Upper limit on SG contributions

Q: Can you please advise the 2010/2011 cap on earnings for the maximum superannuation contributions base?

A: The maximum superannuation contribution base for the 2010/11 year is $42,220 per quarter or $168,880 per year. This limit determines the maximum Superannuation Guarantee (SG) contribution that an employer is required to make under the super laws.

All eligible employees have a right to SG, although the amount of SG you receive is subject to this upper income limit, which is indexed each financial year.

Your employer must contribute 9 per cent of your salary only up to the maximum superannuation contributions base, which is linked to an individual’s earnings. The maximum contributions base is $42,220 each quarter (for the 2010/2011 year), which works out to be an annual income of $168,880. If your income for SG purposes exceeds $42,220 each quarter ($168,880 a year), your employer makes your SG contributions on the basis of the maximum superannuation contributions base.

Your employer doesn’t have to pay contributions under the SG rules for any earnings above this limit. For example, if you earn $200,000 a year plus SG, your employer doesn’t contribute 9 per cent of your $200,000, but 9 per cent of $168,880 (for the 2010/2011 year), which works out to be $15,199 a year or approximately $3,800 each quarter (for the 2010/2011 year).

Note: In most cases individuals on higher incomes receive super benefits as part of a salary package, which means SG contributions are based on a much lower figure than a person’s total remuneration anyway. The maximum superannuation contributions base is adjusted each year in line with increases in average wages. The base amounts for the previous 18 years appear in the table below. The contents of the table have been sourced from the ATO website.

Related articles:

1. Your 2010/2011 guide to non-concessional (after-tax) contributions
2. Super concessional contributions: 2010/2011 survival guide
3. Capital gains: Reducing tax via super contributions
4. Super rates and thresholds for the 2010/2011 year
5. Wearing two contributions caps