How much you contribute
How are employer contributions calculated?
Under the Superannuation Guarantee, employers must pay a percentage of each employee's salary into their superannuation. It is the employer's responsibility to calculate and pay this percentage based on the employee's Ordinary Time Earnings (OTE).
The minimum superannuation contribution that employers must make is set by the Federal Government under the Superannuation Guarantee.
Some industry agreements and awards specify that employees are entitled to a higher percentage of superannuation than currently nominated by the Superannuation Guarantee. If you are an employer within one of these industries, you must pay your employees the higher superannuation amount – if you fail to do so, you will be in breach of the agreement or award.
What is the current Superannuation Guarantee?
The Superannuation Guarantee is currently increasing. From 2013 to 2025, the Superannuation Guarantee will increase incrementally from 9% to 12%. The current legislated scheduled for these phased increases is outlined below:
|Effective from 1 July||Superannuation Guarantee|
(% of OTE)
|2020 (current financial year)||9.5|
Maximum earnings base
Each financial year, there is a set maximum contribution base for superannuation. This means that in any quarter, employers are not required to pay superannuation on any earnings their employees make above the maximum earnings base.
The maximum earnings base is indexed each year in line with the Average Weekly Ordinary Time Earnings (AWOTE) for Australia. The maximum earnings base for each quarter in the 2020–2021 financial year is $57,090 ($228,360 annually). Check the ATO for the current quarterly limit.
This limit does not apply to other mandated contributions, such as those paid under an award.
While employers are not bound to make superannuation payments on earnings that exceed this maximum earnings base, they may still choose to do so.
Salary sacrifice payments
Your employees may request that you make additional super payments from their before-tax income as a salary sacrifice.
Salary sacrifice and income tests
Salary sacrificed super contributions are counted in income tests for some government financial assistance programs, including family tax benefits and Centrelink. Making a salary sacrifice super contribution can affect your employees' eligibility for:
- the Federal Government super co-contribution
- the spouse contributions rebate
- the self-employed tax deduction.
To assist the ATO in performing income tests, you must report any salary sacrificed super contributions you make on behalf of your employees as Reportable Employer Super Contributions (RESCs). You must report these RESCs in PAYG annual withholding reports, and in your employees' PAYG payment summaries.
Salary sacrifice and PAYG tax
Salary sacrificed super contributions do not form part of the assessable income that is used to determine how much PAYG tax an employee must pay.
From 1 January 2020, salary sacrificed super contributions do not:
- reduce the OTE that you are required to use to calculate your employees' super entitlements
- count towards the amount of SG contributions you are required to make for your employees to avoid the SG charge.
Your employees may request that you make additional super payments from their after-tax income as a payroll deduction. Making payments in this way reduces the amount of take-home pay the employee receives, but does not affect your compulsory superannuation payments under the SG or the amount you withhold as PAYG tax.
Contributions of this type must be paid to the employee's super fund within 28 days of the deduction being made.
Please note that we cannot accept voluntary payroll deduction payments for members who have not provided us with their tax files number (TFN).
Your employer contributions and any salary-sacrifice contributions made on behalf of your employees are counted as 'concessional contributions', meaning that they are made with pre-tax income. Any contributions made with your employees' after-tax income (whether they are payroll deductions made by your on your employees' behalf, or voluntary contributions made directly by the employee) are counted as 'non-concessional contributions'.
There are limits on the value of both concessional and non-concessional contributions your employees can make each year. Any contributions above this limit will be taxed at a higher rate and will incur an interest charge.
Below are the contribution caps for the 2020-21 financial year.
|Types of contributions included||Employer (including SG of 9.5%)|
|Contribution cap||$25,0002 per year||$100,000 per year|
Individuals with a total superannuation balance of $1.6 million or more will have a non-concessional contributions cap of nil.
1. Government co-contributions are not counted towards your non-concessional contributions cap.
2. Indexed annually in line with Average Weekly Ordinary Time Earnings, in increments of $2,500 (rounded down).
If you have salary sacrifice or payroll deduction arrangements with your employees and you are concerned they may be exceeding the contribution cap, we recommend that you discuss this with them.
Tax deductions for employers
You can claim a full tax deduction for any Superannuation Guarantee or award super payments you make on behalf of your employees, provided the contribution is made to a super fund for the benefit of your employees. If you have a written agreement with one or more employees that permits you to make salary sacrifice contributions on their behalf, you can also claim a tax deduction on these payments.
You cannot claim tax deductions on any voluntary post-tax contributions your employees make from their take-home pay (such as payroll deductions), as tax has already been applied to the employee's income.
Tax deductions can only be claimed for the financial year in which the superannuation payments were made.
Tax deductions for self-employed people
If you are self-employed, you can claim a full tax deduction on any voluntary contributions you make to your super.