For Australian workers 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 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 percentage rate for SG payments by your employer increased from 9.5% in 2020/21 to 10% for 2021/22. This rate is currently set to continue until 1 July 2022, when it is due to increase to 10.5%.
Previously, the SG rate was originally set to increase to 10% in July 2015, however the government legislated to slow the gradual increases in the rate, delaying the increase to this amount by 7 years until 1st July 2021.
If your employer doesn’t pay the required rate of SG into your super account by the quarterly due date, they may have to pay a 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.
How To Know If You Are Eligible For Superannuation Guarantee
If your employer is paying you $450 or more (before tax) in a calendar month, you are required to 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 a full-time, part-time or casual employee.
As part of the May 2021 Federal Budget, the government announced it intended to remove the $450 per month minimum income threshold for employees to receive SG contributions from their employer. This measure is not yet law, but once it passes through Parliament it is expected to apply from 1st July 2022.
Employees who are a company director, a family member working in a business, or someone receiving a super pension or annuity or transition-to-retirement payments are also eligible for SG payments.
Temporary residents are also entitled to receive SG payments from their employer into their super account.
Your employer is not required to make SG contributions if you are a non-Australian resident and are paid to do work outside Australia, are an Australian resident but paid by a non-resident employer for work done outside the country, a senior foreign executive on certain visas, or temporarily working in Australia for an overseas employer and are covered by super provisions in a bilateral social security agreement.
If you are working as a contractor you might 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 for a result, and who must perform the contracted 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.
How Is A Workers SG Calculated?
In 2021/22, your SG contribution rate is 10% 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.
Are There Limits On How Much SG A Worker Can Receive?
The current SG contribution rate is 10% of your earnings up to a limit called the maximum super contribution base (MSCB). If you earn above that amount in a particular quarter, your employer does not have to make SG contributions for the part of your earnings over the limit.
The MSCB for 2021/22 is $58,920 per quarter, which equals a maximum SG contribution by your employer of $5,892 per quarter.
What Are The Rules For Workers Who Have Multiple Jobs?
From 1 January 2020, if you have multiple employers you can apply to opt out of receiving SG contributions from some of your employers so you don’t unintentionally go over your annual concessional (before-tax) contributions cap ($27,500 in 2021/22).
To be eligible to opt out, you must have more than one employer and expect the total of all your employers’ mandated concessional contributions to exceed your concessional cap for the financial year.
Employees in this situation can submit a Super guarantee opt out for high income earners with multiple employer’sform to the ATO. You then receive an SG employer shortfall exemption certificate to give to one or more of your employers to release them from their SG obligation for up to four quarters within a financial year. This means they will not be liable for the super guarantee charge (SGC) if they do not make SG contributions for you in the quarters covered by the shortfall exemption certificate.
Your employer can’t apply for an exemption on your behalf and you must receive SG contributions from at least one of your employers each quarter. It’s important to note your application must be lodged at least 60 days before the start of the next quarter.
Even if you provide some of your employers with an SG employer shortfall exemption certificate that releases them from their SG obligations for up to four quarters within a financial year, they can choose to disregard the exemption certificate and continue making SG contributions on your behalf.
Applying for an exemption may not be beneficial for you as it may affect your pay and other entitlements, so ensure you talk to an accountant or tax agent before lodging the release form.
How Are SG Contributions Taxed?
SG contributions going into your super account receive a concessional tax treatment – which means they are contributions from money that has not been taxed – so they are 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 your income is up to $250,000) or 30% (on income above $250,000). For many people this tax rate is lower than the marginal tax rate they pay on their normal income.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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