An arrangement you make with your employer where your employer agrees to pay some of your before-tax salary into your super account rather than giving it to you as take-home pay. Salary sacrifice contributions are concessional contributions because, depending on how much you earn, they may be taxed at a concessional rate i.e. lower than you would pay if the amounts were taxed at your marginal tax rate. As well as potentially giving you a tax benefit today, salary sacrifice contributions can help build your super balance for the future. You can make salary sacrifice contributions until age 75.
A super contribution is an amount added to your super balance. Generally, by law, employers must pay at least 10.5% of your salary to your super each year. These contributions are called employer contributions or Superannuation Guarantee contributions. Contributions can also be additional payments aimed at boosting your balance so you have more when you retire. These can be concessional super contributions or non-concessional contributions. Concessional refers to payments made to your super account pre-tax (such as in a salary sacrifice arrangement), and non-concessional are voluntary contributions you make after tax from your bank account or other savings. The government can also make a ‘co-contribution’ into your account if you earn less than a certain amount per year and make a voluntary contribution into your account.
The government caps or limits the amount you can add to your super. The concessional or before-tax contribution cap is $27,500 per year for all individuals regardless of age. The non-concessional contribution cap is $110,000 per year for all individuals regardless of age or $330,000 under the three-year bring-forward where you can contribute up to three times the cap at once or at any time during a three-year period.
Concessional contributions are those contributions into your super made pre-tax i.e. from your salary prior to tax being taken out. These are often in the form of salary sacrifice contributions or contributions you make and then claim a tax deduction for. Generally, concessional contributions are taxed at 15%, which may be lower than the rate you’d pay on income or earnings outside of super. It is important to note there is a cap on the amount you can make in concessional contributions to your super each year of $27,500. If you contribute over the cap in that year, you can pay extra tax.
Employer superannuation contribution - For Employers
An employer superannuation contribution is generally 10.5% of your salary per year that your employer is required to contribute into a super fund on your behalf. This is also known as a Super Guarantee (SG) payment. Employer contributions should be paid into a complying super fund by the quarterly due dates each year; however, many employers choose to make contributions monthly.
Reportable superannuation contributions
A reportable superannuation contribution is any personal super contribution that you make pre-tax or make then claim a tax deduction on. They are also any super contributions your employer makes for you above the standard 10.5% Superannuation Guarantee payment. Reportable super contributions can affect income tests for tax offsets, deductions, concessions, the Medicare levy and particular government benefits.
The government specifies contribution caps for how much you can contribute to super in concessional (pre-tax) contributions and non-concessional (after-tax) contributions. The concessional contribution cap is $27,500 per year for all individuals regardless of age. The non-concessional contribution cap is $110,000 per year for all individuals regardless of age or $330,000 under the three-year bring-forward where you can contribute up to three times the cap at once or at any time during a three-year period.
Voluntary superannuation contributions are also called non-concessional, after-tax or personal contributions. They are contributions you make voluntarily from your bank account or other savings. Adding more or ‘topping up’ your super with a voluntary contribution is a way to boost your balance for the future. To make a voluntary contribution you can generally ask your employer to make a deduction to your super from your after-tax pay, or you can arrange the contribution yourself to your super account via direct debit or BPAY. You can make voluntary contributions until age 75.
You can make a spouse superannuation contribution to your spouse’s super account and claim a tax offset if they earn less than $40,000 in income per year. The maximum tax offset of $540 can be claimed if your spouse earns less than $37,000 in a year and you make the maximum contribution of $3,000 to their account. A number of other eligibility rules apply to spouse contributions, such as both parties needing to be Australian residents and not being part of a Family Court order to split super.
Compulsory super contributions are the contributions most employers are required by law to contribute to their employees’ super accounts each year. They are also called Superannuation Guarantee payments, are currently 10.5% of an eligible employee’s earnings, and are required to be paid at least quarterly by a set deadline. Since 1991-92 it has been compulsory for employers to allocate a percentage of eligible employees’ earnings to a complying superannuation fund.