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 my superannuation obligations if I'm an employer?

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.

What is superannuation?

Superannuation is money set aside for your retirement. This money is automatically paid into your superannuation fund by your employer.

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.

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.

What superannuation details do I give to my employer?

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

What are ethical investment superannuation funds?

Ethical investment funds limit themselves to making ‘ethical’ investments (which each fund defines according to its own principles). For example, ethical funds might avoid investing in companies or industries that are linked to human suffering or environmental damage.

Is superannuation compulsory?

Superannuation is compulsory. Generally speaking, it can’t be touched until you’re at least 55 years old.

How do you calculate superannuation from a total package?

Superannuation is calculated at the rate of 9.5 per cent of your ‘ordinary-time earnings’. (For most people, ordinary-time earnings are their gross annual salary or 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.

As the Australian Taxation Office explains, some items are excluded from ordinary-time earnings. They include:

  • Overtime work paid at overtime rates
  • Expense allowances that are fully expended
  • Expenses that are reimbursed
  • Unfair dismissal payments
  • Workers’ compensation payments
  • Parental leave
  • Jury duty
  • Defence reserve service
  • Unused annual leave when employment is terminated
  • Unused long service leave when employment is terminated
  • Unused sick leave when employment is terminated

Although the superannuation guarantee is currently at 9.5 per cent, 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 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.

Can I buy a house with my superannuation?

First home buyers are the only people who can use their superannuation to buy a property. The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So if you pay $15,000 per year into the First Home Super Saver Scheme, you have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.

What happens if my employer goes out of business while still owing me superannuation?

If your employer collapses, a trustee or administrator or liquidator will be appointed to manage the company. That trustee/administrator/liquidator will be required to pay your superannuation out of company funds.

If the company doesn’t have enough funds, in some cases company directors will be required to pay your superannuation. If the directors still don’t pay, the Australian Securities & Investment Commission (ASIC) might take legal action on your behalf. However, ASIC might decline to take legal action or might be unsuccessful.

So there might be some circumstances when you don’t receive all the superannuation you’re owed.

Do I have to pay myself superannuation if I'm self-employed?

No, self-employed workers don’t have to pay themselves superannuation. However, if you do pay yourself superannuation, you will probably be able to claim a tax deduction.

How do I choose the right superannuation fund?

Different superannuation funds charge different fees, offer different insurances, offer different investment options and have different performance histories.

So you need to ask yourself these four questions when comparing superannuation funds:

  • How many fees would I have to pay and what would they cost?
  • What insurances are available and how much would they cost?
  • What investment options does it offer? How would they match my risk profile and financial needs?
  • How have these investment options performed historically?