Superannuation Guarantee Explained

Superannuation Guarantee Explained: Who is Eligible in 2022 – 2023?

One thing that helps Australians plan for retirement is the Superannuation Guarantee (SG). With many changes impacting superannuation contributions this financial year, it’s critical to get up-to-date information on the Superannuation Guarantee and how it affects you. 

The Superannuation Guarantee is a compulsory contribution that your employer makes to your super fund on your behalf. The current minimum contribution is 10.5% of your before-tax salary and is payable quarterly. 

The Superannuation Guarantee is designed to provide a safety net for all Australian workers in retirement. Whether you’re new to retirement planning or already have a Self Managed Super Fund (SMSF), you’ll receive the same Superannuation Guarantee rate. 

However, there are a few exceptions to the Superannuation Guarantee, so not every employee in Australia will receive super. It’s important for both employers and employees to understand who is entitled to superannuation and when it needs to be paid. 

We have created this article to help you understand the basics of the Superannuation Guarantee. 

In this article you’ll learn:

  • Whether you (or your employees) are eligible for the Superannuation Guarantee
  • Who doesn’t need to be paid superannuation in Australia
  • The Superannuation Guarantee rate for 2022 – 2023 
  • How superannuation is calculated 
  • When super needs to be paid 

and other essential information that might help you along the way. 

Continue reading to learn all about superannuation in the 2022 to 2023 financial year. 

What is Superannuation Guarantee?

The Superannuation Guarantee in Australia is an amount set by law that employers must pay into eligible employees’ superannuation accounts. The Superannuation Guarantee (SG) rate is the percentage of Ordinary Time Earnings (OTE) contributed to an employee’s super. 

Since employers are legally bound to contribute a certain amount of money to your superannuation account each month, your superannuation guarantee is calculated based on your salary or wages and is paid out before tax. Employers pay this contribution directly into the employee’s superannuation fund, which is only accessible upon retirement.

Ordinary Time Earnings (OTE) are the amount earned for every ordinary hour of work. This generally includes leave (sick leave, annual leave, and long service leave), certain shift loadings, specific allowances (such as on-call and danger allowance), backpay, commissions, and bonuses.

The Australian Tax Office (ATO) has a list of payments considered Ordinary Time Earnings. Keep in mind that OTE and salary/wages are two distinct payments under the ATO. Salary and wages only have to be considered if the minimum super guarantee contribution (usually calculated through the OTE) has been missed by the due date. Salary and wages are similar to the OTE, but also include overtime payments.

Does an Employer Have to Pay the Superannuation Guarantee? 

Yes. As long as you are entitled to receive compulsory superannuation contributions, your employer must pay 10.5% of your gross salary/wages into your super. Superannuation must be to almost all employees in Australia, as well as some contractors. 

Employers that intentionally break SG rules are liable to penalties and will have to:

  • Catch up on your superannuation payments
  • Pay a fine that could short up to 75% of the shortfall
  • Pay an administration charge for every employee whose SG contributions were not fulfilled per quarter

What is the Superannuation Guarantee Charge? 

If an employer fails to contribute the rate required into your super by the quarterly due date, they might have to pay the Superannuation Guarantee Charge (SGC) to the ATO. The SGC includes the superannuation contributions owed, interest and administration fees. 

Should an employer mistakenly pay the SG into someone else’s super, then they must rectify it by the due date and report it by lodging an SG Statement as well as paying the SGC.

Who is Eligible for the Superannuation Guarantee? 

As of 1 July 2022, employees eligible for the superannuation guarantee include:

  • Employees over 18 in Australia, whether full time, part time or casual 
  • Employees under 18 who work more than 30 hours per week 
  • Domestic/private workers who work more than 30 hours per week
  • Contractors paid primarily for their labour 
  • Australian employees sent temporarily to work overseas

Before 01 July 2022, employees below 18 were only eligible for SG if they were paid $450 or more (before tax) in salary within a calendar month. This threshold also applied to superannuation for casual employees, contractors and domestic/private workers before 01 July 2022. However, there is no minimum earning threshold to be eligible for the superannuation guarantee in the 2022 to 2023 financial year. 

Those classified as domestic/private workers perform work relating personally to the employer, home or household, such as housekeepers and nannies. These employees are eligible for the superannuation guarantee if they work over 30 hours per week. 

The superannuation guarantee is not applicable for:

  • Employees under 18 and domestic workers who work less than 30 hours per week
  • Contractors paid for a result rather than their labour or skills 
  • Non-resident employees who are currently working outside Australia
  • Foreign executives who hold entry permits/certain visas
  • Employees who are currently temporarily working in Australia and are covered by a bilateral super agreement.

If you need details regarding your employer’s SG contributions, you can check them on your payslip and/or digital payment summary. You may verify your eligibility for SG contributions by visiting the Australian Taxation Office’s (ATO) ‘Am I Entitled to Super? Online Calculator’.

If you think/find out that your employer should be paying your SG contributions and they aren’t, contact the ATO immediately. 

Are Contractors Eligible for Superannuation Guarantee?

Yes, contractors paid primarily for their labour must be paid superannuation in Australia. Prior to 1 July 2022, contractors needed to be paid more than $450 pre-tax income in a calendar month to be eligible for the superannuation guarantee. 

From 1 July 2022, contractors are entitled to superannuation if they are paid primarily for their labour, regardless of if they have an Australian Business Number (ABN) or not, so long as they are being paid:

  • Under a verbal/written contract that is predominantly for their labour (this means more than half the dollar value is allocated for their labour)
  • For their personal labour and/or skills (this means that the payment does not depend on achieving or accomplishing a specific result/ outcome)
  • To perform the contract work (this means the work is not and cannot be delegated to another individual)

This is because individuals contracted for their personal labour are considered employees for superannuation purposes, even if they have an ABN. This doesn’t apply to contracts with a company, partnership or trust who then delegates the work to an individual. 

The super guarantee percentage is applied to the labour portion of the contract or payment, not including materials, overtime, or GST. If this information isn’t formalised in the contract, it can be calculated at the market rate. 

Note that paying an additional sum to the contractor to cover the superannuation guarantee percentage doesn’t count – only contributions to the contractor’s superannuation fund meet this obligation. 

Are Casual Workers Eligible for Superannuation Guarantee?

Yes, the Superannuation Guarantee applies to all workers over the age of 18 regardless whether they are employed on a casual basis. Casual workers (individuals who work less than 30 hours per week) are eligible for the SG even if they don’t earn enough money to pay income tax. 

The exception is casual employees under the age of 18, who are not entitled to the superannuation guarantee if they work under 30 hours per week. 

Are People from Overseas Eligible for Superannuation Guarantee? 

Superannuation Guarantee applies to all Australian residents regardless of whether or not they live permanently in Australia. If you are working in Australia under a bilateral agreement, you should contact your local tax office to find out if you are eligible for the SG.

International workers are also entitled to SG, even if they hold a temporary resident status, like a backpacker or a working holiday maker. 

The following are not eligible for SG:

  • Non-resident employees who are currently working outside Australia
  • Foreign Executives who hold entry permits/certain visas
  • Employees who are currently temporarily working in Australia and are covered by a bilateral super agreement.
  • Temporary residents who work in Australia under a bilateral Social Security Agreement.

Are Australian Citizens Living Overseas Eligible for Superannuation Guarantee?

Yes, but your employer should provide you with a certificate of coverage before you go overseas. This ensures that Superannuation Guarantee contributions are paid into your super account regardless of where you live or work. 

Even Australian employees who are sent to work temporarily in a different country must continue to receive super contributions back in Australia. Remember that no provision requires an Australian citizen working abroad to return home to claim super payments.

Are Self-Employed People Eligible for Superannuation Guarantee?

Generally speaking, the SG applies to employers who employ workers. If you are self-employed, then you may want to consider making personal contributions to your super fund. However, self-employed individuals as sole traders or in a partnership will not have to pay SG contributions for themselves.

What is the Superannuation Guarantee Rate? 

The current Superannuation Guarantee (SG) rate in Australia currently sits at 10.5%, with a yearly increase of 0.5% until 2025. This rate is how much your employer must contribute to your super account. 

The SG forms part of the remuneration that your employer pays you, in which the rate is based on a percentage of your gross salary wage, determined by the Australian government and subject to change over time.

The SG rate increased last 01 July 2022, from 10% to 10.5%. The next increase will occur on 01 July 2023 for the 2023 – 2024 fiscal year. As of now, the final rate is 12%, which will be achieved on 01 July 2025. Below is a table of the SG rate increases so far and those to be expected:

PERIODSUPER GUARANTEE RATE
01 July 2002 – 30 June 20139.00%
01 July 2013 – 30 June 20149.25%
01 July 2014 – 30 June 20219.50%
01 July 2021 – 30 June 202210.00%
01 July 2022 – 30 June 202310.50%
01 July 2023 – 30 June 202411.00%
01 July 2024 – 30 June 202511.50%
01 July 2025 – 30 June 2026 onwards12.00%

It’s interesting to note that the Superannuation Guarantee rate was originally meant to increase to 10% last July 2015. However, legislation was passed to slow the gradual increase, delaying the 10% rate for seven years to 01 July 2021.

What is the Maximum Super Contribution Base? 

Under the provisions governing superannuation, an employer must make regular Superannuation Guarantee (SG) contributions into an employee’s super account, included in the agreed remuneration package.

However, the government sets a quarterly cap on the amount the employer can contribute to an employee’s super account for high-income earners. This cap is known as the Maximum Super Contribution Base (MSCB). It is indexed to Average Weekly Ordinary Time Earnings (AWOTE), which changes every fiscal year. The MSCB does not apply to other mandated contributions, including super contributions paid under an enterprise agreement/ industrial award.

For 2022 – 2023, the MSCB is set to $60,220 per quarter, totalling $240,880 per year. This means that the maximum Superannuation Guarantee contribution that your employer can make is equal to $6,323 per quarter ($60,220 x 10.5%). Below is a table showing the historical MSCB from 2008 up to today:

Maximum Super Contribution Base (MSCB) for 2022 – 2023 and Previous Years

INCOME YEARQUARTERLY INCOMEMAXIMUM SG CONTRIBUTION PER QUARTER (SG CONTRIBUTION RATE x QUARTERLY INCOME)
2022 – 2023$60,220$6,323.10
2021 – 2022$58,920$5,892.00
2020 – 2021$57,090$5,423.55
2019 – 2020$55,270$5,250.65
2018 – 2019$54,030$5,132.85
2017 – 2018$52,760$5,012.20
2016 – 2017$51,620$4,903.90
2015 – 2016$50,810$4,826.95
2014 – 2015$49,430$4,695.85
2013 – 2014$48,040$4,443.70
2012 – 2013$45,750$4,117.50
2011 – 2012$43,820$3,943.80
2010 – 2011$42,220$3,799.80
2009 – 2010$40,170$3,615.30
2008 – 2009$38,180$3,436.20

Unfortunately, due to the MSCB, high-income earners with irregular/inconsistent income may miss out on some superannuation. If an individual’s income reaches beyond the MSCB in a certain quarter due to a bonus or overtime, then the amount of SG the employer must pay will be capped, so the individual would not receive an SG contribution on the entire amount.

How Are Super Guarantee Contributions Taxed? 

The tax you pay on Superannuation Guarantee (SG) contributions will depend on your income. As concessional contributions, a tax rate of 15% generally applies. However, there are some scenarios where you may pay more or less tax.

  • If you earn under $37,000 per annum, you may be eligible for the Low Income Super Tax Offset and have the tax paid back into your super account 
  • If you earn over $250,000 per annum Division 293 tax may apply, which incurs an additional 15% tax rate 
  • If you exceed the concessional contributions cap for the year, the excess will be taxed at the individual’s marginal tax rate
  • If you don’t provide your super fund with your Tax File Number (TFN), additional tax will apply

The concessional contributions cap for the fiscal year 2022/23 is $27,500 for all individuals, regardless of age. This limit applies to all concessional contributions, including salary sacrificed super contributions. Once it is exceeded, the amount over the cap will be taxed at the individual’s marginal tax rate.

Note that withdrawals from a superannuation fund and investment earnings within a super fund are taxed separately to contributions. 

How is My Superannuation Guarantee Contribution Calculated? 

For 2022 – 2023, the Superannuation Guarantee (SG) contribution rate is equal to 10.5% of your Ordinary Time Earnings (OTE). The Superannuation Guarantee contribution is paid on top of your salary or wages. 

The OTE refers to the amount that an individual earns for their ordinary hours of work, including shift loadings, allowances, commissions, and bonuses. Overtime payments are not included. To identify which type of remuneration counts as OTE, see the table below (based on the Australian Taxation Office’s checklist of salary/ wages and OTE):

PAYMENT TYPESALARY/ WAGESORDINARY TIME EARNINGS (OTE)
Overtime hours: Award stipulates ordinary hours to be worked, and the employee works additional hours for which they are paid overtime ratesYesNo
Overtime hours: Agreement prevails over awardYesNo
Agreement supplanting award removes the distinction between ordinary hours and other hoursYes: All hours workedYes: All hours worked
No ordinary hours of work stipulatedYes: All hours workedYes: All hours worked
Casual employees: Shift loadingsYesYes
Casual employee: Overtime paymentsYesNo
Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clauseYesNo
Piece rates: No ordinary hours of work stipulatedYesYes
Overtime component of earnings based on an hourly driving-rate method YesNo

How does the Superannuation Guarantee Work if I Have Several Jobs? 

From 01 January 2020, individuals with several employers may apply to opt out of Superannuation Guarantee (SG) contributions from certain employers. This aims to prevent them from exceeding the concessional contributions cap of $27,500 for the current fiscal year (2022 – 2023).

In order to be eligible to opt-out:

  • The individual should have multiple employers; and
  • Their expected total concessional contributions will exceed the cap for the current fiscal year.

Interested individuals should submit what is known as a ‘Super Guarantee opt out for high income earners with multiple employers’ to the Australian Taxation Office (ATO). It is not possible for an individual’s employer to apply/ submit for an exemption on your behalf, and one of your employers should still be sending SG into your super account. The application has to be submitted at least 60 days before the beginning of the next quarter.

Successful applicants will receive an SG employer shortfall exemption certificate to provide to one or more of their employers. This relieves them of the obligation to contribute to your super fund for a maximum of four quarters within the current fiscal year.

An important thing to note is that despite providing your employer with a shortfall exemption certificate, they can disregard the certificate mentioned above and carry on with the SG contributions.

Can I Choose What Fund my Superannuation Guarantee Gets Paid To? 

The employee is usually allowed to choose which super fund and account the Superannuation Guarantee (SG) contributions are paid to. However, there are specific circumstances in which the contributions must be made to a specific super account, such as for members of a defined benefit fund. 

Employees in Australia typically fill out an approved Superannuation choice of fund form and provide it to their employer. If you’re unsure whether you can choose your own superannuation fund, consult your financial advisor or an employment lawyer. 

What Happens if My Employer Doesn’t Pay My Superannuation Guarantee? 

Employers who fail to pay the Superannuation Guarantee (SG) on time and/or correctly will incur penalties, whether intentional or unintentional. Employers will have to catch up on superannuation payments, pay a penalty of up to 75% of the shortfall, and pay an administration charge per employee per quarter.

Super funds will always send out reminders to employers to ensure they pay the SG on time. Should there be a problem with SG contributions, the Australian Taxation Office (ATO) will levy a penalty for unpaid SG charges.

Related Questions 

How Can I Keep Track of My Superannuation Guarantee Contributions? 

You can check and/or manage your superannuation using the Australian Taxation Office’s (ATO) online services via myGov

What Happens to My Superannuation?

Superannuation is held and managed by the superannuation fund until you’re able to withdraw it – typically when you reach preservation age and retire. You may be able to withdraw super early under some circumstances, like terminal illness or incapacitation. 

If you pass away before withdrawing all your superannuation, it is paid out to your nominated beneficiary as superannuation death benefit

Disclaimer:

This article is provided as general information only and does not consider your specific situation, objectives or needs. WealthVisory Private Clients makes no warranties about the ongoing completeness or accuracy of this information. It does not represent financial advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.

Matthew Rutter, Director/Head Financial Advisor of WVPC

Matthew has a wide ranging background in business, finance, taxation and accounting with over 25
years’ experience, firstly as an Accountant before becoming a Financial Planner. Matthew has been in
the Financial Planning Industry since March 1998 and has been the principal of his own financial
planning practice since 2003.

Matthew has studied a Bachelor of Commerce degree from Newcastle University majoring in Financial
Accounting and the Diploma of Financial Planning from Deakin University. Matthew is a Registered Tax
Agent and is a member of the National Tax & Accountants Association (NTAA).

Matthew has particular expertise in the areas of retirement planning, superannuation, investments and
insurance. His emphasis is on building a professional, integral and lasting relationship with clients with
the objective of assisting them to achieve their financial and lifestyle goals.

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