have at my age?

What if my employer doesn’t pay my super on time?

Employers are obligated to pay your Super Guarantee contributions quarterly, at a minimum. If they fail to do this, they’ll have to pay what’s known as a Superannuation Guarantee Charge (SGC) to the ATO.

The SGC includes the owed Super Guarantee payment, as well as interest and an administration fee per employee, per quarter, for missing the payment.

Any ‘choice liability penalty’ that is owed, which is a penalty for not giving eligible employees the right to choose their own super fund, is also applied. The SGC is not tax-deductible, according to the ATO.

If you believe your employer is not paying your Super Guarantee, it is a good idea to contact them directly. If they don’t correct their error or pay the correct amount, you can report unpaid super contributions to the ATO.

→ Related article: 6 questions to ask when planning for retirement

Are contractors and self-employed business owners eligible for the Super Guarantee?

The law provides that contractors may need to be paid the Super Guarantee if the service they provide is based on an amount of labour, rather than a service based on an outcome. In addition, the work needs to be carried out by the contractor personally rather than by another company, trust or partnership.

According to the ATO, contractors who are paid mainly for their labour may be considered employees for Super Guarantee purposes, provided that:

• they’re paid under a verbal or written contract that’s predominantly for their labour (more than half the dollar value of the contract is for labour)
• they’re paid for their personal labour and skills such as physical labour, artistry or mental effort
• they perform the work personally and don’t delegate it.

The ATO offers a handy guide designed to help you decide whether you should treat a particular worker as an employee or contractor more generally.

You can also use the ATO’s superannuation guarantee eligibility decision tool to help deduce whether you will need to pay Super Guarantee contributions for the contractor.

If you run a self-employed business as a sole trader or in a partnership, the ATO says you generally aren’t required to make Super Guarantee payments for yourself. But you may want to make personal contributions to super as a way to help fund your retirement.

What are the Super Guarantee contribution limits?

There’s a cap to how much superannuation employers are required to pay, known as the maximum super contribution base (MSCB). This is indexed in line with average weekly ordinary time earnings, and changes each financial year.

If you earn above the MSCB in a quarter, your employer isn’t obligated to make Super Guarantee contributions for anything you earn above the limit.

See also: Canstar’s superannuation and retirement planning calculator

Are Super Guarantee contributions taxed?

Super Guarantee contributions are normally taxed at a concessional contribution rate of 15%. You can also choose to make pre- or post-tax voluntary contributions to your super.

Keep in mind that there are caps each financial year for these contributions. If you contribute more than the cap, you may need to pay extra tax.

Read more: Canstar’s superannuation contribution calculator

How does the Super Guarantee work if I have more than one job?

If you have multiple jobs and a Super Guarantee eligibility amount for each, you’re entitled to have your super paid on all of them. But if you’re likely to exceed the concessional contributions cap of $27,500 per financial year, you can decide to opt-out of having one or more employers making Super Guarantee contributions.

You must maintain at least one employer who will make Super Guarantee contributions for you at least each quarter.

To opt out of receiving superannuation from an employer, you will need to submit a form to the ATO. Once the ATO has received this form, it will issue an Super Guarantee employer shortfall exemption certificate that can be given to your employers so that they’re released from their Super Guarantee obligations.

To recap on Super Guarantee contributions

For the majority of people who have a job, it’s likely you’re eligible for Super Guarantee payments from your employer. It’s important to keep an eye on your superannuation balance, to ensure that your employer is making the correct contributions on your behalf.

For sole traders or contractors, there are specific conditions that need to be met that determine whether any employers you do paid work for are required to contribute Super Guarantee payments on your behalf.

If you don’t meet these criteria, you can always choose to contribute to your own superannuation.

If you’re self-employed as a sole trader or in a partnership, you may not be required to contribute to your own super, but again, it could still be worth considering making voluntary contributions if you want to grow your retirement nest egg.

If you’re unsure of your personal superannuation contributions, whether you’re self-employed or working for an employer, it could be a good idea to visit the ATO’s website or consult a tax agent or accountant who can help you decide what the best strategy is for your situation.

About Davie Mach

Davie Mach is a Chartered Accountant and Director of Box Advisory Services, a boutique accounting firm focused on assisting small businesses and contractors in taxation, business advisory and accounting. Davie has over 15 years’ experience in finance and a Bachelor of Commerce, Accounting and Taxation from the University of New South Wales. You can find him on LinkedIn.

Cover image source: Atstock Productions/Shutterstock.com