What is the maximum contribution base for superannuation?

What is the maximum contribution base for superannuation?

Superannuation plays a vital role in the retirement strategy of most individuals. However, if you don’t understand the technical details related to the salary benefits and compensation packages, you might end up getting quite a low contribution from your employer. One of the complexities that you might be confused about is the Maximum Super Contribution Base, also known as the MSCB, as the terms and limits tend to change annually. 

It is mandatory for employers to pay a certain amount into their employee’s chosen superannuation fund quarterly in Australia. The amount that the employer is legally required to pay each employee is known as the Superannuation Guarantee. This amount is currently calculated at 9.5 per cent of an employee’s regular earnings up to the maximum contribution base for superannuation. 

What is the maximum contribution base?

The maximum contribution base is used to identify the most an employer is legally required to pay as part of the super guarantee in a particular fiscal quarter. Legally, the employer doesn’t need to pay any further super contributions for income over the MSCB level, though there is no prohibition against doing so. The MSCB level changes periodically and is indexed in line with the Average Weekly Ordinary Time Earnings, usually determined in February. 

How does the maximum contribution base work?

To understand how the superannuation maximum contributions base works, let’s say, for example, that you’re a high income earner on $260,000 a year in the 2017-18 financial year. This would mean you'd earn $65,000 per quarter. 

You’d expect that your employer would have to pay 9.5 per cent of these earnings into your super fund as part of the superannuation guarantee. However, because  the maximum contribution base for 2017-18 is $52,760 per quarter, your employer  would only be legally required to pay 9.5 per cent of $52,760 each quarter. 

Employers can still choose to offer a salary package with super benefits, including the employer paying a higher contribution for high earners. Nevertheless, employers need to ensure that every employee gets at least 9.5 per cent of their income up to the maximum contribution base for superannuation. Hence, it’s imperative to know the maximum contribution base for any particular year. 

Maximum contribution base limits for current and previous years:

Income year

Income per quarter

2020–21 $57,090 
2019–20 $55,270 
2018–19  $54,030 
2017–18  $52,760 
2016–17  $51,620 
2015–16  $50,810 
2014–15 $49,430

Source: Australian Taxation Office

What if the employer doesn’t meet the maximum contribution base? 

Suppose an employer fails to meet obligations towards an employee’s super contributions, like not paying 9.5 per cent on the maximum contribution base for superannuation. In that case, they may be liable for a penalty or liability. Moreover, if the employer doesn’t disclose their Tax File Number information to an employee-nominated super fund, they might have to pay a penalty of $1,100 per employee. 

What can an employee do if the maximum contribution base isn’t met? 

If an employee is concerned about insufficient SG payments made by their employer, their first course of action should be to check the actual contributions made to their super fund. If the concerns persist, they can approach their employer for information about the contributions made. If this doesn’t resolve the issue, the final step would be contacting the ATO to report unpaid SG. To do this, the employee would need to provide the following information to the ATO: 

  • Employee’s tax file number
  • Period for which details are required
  • Employer’s details, including ABN

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Learn more about superannuation

How do you pay superannuation?

Superannuation is paid by employers to employees. Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Currently, the superannuation rate is currently 9.5 per cent of an employee’s ordinary time earnings. This is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

What are reportable employer superannuation contributions?

Reportable employer superannuation contributions are special contributions that an employer makes on top of the regular compulsory contributions. One example would be contributions made as part of a salary sacrifice arrangement.

How can I increase my superannuation?

You can increase your superannuation through a ‘salary sacrifice’. This is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Like regular superannuation contributions, salary sacrifices are taxed at 15 per cent when they are paid into the fund.

What are reportable superannuation contributions?

For employees, there are two types of reportable superannuation contributions:

  • Reportable employer super contributions your employer makes for you
  • Personal deductible contributions you make for yourself

What is salary sacrificing?

A salary sacrifice is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Salary sacrifices come out of your pre-tax income, whereas personal contributions come out of your after-tax income.

Can I transfer money from overseas into my superannuation account?

Yes, you can transfer money from overseas into your superannuation account – under certain conditions. First, you must provide your tax file number to your fund. Second, if you are aged between 65 and 74, you must have worked at least 40 hours within 30 consecutive days in a financial year. (Australians under 65 aren’t subject to a work test; Australians aged 75 and over cannot receive contributions to their superannuation account.)

Money transferred from overseas will generally count to both your concessional contributions limit and your non-concessional contributions limit. You will have to pay income tax on the applicable fund earnings component of any money transferred from overseas. You might also be liable for excess contributions tax.

How much extra superannuation can I add to my fund?

There is an annual limit of $25,000 for concessional contributions – that is, money paid by your employer and extra money you pay into your account through salary sacrificing. There is also a limit on non-concessional contributions. Australians aged between 65 and 74 have a limit of $100,000 per year. Australians aged under 65 have a limit of $300,000 every three years.

What are personal contributions?

A personal contribution is when you make an extra payment into your superannuation account. The difference between personal contributions and salary sacrifices is that the former comes out of your after-tax income, while the latter comes out of your pre-tax income.

What is the superannuation rate?

The superannuation rate, or guarantee rate, is the percentage of your salary that your employer must pay into your superannuation fund. The superannuation guarantee has been set at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How does superannuation work?

Superannuation is paid by employers to employees, at least once every three months. The ‘superannuation guarantee’ is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary. The guarantee is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Superannuation is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

 

How much is superannuation in Australia?

Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How much is superannuation?

Superannuation is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How is superannuation calculated?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How do you calculate superannuation?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.