What Is The Superannuation Guarantee + What Does That Mean For Me?
Written by: Danny Grigg l Accounting Team
Australia’s superannuation system is set up to be the main way most people save for their retirement. Compulsory superannuation was introduced in Australia in 1992 at a rate of 3% and steadily increased in the years since then. For most people, superannuation begins when you first start in the workforce. For persons under the age of 18, the employer is only liable to pay superannuation for the employee if they work more than 30 hours in a week. There is no upper age limit to super guarantee liability.
So, who is liable to pay the Super Guarantee?
Your employer!
Employers have an obligation to contribute superannuation on behalf of their employees at a percentage that is determined by the government and administered by the Australian Taxation Office. Superannuation Guarantee may also be payable to subcontractors if they are paid mainly for their labour. Want to know more? Check out what the ATO has to say about it directly: Super for Contractors.
How Much Superannuation Is Required To Be Paid?
The minimum superannuation guarantee percentage for the 2023-2024 financial year is set at 11% of ordinary time earnings (OTE).
Ordinary time earnings is the amount paid to employees for their ordinary hours of work and can include:
- Commissions;
- Shift Loadings;
- Allowances;
- Bonuses;
- Leave Payments; and
- Termination Payments.
For a full list of what is included in ordinary time earnings (OTE), what’s excluded and examples, check out the ATO website: List of Payments that are Ordinary Time Earnings.
What Are The Due Dates for Paying The Superannuation Guarantee?
Employers are under an obligation to pay their employees superannuation, by the 28th day of the month after the end of the quarter.
Contribution quarters end on the following dates:
- 30th September;
- 31st December;
- 31st March; and
- 30th June.
For the 30th September quarter, the superannuation must be paid into the employee’s superfund on the 28th of October. The payment must reach the employee’s nominated fun by this date, so if the employer is using a clearing house or accounting software to pay the super, the actual payment may have to be made up to a week beforehand.
If payment is not made by the due date, the employer needs to complete a Superannuation Guarantee Charge Statement, which will include interest and an administration fee, but we will cover that in more detail later.
Are There Caps To The Amount of Superannuation Guarantee?
There are caps to the amount of concessional superannuation contributions that can be made to an employee’s super fund each year, which is currently set at $27,500. This cap includes employer contributions as well as additional contributions an employee may make by way of salary sacrificing part of their wages or making personal contributions. To ensure the employer contributions do not exceed the caps there is a maximum superannuation contribution base, which is set at $62,270 per quarter for the 2023-24 financial year.
If the employee’s income is above the contribution base for the quarter, the employer does not have to contribute 11% super for the amount that is in excess.
For further details of the superannuation guarantee percentages, contribution quarters and maximum super contribution base, check out the ATO Website: Super Guarantee.
What Is The Superannuation Guarantee Charge?
The Superannuation Guarantee Charge (SGC) is applicable where an employer has not paid an employee superannuation by the due date. It can also occur if the employer has not paid the super to the employees correct superannuation fund. In this case, the employer needs to complete the Superannuation Guarantee Charge statement and lodge it with the ATO. If an employer needs to complete an SGC statement, they will end up paying more than was originally required, due to the calculation being based on the full salary and wages (including overtime) instead of ordinary time earnings (OTE), interest (for potential loss of earnings in the employee’s super fund) and administration fees. It also means that the superannuation payment is not tax deductible to the employer.
For more details on the Superannuation Guarantee Charge and the process for completing the statement, check out the ATO Website: The Superannuation Guarantee Charge.
The due date for lodging the SGC statement is one month after the due date of the original payment date. If the original payment date was the 28th October, the SGC statement due date will be the 28th November.
Recent + Upcoming Changes To The Superannuation Percentage
There has been a lot of changes to the superannuation guarantee percentage over the last few years. Up until 30 June 2021, the percentage had been 9.5% of ordinary time earnings (OTE) for seven years. Since then it has been increasing by 0.5% each year, until the 2026 financial year:
- 2022 – 10%
- 2023 – 10.5%
- 2024 – 11%
- 2025 – 11.5%
- 2026 – 12%
Accounting software programs such as Xero, Quickbooks and MYOB that are using the latest program updates should automatically apply the increase in the superannuation guarantee percentages each year. If any employer is not using accounting software or using out-of-date software, they will need to ensure the correct percentage is being applied to the employees ordinary time earnings.
What Do The Recent Changes Mean For Me?
If you are an employer there have been an increasing superannuation guarantee obligation over the past few years and will continue to increase over the next few years – as we highlighted above.
With the introduction of Single Touch Payroll (STP), the ATO have greater awareness of the superannuation obligations of an employer and if payments are being made on time. We have seen an increase in notifications to employers for the ATO regarding their superannuation obligations.
If you are an employee there is an increasing amount of superannuation being paid into your super fund by your employer. This is going to boost your retirement savings in the future when you are planning on retiring from work.
When Can I Access My Super?
There are restrictions to when and how much you can withdraw from your super fund.
In very limited circumstances, you will only be able to withdraw from super if you have reached your preservation age and meet the conditions of release. When considering retirement and accessing your superannuation, you may wish to speak to a financial adviser to obtain personalised advice.
Canny Accounting + Your Superannuation
If you are a business that has employees and are struggling to understand the changes to the superannuation guarantee, you’re not alone. There has been a lot of changes recently and there are more to come.
Get in touch with our team so that we can ensure you are meeting your employee requirements and paying the right amount, at the time time, of superannuation.
