Superannuation
Superannuation
Employers are required to contribute a minimum level of superannuation support, known as the Superannuation Guarantee, which is currently set at 12.00% of your gross wages.
This section outlines how your superannuation is calculated, the options available through our payroll system, and the relevant limits and thresholds that apply. The focus, however, is on the salary packaging aspects of superannuation rather than the treatment of contributions once they are inside your super fund.
Valid Salary Sacrificing Contributions
A salary sacrifice arrangement lets you agree with your employer to receive benefits instead of part of your salary. By directing some of your salary into your super fund, you reduce your taxable income and pay less tax. These contributions are taxed at 15% in the super fund, which is usually lower than your personal income tax rate.
Valid salary sacrifice super contributions:
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Do not reduce your employer’s super guarantee obligations or the calculation of your super entitlement.
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Are treated as additional employer contributions, not personal contributions.
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Are not counted as assessable income for tax purposes, so they aren’t subject to PAYG withholding, but must be reported in your tax return as reportable super contributions.
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Are not considered a fringe benefit if paid to a complying super fund, so they aren’t subject to fringe benefits tax.
Super Options
Our payroll system currently provides for the following superannuation contribution options:
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No election made – Defaults to the Superannuation Guarantee (SG), subject to the Maximum Contribution Base limit.
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Proportion of gross wages – Contribute a higher percentage of your gross wages (for example, 20% instead of the standard 12% rate). You may also choose to contribute the SG rate in all cases without applying the Maximum Contribution Base cap.
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Percentage of taxable income – Contribute a percentage of your contract income after deductible expenses (excluding superannuation). This option allows you to contribute up to 100% of available funds to super, with no gross wages paid.
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Flat amount per pay – A fixed dollar amount is deducted each pay period. For example, if you nominate $1,000 and submit two timesheets, a total of $2,000 will be contributed.
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Flat amount per hour – Specify a fixed amount to be contributed for each hour worked. This option is useful if you wish to keep your super contributions independent of any salary packaging arrangements.
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Amount above SGC – Similar to the “Proportion of gross wages” option, but automatically adjusts when the SGC (superannuation guarantee contributions) rate changes.
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Desired gross wages – Nominate the amount you wish to receive as take-home pay each period, with the remaining balance contributed to superannuation.
Although superannuation legislation only requires contributions to be paid quarterly, we generally process payments in line with your pay schedule through our clearing account with Colonial First State. Please note that there may be a delay of up to one week between your payslip and the actual super payment.
Maximum Contributions Base and Concessional Cap
There is an upper limit on the minimum superannuation support required, known as the Maximum Contribution Base. The ATO’s rationale is that the Superannuation Guarantee (SG) is normally an employer-paid amount in addition to salary, making it an employer expense. To be fair to employers, a cap is applied to the amount they are expected to contribute each quarter.
As a contractor, your contract income is paid to you in full, with any super contributions deducted pre-tax from your income. If you prefer to have access to your funds for purposes such as paying off a mortgage or investing, this cap can be useful. Our system is set to follow the minimum required contributions, so at the end of each quarter, you may notice contributions falling below the SG rate. If you would like to contribute at the full SG rate in all cases, simply let us know and we can update your package configuration.
There is also an upper limit on contributions that can be claimed as a tax deduction, known as the concessional contributions cap, which is currently $30,000 per year. Super funds report all contributions to the ATO, and your total contributions are compared against this limit. If you have multiple employers, it’s important to monitor contributions, as reaching this cap does not exempt an employer from paying the minimum SG contributions. Any excess contributions above this limit are subject to additional taxation. More information can be found [here].