For most employers, the minimum contribution is the Superannuation Guarantee (SG) rate of 9%. Some awards, industrial agreements and individual agreements between an employer and an employee require a superannuation contribution that is higher.
Where an award or agreement overrides the SG amount, it is important to ensure your employer contribution complies with the relevant provisions for each employee.
The topics below will help you understand more about SG contributions as well as other important contribution-related and administrative matters:
Superannuation Guarantee contributions
The Superannuation Guarantee (Administration) Act 1992 requires employers to pay superannuation contributions into a complying fund for their employees. The current Superannuation Guarantee (SG) amount is 9% of an employee's ordinary time earnings (OTE). From 1 July 2008, all employers are required to use OTE to calculate their employees' SG contributions, removing other bases of calculation so that all employees are treated the same for SG purposes. The changes also make it easier for employers to comply with their SG obligations, with a simple checklist used to determine what is counted as salary/wages under the OTE definition. For more information download the Your super obligations fact sheet.
To determine if you are using an earnings base other than OTE to calculate SG contributions for your employees, visit the Australian Taxation Office website or phone their office on 13 10 20. If the SG amount calculated is less than the minimum 9%, you will have to increase this amount to meet the minimum requirement to avoid the SG charge.
Concessional tax rates and SG requirements
An annual limit of $25,000 p.a at a concessional tax rate of 15%, applies to before-tax contributions (SG and salary sacrifice amounts) made to super. Contributions above $25,000 are taxed at 46.5%.
Members aged 50 years or over are entitled to a higher limit of $50,000 p.a. at the concessional tax rate until 1 July 2012, when the limit will revert to $25,000 p.a. regardless of age.
SG contributions are not required for employees who:
- Earn less than $450 in a calendar month
- Are aged 70 years or over, or
- Are under age 18 and work fewer than 30 hours a week.
Contributions are payable from the time an employee becomes eligible for superannuation under the provisions of an Award, Enterprise Agreement or the Superannuation Guarantee (Administration) Act.
Contributions should generally be made for AustralianSuper members who are:
- At work
- On annual leave
- On long-service leave
- On paid sick leave
- While on workers compensation in some circumstances.
Employers are not required to pay SG contributions when an employee is absent from work and not receiving pay. For example, while on parental leave or approved leave without pay.
Other situations may apply. You should refer to the relevant award or statutory obligations for superannuation payments for employees who are off work due to illness or work-related injury. Many awards provide for the payment of contributions when an employee is absent on worker's compensation or entitled to make-up pay from an employer.
Salary sacrifice contributions
Salary sacrifice is an agreement between an employer and an employee, where the employee foregoes (sacrifices) part of their future salary in return for a higher employer contribution to their superannuation account. Contributions made through salary sacrifice are treated as employer contributions.
AustralianSuper members can make contributions towards their superannuation out of their before-tax income through salary sacrifice. An annual limit of $25,000 p.a. at a concessional tax rate of 15% applies to before-tax contributions (SG and salary sacrifice amounts) made to super from 1 July 2009. Contributions above $25,000 are taxed at 46.5%.
Members aged 50 years or over are entitled to a higher limit of $50,000 p.a. at the concessional tax rate until 1 July 2012 when the limit will revert to $25,000 p.a. regardless of age.
It is usual practice among employers that all the employee entitlements that would have been based on pre-salary earnings, continue to be paid as if no salary sacrifice was made.
These entitlements may include long-service leave, annual leave, penalty rates, termination payments, allowances and superannuation contributions.
Check the provisions in enterprise or individual agreements to see how these entitlements are calculated for your employees. You should also review the circumstances under which salary sacrifice contributions must be paid.
Voluntary contributions
AustralianSuper members can make voluntary contributions from their after-tax salary to increase their superannuation.
An annual limit of $150,000 p.a. (or $450,000 averaged over 3-years) applies to all after-tax contributions made to super.
For members aged 65-74 years, an annual contribution limit of $150,000 applies provided they meet the Work Test (which requires a minimum of 40 hours work completed in a 30-day consecutive period). Members aged 75 and above cannot make voluntary contributions to super.
By making a voluntary contribution/s, a member may be eligible to receive up to $1,000 tax-free from the from the Federal Government Co-contribution scheme, paid directly into their superannuation account.
Voluntary contributions can be made by regular payroll deduction with the employer's agreement or by direct debit or cheque.
To arrange contributions by payroll deduction the member must complete a Voluntary Contributions Form.
It is a good idea for employers to keep a copy of the completed form on file.
Any amounts contributed by a payroll deduction must be shown on the monthly Contribution Advice and included in the total payment for the month.
Tax deductions
Employers are able to claim tax deductions for employer contributions made for their employees (including contributions made via salary sacrifice). Claims can be made in the year that the contributions have been paid.
Annual limits apply to the amount of before and after- tax contributions made to super by and paid on behalf of your employees. Before-tax contributions such as Superannuation Guarantee and salary sacrifice are capped at $25,000 a year (or $50,000 pa for members aged 50 or over, which will revert to $25,000 pa from 1 July 2012). Contributions that exceed the cap will be taxed at the top marginal rate plus the Medicare levy. Employer contributions that exceed the cap will also count towards the after-tax contributions cap.
Contribution Advice
As a participating AustralianSuper employer, you agree to provide contribution details to AustralianSuper each payment period (generally monthly).
You can submit this information online or, if you require, we will send you a paper-based Contribution Advice by mail.
You must provide contribution details each payment period, even for periods when you are not required to pay employer contributions, for example, periods where there are no employees on your payroll who are entitled to super.
In such cases, submit or write 'Nil' on the Contribution Advice, or notify us via email that you will not be making a payment.
Online submission
If you submit your contribution data electronically, you may be able to have your data transmitted automatically from your payroll to our administration system.
Paper-based submission
If you complete a paper-based Contribution Advice, it should be returned to us within 14 days of the last business day of the payment period to avoid being in arrears with contributions.
Annual Record of Contributions
Following the end of each financial year, we will send you a Record of Contributions showing all contributions you have paid to AustralianSuper over the past 12 months.
Contribution arrears
AustralianSuper has a statutory obligation to ensure that contributions for members are paid on a regular basis and when due.
Step 1.
We will send you a reminder of the outstanding contributions.
Step 2.
If we do not receive the contributions, we will send you a follow up letter requesting immediate payment of outstanding amounts.
Step 3.
If we have not received the contributions at this stage, we will ask our arrears collection agency – Industry Funds Credit Control Pty Ltd – to investigate the matter.
What to do if you are going to be late with your payment
If you are going to be late paying, it is important that you call AustralianSuper weekdays 8am-8pm (EST) and explain the circumstances.
Further information on employer contribution resoponsibilities, can be found in the 'Employer Guide' located within the 'Forms & publications' section of this website.
Important note
Unless you hold an Australian Financial Services Licence (AFSL), or are an authorised representative of an organisation that holds an AFSL, you cannot recommend any financial products or give advice about any superannuation funds.
Breaches of the relevant legislation could expose employers to hefty fines and/or imprisonment.
Any person wanting advice about financial products should seek advice from an Australian Financial Services licensee or an authorised representative of a Licensee.