More money in your super

The superannuation guarantee (SG) is the amount your employer contributes to your super on your behalf… it’s your savings for your retirement. For most, the SG is 9.5 per cent of your ‘ordinary time earnings’ but  this rate will increase gradually to 12 per cent by 2019/20.

Are you aged 70 or over?

Prior to 1 July 2013, if you are aged 70 or over, while you may be eligible to receive employer contributions, your employer is not required to make SG payments on your behalf. From 1 July 2013, however, the rules  have changed which means that your employer may be required to make SG on your behalf. Also the upper age limit that applies to SG contributions has been abolished.

Great news for workers, but…

The increasing SG rate means you will have more in your super, but it could affect your take home pay depending on your terms of employment.

Fixed salary package

If you receive a fixed salary package (including your salary and your employer’s contributions to super), then when your employer applies the SG increases you could experience a reduction in your take home pay, although your overall salary package remains the same.

For example: Craig has a salary package of $90,000. An SG increase to 9.5 per cent means his employer’s super contribution will increase but his salary will reduce by the same amount.

Salary package SG rate SG contribution Pre-tax salary
$90,000 9.25% $7,620 $82,380
$90,000 9.5% $7,808 ($188 more) $82,191 ($189 less)

Fixed salary amount

If your salary is a fixed amount and your employer pays SG contributions on top of this based on your salary, then your take home pay will remain the same and the increase in SG will be borne by your employer.

For example: Donna has a fixed salary of $40,000. An SG increase to 9.5 per cent means that her SG contribution will increase by $100 but her salary remains the same.

Fixed salary SG rate SG contribution Pre-tax salary
$40,000 9.25% $3,700 $40,000
$40,000 9.50% $3,800 ($100 more) $40,000 (same)

As the SG rate gradually increases to 12 per cent in future years, remember that this may have a progressive impact if you are working.

SG contributions are concessional contributions. If you are making salary sacrifice contributions, then make sure you don’t unintentionally breach the concessional contribution limit. The cap is $30,000 per annum. From 1 July 2014 the $35,000 cap is available for people aged 50 and over.

If you have any questions about the rate of SG and how it affects your wages, speak to your local Bridges financial planner.