Superannuation Guarantee

 

..is a form of compulsory superannuation for employees, with contributions being made by employers as a percentage of (not deducted from) the employee’s and certain contractors’ ordinary time earnings.

The Superannuation Guarantee Act is administered by the Australian Tax Office, which monitors compliance by employers. It also helps employees find their “lost superannuation” contributions, unclaimed super, and can assist employees wanting to transfer their super from one account to another.

Key ATO references:
For Employees -|-  For Employers

The compulsory Superannuation Guarantee contributions are required to be made as a specified percentage of an employee’s Ordinary Time Earnings before tax.

Super increases 1 July 2013… and again 1 July 2014 **

The superannuation guarantee contribution percentage rates are as follows:

Superannuation
Guarantee Rates **
Year from to Rate
1 July 2010 30 June 2011 9%
1 July 2011 30 June 2012 9%
1 July 2012 30 June 2013 9%
1 July 2013 30 June 2014 9.25%
1 July 2014 30 June 2015 9.5%
1 July 2015 ** 30 June 2016 10% 9.5%
1 July 2016 ** 30 June 2017 10.5% 9.5%
1 July 2017 ** 30 June 2018 11% 9.5%
1 July 2018 ** 30 June 2019 11.5%10%
1 July 2019 ** 30 June 2020 12% 10.5%
1 July 2020 ** 30 June 2021 11%
1 July 2021 ** 30 June 2022 11.5%
1 July 2022 ** 30 June 2023 12%

** the revised schedule of percentage rates shown in this table are in accordance with the Federal Budget 2014 proposals announced on 13 May 2014 – see below.

** Budget Announcement 13 May 2014

The Federal Budget 2014-15 presented to parliament on 13 May 2014 provided for a deferral of currently legislated increases in the Superannuation Guarantee percentage rates in measures associated with the Mining tax repeal measures.

For progress of the amendments through parliament (with a further rate deferral negotiated in order to secure the necessary votes in the Senate) see MRRT Repeal Measures Bill.

super-guarantee-rephase-2015

Superannuation Guarantee Scheme

The Definition of Ordinary Time Earnings (“OTE”)

Not as simple as you’d think, although it starts with an intuitive notion of “ordinary earnings”.

As a generalisation, OTE is understood to refer to ordinarily recurring and unexceptional kinds of wage payments, and therefore doesn’t include (for example) ex gratia and redundancy payments.

However it’s not always clear cut, and there can be a difficulty in practice, in deciding what is “ordinary” in various contexts and what’s not. Overtime earnings, for example, can form part of OTE.

ATO Ruling – Ordinary Time Earnings

The Tax Office has issued rulings on this tricky subject, which includes a fairly long list of what’s in and what’s out of the OTE definition. At the time of writing, the latest ruling is Superannuation Guarantee Ruling SGR 2009/2.

In addition, be aware of the expanded definition of ‘employee’ for Superannuation Guarantee purposes, which includes contractors if the contract is “wholly or principally” for their labour. The Tax Office has provided detailed guidance on their interpretations on this issue; At the time of writing contained in ruling Superannuation Guarantee Ruling SGR 2005/1.

Suffice to say that the definitional edges in this area are sufficiently blurred to justify professional advice, especially if you may be forming an opinion to exclude certain payments.

Free Online SGC Eligibility Decision Tool

The ATO has an anonymous on-line Super Guarantee decision tool which can help you step through the issues.

The Minimum – Maximum Wage Limits For Compulsory Contributions

Minimum threshold – gross wages of $450 per calendar month

  • Maximum: OTE in 2014-15 of $49,470 per quarter ($197,880 for the year)
  • Maximum: OTE in 2013-14 of $48,040 per quarter ($192,160 for the year)
  • Maximum: OTE in 2012-13 of $45,750 per quarter ($183,000 for the year)
  • Maximum: OTE in 2011-12 of $43,820 per quarter ($175,280 for the year)
  • Maximum: OTE in 2010-11 of $42,220 per quarter ($168,880 for the year)

These thresholds are adjusted annually.

Contributions above these earnings base levels are voluntary. Note also that Superannuation Guarantee contributions count towards an individual’s concessional contributions cap.

 

The Age Limits

Excluded:

  • Under 18 part time employees, i.e. working less than 30 hrs per week. (Each week considered separately)
  • Employees over age 70 until 30 June 2013

Included:

  • Effective from 1 July 2013 there is no upper age limit, bringing eligible employees over the age of 70 years back into the SGC net.

Time Limits: When Do The Contributions Need To Be Paid

The ATO time limit for payment of Superannuation Guarantee contributions is 28 days after the end of each quarter.  Some employment agreements or awards may provide a greater frequency.

Failure to make a contributions deadline, requires a Superannuation Charge statement to be lodged and paid within a further 28 days. The Superannuation Charge is non tax deductible and made up of:

  • the required superannuation contributions (less any since paid)
  • interest
  • administration penalty

Employee’s Choice of Super Fund

Since 1 July 2005, employees generally have had the right to choose the super fund for their compulsory superannuation guarantee contributions. Most employees are eligible, but there are some exclusions which can be reviewed here.

An employer meets the choice requirements by giving the employee a Standard Choice Form (PDF download) and then acting on the employee’s election within 2 months.

If an employee fails to complete a choice nomination and provide the necessary information, the employer has to pay the superannuation guarantee contributions to a complying Employer Nominated Fund which must also (with some exceptions) offer a minimum level of life insurance cover.

An employer is only obliged to respond to one choice nomination within each year.

Small Business Superannuation Clearing House

This is a free government superannuation payments clearing service for small businesses with less than 20 employees.

This enables small businesses to make one payment to the clearing house, which then disburses the money to the required selection of superannuation fund accounts.

There’s some more information about the Clearing House here.

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This page was last modified on 2 September 2014