As an employee, you’ll understand that your employer is obligated to pay you superannuation with each pay period. This is known as the Super Guarantee and a part of the remuneration you receive as a percentage of your wage or salary.
The money that’s paid into your super fund are savings that go towards your retirement. It’s paid into the super fund of your choice, which should travel with you in every job you have. You can contribute extra money, or contributions, into your super fund to help build your retirement savings. Many people receive a super stream income, as well as government pensions, when they retire.
The Superannuation Guarantee
The Superannuation Guarantee (SG) is the minimum amount that your employer should pay into your fund. This percentage is controlled by the Australian Government and should be paid into your super fund with each pay period.
The SG rate increased to 10.5% from 1 July 2022 for the 2022-23 financial year. The SG rate has been set to increase 0.5% every year until it reaches 12% from 1 July 2025.
A maximum limit is applied to the SG. Employees earning more than $230,680 per year for the 2021-22 financial year is entitled to a maximum SG payment of 10%, or $23,568.
Who Qualifies For The SG? New rules recently brought in has ensured that almost all full-time, part-time and casual employees over the age of 18 earning more than $450 per month are eligible for SG contributions. Those people under 18 who earn more than $450 per month and work more than 30 hours a week for one employer are eligible. Contractors under some workplace arrangements may also be eligible.
New Choice Rules
From 1 November 2021, a new choice of super was introduced with a mandatory default super fund to be the employee’s choice of fund that travels with them from job to job. This is known as a ‘stapled’ fund. This rule was introduced to avoid over payment of fees on multiple super funds.
Once you’re employed, your new employer will offer you a choice of using their chosen superannuation body, or paying your entitlements into a fund of your own choice.
Once your super fund has been accepted by your employer, contributions should be paid into the super account at least 4 times a year. The minimum paid is the SG percentage of your wage, and should be in addition to your salary or wage.
Your employer must pay your contributions electronically using Single Touch Payroll to meet SuperStream requirements, which is linked to the Australian Taxation Office (ATO). Payments can be made into multiple super funds if requested. Your employer is legally bound to comply by your wishes. Your SG should be calculated on your total salary and wages, including overtime and some allowances.
Making Extra Payments
You can let your employer know if you want to make extra personal payments into your super fund to super charge your retirement savings from your pre-tax wage. These extra payments are known as concessional super contributions. You can also make non-concessional payments from your after tax wage into your super fund.
Concessional payments are capped at $27,500 for all individuals regardless of age. The non-concessional payments cap is $110,000 per year for all individuals regardless of age. A limit of $330,000 has been imposed allowing individuals to bring-forward their contributions up to three times the cap at once or at any time during a three year period for individuals over the age of 67.
Concessional payments are taxed at 15% which may be lower than your current marginal tax rate. Non-concessional payments are made from after-tax money and do not attract any further tax. The earning on your super fund money will be taxed at a maximum of 15%. Money accessed from non-concessional payments made to your super fund after retirement is not taxed, either as a lump sum or income stream.
Non-concessional payments include:
- Contributions made from after-tax income
- Contributions made from your spouse
- Contributions exceeding the cap
- Contributions exceeding a capital gains tax (CGT) amount
- Retirement benefits withdrawn from a super fund to re-contribute to super which has not been claimed as a tax deduction
- Contributions made for you by someone else if you are under 18 and the contributor is not your employer
- Most transfers from foreign income super funds
- Life insurance premiums and fund fees
Super Fund Tax Deductions
Tax deductions can be made on non-concessional contributions paid into your super fund from your after-tax income. You must give a super fund notice form and receive an acknowledgment from your fund before you can claim.
Eligibility is given to people who derive their income from:
- salary or wages
- a personal business (self-employed contractors or freelancers)
- investments from interest, dividends, rent and capital gains
- government pensions or allowances
- partnership or trust distributions
- a foreign income source
Pro Tax Tip: personal super contributions claimed as deductions will count towards your super contributions cap. In this instance, extra tax may need to be paid
Your super payments form part of your wage and basic entitlements. If you need help finding a super fund or want to start your own SMSF, ITP Accounting Professionals can guide you according to your circumstances. ITP Accounting Professionals can help grow your super, locate and consolidate lost super and ensure that you’re maximising your money. Book online to chat with an advisor today.