The superannuation guarantee

In Australia, most employers are required under federal law to pay superannuation contributions on your behalf to approved super funds.

These contributions are paid at least quarterly, and there’s a minimum rate of contribution, known as the superannuation guarantee rate.

What is the superannuation guarantee rate?

The superannuation guarantee (SG) is the percentage of your ordinary time earnings (in addition to your wages) paid into your super fund by your employer.

The SG rate in Australia is 10% per annum, and is set to rise by 0.5% per year till it reaches 12% in July 2025.

What are Ordinary Time Earnings?

Your ordinary time earnings (OTE) is the amount you earn for your ordinary hours of work. It generally includes things like leave (annual, sick, long service), some shift loadings, certain allowances (such as danger allowance or on-call allowance), back pay, commissions and bonuses.

For more detail on what makes up OTE, see the ATO’s List of payments that are ordinary time earnings page.

Does my employer have to pay the 10% superannuation guarantee rate?

Yes, your employer must pay the 10% SG rate, provided you’re entitled to receive compulsory superannuation contributions.

Generally, your employer must pay you super if:

• you're 18 years old or over and paid $450 or more (before tax) in wages in a calendar month, or
• you're under 18 years, working at least 30 hours a week, and paid $450 or more (before tax) in wages in a calendar month.

From 1 July 2022 its proposed that the $450 monthly income threshold will be removed. This will allow more working Australians to be paid super, no matter their income or hours.

What if my employer doesn’t pay the superannuation guarantee?

Employers who don’t pay the SG on time (at least quarterly), and to the correct super fund, are liable to pay a superannuation guarantee charge (SGC). They also need to lodge an SGC statement to the Australian Taxation Office (ATO).

The SGC amount is more than the super they’d be required to pay to your super fund and is not tax-deductible. An administration fee also applies for each employee, so it’s in the employer’s best interest to pay the required SG rate.

Can my employer pay a higher rate than the super guarantee rate?

Your employer may make additional contributions to your super. Anything above the required 10% may be reportable. To find out more, see Reportable employer super contribution types on the ATO website.

Does the superannuation guarantee apply if I’m a casual worker?

It applies whether you’re full-time, part-time, casual or contracting. It also applies if you’re a domestic or private worker. (See Domestic or private workers.)

If you’re unsure about eligibility, the ATO has tools for both workers and employers to determine when the SG rate needs to be paid. See:

• Am I entitled to super guarantee from my employer? (for workers)
• Super guarantee eligibility tool (for employers)

If I’m on the NDIS, do I have to pay the superannuation guarantee to my carers?

If you are on the National Disability Insurance Scheme (NDIS) and hire domestic workers and/or carers, you may need to pay them super.

The hiring a support worker chapter on the ATO website has more information and includes an Employee/contractor decision tool that helps you work out if you need to pay your support worker superannuation.

Am I eligible for the super guarantee if I’m from overseas?

Usually yes. Even if you are a temporary resident, you’re eligible to earn the SG in Australia.

The main exception is if you’re working temporarily in Australia under a bilateral social security agreement. In this case you would be employed by, and likely receiving super contributions from your employer in your origin country.

See the list of countries with bilateral social security agreements with Australia here.

Can I earn super if I’m an Australian citizen working overseas?

If you’re an Australian citizen working for an Australian employer, and you’re sent to work temporarily overseas, your employer should still pay you super.

Your employer will need to arrange a certificate of coverage for you to present in the country you’ll be working in. This will ensure you’re receiving super contributions in Australia, and your employer won’t pay you equivalent contributions. This applies only in countries Australia has bilateral social security agreements with.

When is the super guarantee not required?

Employers don’t need to pay the SG:

• when a non-Australian works for an Australian business outside of Australia
• for some foreign executives who hold certain visas or entry permits
• to international employees covered by a bilateral social security agreement
• to members of the Australian Defence Force working in that role
• to themselves (self-employed workers), unless they’re under a PAYG setup
• to high-income earners working for multiple employers who don’t wish to be paid the super guarantee from all their employers.

Why doesn’t the super guarantee apply to the self-employed?

In general terms, the SG scheme requires an employer to provide a minimum level of superannuation support to its employees. If you’re self-employed, a sole trader or in a partnership, you’re not required under law to pay yourself the SG.

This may differ if you own your business and employ yourself under a PAYG setup.

While it isn’t legally required, it may be wise to make personal contributions to your superannuation fund. Generally personal contributions are regarded as non-concessional contributions. But you may be eligible to claim a tax deduction on a personal contribution if you satisfy certain conditions. If you validly claim a tax deduction on a personal contribution, it will be regarded as a concessional contribution. We recommend that you should obtain advice to confirm your circumstances.

See Super for self-employed people on the MoneySmart website for more information.

What is the maximum amount I can contribute to super each year before I’m taxed?

The below is a general summary of the rules around contribution caps. For more detail refer to the ATO website.

Concessional contributions (pre-tax)

Concessional contributions include contributions made to your super by your employer via the SG, and any contributions you make through salary sacrifice.

The cap on concessional contributions is $27,500 per year from your pre-tax income. If you have less than $500,000 in super, you may be able to make additional contributions using any available unused concessional contribution cap from 1 July 2018 onwards.

Contributions in excess of your cap will attract tax. You can request the excess contribution be returned to you. See what if I exceed the super contributions cap below.

Non-concessional contributions (after-tax)

Non-concessional contributions include:

• contributions made from your after-tax income by you or your employer
• contributions made by your spouse to your super fund
• personal contributions you make that you’re not claiming as an income tax deduction.

After-tax personal super contributions are not subject to tax, as they are made with earnings that have already been taxed.

The cap on non-concessional contributions is $110,000 per year from your after-tax income. Depending on your age and super balance, you may be eligible to make non-concessional contributions up to $330,000 by bringing forward future years’ caps. If your total super balance is greater than or equal to the general transfer balance cap (currently $1.7 million), your non-concessional contributions cap is nil ($0) for the financial year.

Note:

• If you’re over 67 and you wish to make non-concessional contributions or certain types of concessional contributions (such as salary sacrifice contributions and personal contributions for which you want to claim a tax deduction), you need to complete a Work Test with the ATO.
• From age 75 onwards, you can no longer make either type of contributions.

From 1 July 2022 The Federal Government has proposed new changes to the work test to increase flexibility for older Australians to save for their retirement through super.

If these changes are legislated, and you’re aged 67 to 74 (inclusive) you will be able to make or receive non-concessional (including the bring forward rule) or salary sacrifice super contributions without meeting a work test, subject to existing contribution caps. Although personal deductible contributions will still need to meet the work test.

What if I exceed the super contributions cap?

Exceeding the concessional cap

If you go over your concessional cap, any excess is classed as income by the ATO, and included in your income tax return where it will be taxed at your marginal tax rate.

If this happens, you can request to withdraw some of the excess from your super and put it towards paying the additional tax.

Exceeding the non-concessional cap

If you exceed the non-concessional cap, you can withdraw the excess contributions, plus notional earnings on it, from your super fund.

If you do withdraw the excess and earnings, the earnings will be included in your income tax assessment and taxed at your marginal rate.

If you choose not to withdraw the excess and earnings, you will be taxed on the excess at 47%.

For more information on your options if you exceed the cap visit the ATO website – exceeding your non-concessional contributions cap.

In summary…

The superannuation guarantee ensures that if you’re employed in Australia, generally you’ll be paid super without you doing much more than providing your employer your Tax File Number (TFN).

It’s worth checking your super account to ensure that your employer is paying your contributions at the SG rate of 10%. If you’re a UniSuper member you can login to your online account to check this.

It might also a good idea to make additional personal contributions if you can (provided you stay below the caps), and if you’re self-employed, aim to pay yourself super at the SG rate.