Super Guarantee contributions

How often do you look at your payslip in detail? If you look closely, there’s usually an amount called “Superannuation Guarantee (SG)”.

However, this amount is often overlooked because it doesn’t go into your everyday bank account, rather it goes into an account specifically for your superannuation. These regular payments are designed to grow over time and help fund your retirement.

This makes SG really important, and here are our top things for you to know. 

If you’re 18 years old or over and paid $450 or more (before tax) in a month, then your employer must pay an SG rate of a minimum of 9.5% (set to increase to 10% on 1 July 2021 and gradually up to 12% by 1 July 2025), of your Ordinary Time Earnings (OTE) generally into a super fund of your choice.

This applies whether you’re a full-time, part-time, or casual employee, or a citizen, or temporary Australian resident. 

Your Ordinary Time Earnings (OTE) are made up of the following:

• Ordinary work hours
• Bonuses
• Shift loading
• Allowances
• Commissions

(The ATO website spells out what is and isn’t included in OTE.)

SG is a part of your total remuneration package and it’s important you understand how yours is calculated.

For instance, are you being paid a base salary plus super, or a total package including super? A good idea is to have a look at your payslip to see how your SG is being calculated as a part of your total remuneration package.

If you work for yourself, and you want to pay superannuation, you will need to make your own contributions.

Depending on the structure of your business, you can either make personal concessional contributions, which are fully deductible until the age of 75, or you can make a concessional contribution from your business account. You also need to ensure you’ve passed the Superannuation Work Test if you’re over 67. 

Learn more about Self-employed super contributions.  

All SG contributions paid into your super account come from money that hasn’t been taxed, meaning these contributions receive a concessional tax treatment (i.e. before-tax). You’ll generally pay just 15% tax (or 30% tax if your income is greater than $250,000).

If your income tax rate is less than 15%, you may be eligible to receive a Low Income Super Tax Offset payment directly to your super account. This payment effectively offsets the 15% contributions tax on all the concessional (before tax) super contributions (including SG) you or your employer pay into your super fund.

Yes. There is an annual cap on SG contributions that can be paid to people earning higher salaries, called a Maximum Super Contributions Base (MSCB).

The MSCB for the 2020/21 financial year is $57,090 per quarter (beyond which SG is not required). This equates to $57,090 x 9.5% = $5,424 as the maximum SG contribution per quarter.

Did you know your employer has a quarterly deadline to pay you your SG contributions? If they don’t, they will be penalised by the ATO.

Your employer must pay your SG contributions at minimum every three months within 28 days of the quarter ending, as follows:

A good way to check if your employer has been paying your SG on time, is to log in to your account online and have a look at your contribution history. If your SG payments aren’t being made (at minimum once a quarter) then you should notify your employer.

Generally yes, although there are some instances where certain employment arrangements mean you can’t choose (you can read more at the ATO website.)

Which super account your SG contributions get paid into is generally up to you, not your employer, however it must be a complying fund, as set out in the Superannuation Industry (Supervision) Act 1993. If you don’t choose a super fund, your employer will put you in an employer-nominated MySuper fund, knowns as a ‘default’ fund.

Some points to consider when you choose a super provider could include: 

• What is the fund history – is it well-established in market, does it have a track record for providing positive outcomes for its members?
• What is the fee structure – what fees are expected to be paid, and what services are you getting in return for this?
• Insurance offering – life insurance via super can be cost-effective, however it’s worth looking at the insurance provider, checking their claims history, and understanding the premiums you would pay.
• Investment options – does the fund have options that suit your personal investment appetite?
• Other services – many funds offer a balance of lifestyle and wellbeing programs alongside super to help their members not just have a comfortable retirement but to also be able to live life to the fullest.  

If you have more than one employer, and you’re worried that you may go over your concessional contributions cap, you can apply to the ATO to opt-out of having SG contributions paid from a nominated employer(s) (PDF).

You can only do this if you anticipate the sum of all your sources of employer SG contributions would exceed your concessional cap for any given financial year, and you need to lodge your application at minimum 60 days before the beginning of the following quarter. 

Do you remember when your first super account was opened, possibly by your employer? And perhaps more were opened by respective employers when you changed jobs.

Changing jobs is one reason why people end up with multiple superannuation accounts and why they may even lose track of their super altogether. However, changing jobs doesn’t mean you have to change your superannuation too, rather you can let your new employer know which super fund you want them to pay their SG contributions into. 

There are some benefits to having the same super account when you move through different jobs throughout your career, including keeping track of one balance, one set of fees and charges, and one life insurance arrangement, if you have this set up as a part of your super.

Regardless of when you change jobs, every Australian employer has an obligation to pay Superannuation Guarantee to every eligible employee, in most instances into the account of their own choosing. 

When your employer makes SG contributions during your working years, you’re effectively buying ‘units’ in your chosen investment option over the long term, instead of making one-off investments here and there.

Given unit prices move up and down with the markets, you’d buy more units when prices are low, and less when prices are high – averaging out the cost of your investment.

‘Dollar-cost averaging’ as a strategy can help provide a disciplined approach to investing, and smooth out market fluctuations.

To learn more, read about dollar-cost averaging – the benefits of a market downturn.