- So just what is the Superannuation Guarantee?
- SG contributions: Am I eligible?
- Contractors and the SG
- How is my SG contribution calculated?
- SG: What’s the maximum amount I can be paid?
- How are SG contributions taxed?
- SG limits: watch the caps
As employees, most of us see the regular note on our payment summary listing the amount for our employer’s Superannuation Guarantee (SG) contribution into our super account and rarely give it much thought.
To help you understand it a little better, here’s SuperGuide’s simple explanation of the SG and what it means for your retirement savings.
So just what is the Superannuation Guarantee?
The most common type of contribution regularly going into your super account is likely to be the Superannuation Guarantee – or SG for short – which is the contribution your employer (whether large or small) is required to make into a super fund on your behalf.
The SG is part of the remuneration you receive from your employer. The amount is a percentage of your salary or wages, with the percentage set by the Australian Government and changing over time.
The current rate for SG payments by your employer is 9.5%, with this rate currently set to continue until 1 July 2021, when it will increase to 10%.
Note: The SG rate was originally set to increase to 10% in July 2015, but the government legislated to slow the gradual increases in the rate, delaying the increase to this amount by 7 years until July 2021.
Superannuation Guarantee rate (2002 to 2026)
|Period||Super guarantee rate|
|1 July 2002 – 30 June 2013||9.00%|
|1 July 2013 – 30 June 2014||9.25%|
|1 July 2014 – 30 June 2015||9.50%|
|1 July 2015 – 30 June 2016||9.50%|
|1 July 2016 – 30 June 2017||9.50%|
|1 July 2017 – 30 June 2018||9.50%|
|1 July 2018 – 30 June 2019||9.50%|
|1 July 2019 – 30 June 2020||9.50%|
|1 July 2020 – 30 June 2021||9.50%|
|1 July 2021 – 30 June 2022||10.00%|
|1 July 2022 – 30 June 2023||10.50%|
|1 July 2023 – 30 June 2024||11.00%|
|1 July 2024 – 30 June 2025||11.50%|
|1 July 2025 – 30 June 2026 and onwards||12.00%|
If your employer does not pay the required rate of SG into your super account by the quarterly due date, they may have to pay the Superannuation Guarantee Charge (SGC) to the ATO. The SGC includes all the SG amounts owing to an employee, plus interest and an administration fee.
Employers who don’t pay the SG into the correct super fund by the due date must report and rectify the missed payment by lodging an SG Statement and paying the SGC.
SG contributions: Am I eligible?
If your employer is paying you $450 or more (before tax) in a calendar month, you must receive super contributions in addition to your wages. Employees aged under 18 or those classified as a private or domestic worker (like a nanny) must work for more than 30 hours per week to qualify for SG payments.
You are eligible for SG payments whether you are full-time, part-time or a casual employee.
Employees who are a company director, family member working in a business, or someone receiving super pension or annuity or transition-to-retirement payments are also eligible for SG payments.
Temporary residents are also entitled to receive SG payments into their super account.
If you want to check whether you are entitled to SG contributions from your employer, you can use the ATO’s Am I entitled to super? web tool. It asks questions about your working arrangement to help you determine whether or not you are entitled to super from your employer.
Contractors and the SG
If you are working as a contractor you may also be eligible for SG payments, even if you hold an Australian Business Number (ABN). Contractors who have a contract that is mainly for their personal labour and skill rather than a result, and who must perform the work personally should be paid the SG.
In situations where the employer contracts a company, trust or partnership rather than a particular person to provide the labour, the contractor is generally not eligible for SG payments.
You can check the ATO’s Super Guarantee Eligibility Decision Tool to work out if your employer should be paying SG contributions for you. If you are ineligible, you can make your own contributions into your super account.
How is my SG contribution calculated?
Your SG contribution is currently 9.5% of your ordinary times earnings (OTE) and is paid on top of your wages or salary.
Your OTE is usually the amount you earn for your ordinary hours of work and includes commissions, shift loadings and allowances, bonuses and any over-award payments. It does not include any overtime payments.
To check you are being paid the right amount of SG, the ATO has an online Estimate my super web tool you can use. You simply enter the time period you want to check plus your OTE for each quarter in that period. The tool then calculates how much super your employer should have paid into your super account.
Awards and agreements
|Payment type||Salary or wages||Ordinary time earnings (OTE)|
|Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime rates||Yes||No|
|Overtime hours – agreement prevails over award||Yes||No|
|Agreement supplanting award removes distinction between ordinary hours and other hours||Yes – all hours worked||Yes – all hours worked|
|No ordinary hours of work stipulated||Yes – all hours worked||Yes – all hours worked|
|Casual employee: shift loadings||Yes||Yes|
|Casual employee: overtime payments||Yes||No|
|Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause||Yes||No|
|Piece-rates – no ordinary hours of work stipulated||Yes||Yes|
|Overtime component of earnings based on hourly-driving-rate method stipulated in award||Yes||No|
For employees with non-standard employment arrangements, this area can be quite complex, so it can be worth checking with the ATO on 13 10 20 or using the ATO’s information checklist if you think your employer is not paying the right amount of SG based on various wage or salary payments you receive.
Eric is employed at an IT service desk and his contract requires him to work a minimum number of hours a week. By agreement with his employer, he often works additional shifts if it is mutually convenient, although there is no consistency or pattern to when this happens.
Eric’s employment is not governed by an award or agreement specifying his ordinary hours of work. Any extra shifts he works are not paid overtime penalties or extra payments.
As Eric’s wage payments are a reward for services provided as an employee, they are classed as salary or wages. Since there are no stipulated ordinary hours of work for Eric’s employment and no obvious pattern of regular or usual hours, all the hours he works are classed as ordinary hours of work and all his wages are OTE.
Source: Adapted from the ATO website
SG: What’s the maximum amount I can be paid?
The current SG contribution rate is 9.5% of your earnings up to a limit called the maximum super contribution base (MSCB). If you earn above that limit in a particular quarter, your employer does not have to make SG contributions for the part of your earnings over the limit.
The current MSCB is $54,030 per quarter, which equals a maximum SG contribution of $5,132.85 per quarter. Learn more about how the maximum super contribution base works.
Another common problem in this area is if you have several employers paying SG contributions on your behalf. Currently, employers are required to make SG contributions for employees even if they have exceeded their concessional (before-tax) contributions cap. Otherwise, the employer will have an SG shortfall and will be liable for payment of a Super Guarantee Charge.
Note: The government is currently seeking to change this situation with Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2018, which is currently before the Senate.
If passed, this amendment to the Superannuation Guarantee (Administration) Act 1992 will enable employees with multiple employers to apply for an employer shortfall exemption certificate. This will prevent their employer from having an automatic SG shortfall if they do not make contributions for a period.
How are SG contributions taxed?
SG contributions into your super account receive a ‘concessional’ tax treatment, which means they are contributions from money that has not been taxed – so it’s before-tax. That’s why SG contributions are classed as concessional (before-tax) contributions.
Once SG contributions enter your super account they are taxed at the special low rate of 15% (if you income is up to $250,000), or 30% (if your income is over $250,000). For many people this tax rate is lower than the marginal tax rate they pay on their income.
SG limits: watch the caps
As there are tax benefit to holding retirement savings in your super account, the government has imposed strict annual caps on concessional (before-tax) contributions like SG contributions. If you go over your cap amount, you will have to pay extra tax. The cap or limit applies to the total of all your super accounts across different super funds.
The concessional contributions cap is indexed and any contributions over these limits are subject to extra tax. From 1 July 2017, the cap is indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $2,500 (rounded down).
The annual concessional contributions cap for 2018/2019 is $25,000 regardless of age.
If you have a Total Super Balance of less than $500,000 on 30 June of the previous financial year, you can use any unused amount of your cap for up to 5 years to make a Carry-forward contribution.
When monitoring your concessional (before-tax) contributions like the SG for the financial year, remember contributions are not counted when the payment is sent by your employer, they only count once the payment is received by your super fund.
If you have a salary sacrifice arrangement with your employer, ensure your super fund receives all the salary sacrifice contributions from your employer by 30 June, or the contributions will be counted towards your concessional contributions cap for the following financial year. For more information, see SuperGuide article Salary sacrifice and super: How does it work?
If you have a salary sacrifice arrangement with your employer, ensure it spells out how your employer calculates your SG contributions.
Salary sacrifice contributions are considered employer – not employee – contributions, so your employer may decide not to pay SG contribution on your behalf. For example, if you elect to salary sacrifice more than 9.5% of your salary into your super account, your employer may decide their SG obligations have already been met if it is not made clear in your salary sacrifice agreement that they must make payments on top of your salary sacrifice amounts.
Also, ensure your SG payments are calculated and paid on the full amount of your salary, not your salary minus the salary sacrificed amounts.
Learn more about the Superannuation Guarantee in the following SuperGuide articles: