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What is the Superannuation Guarantee?

In Australia, it’s compulsory for employers to make superannuation contributions on behalf of their qualifying employees.

Generally this means if you’re aged 18 or more, you are employed and earn more than $450 (before tax) per calendar month, your employer is required to pay superannuation contributions on your behalf.

The Superannuation Guarantee contribution rate is 10% of an employee’s ordinary time earnings. Superannuation Guarantee contributions must be made quarterly to a complying super fund.

Who does it apply to?

The Superannuation Guarantee applies to all employers regardless of their size. Generally, superannuation contributions must be paid for:

  • an employee aged 18 or over who earns $450 or more (before tax) per calendar month, and
  • an employee under age 18 working over 30 hours per week, who earns $450 or more (before tax) a calendar month.

In some instances, your employer will also need to make super payments for you if you are employed as a contractor. Further information can be found on the ATO site.

How much is paid?

The Superannuation Guarantee rate is 10%. 

Making extra super contributions

Of course, Superannuation Guarantee contributions alone may not be enough to allow you to retire comfortably.

You can choose to supplement your super by sacrificing some of your pre-tax income into superannuation. Alternatively you can make voluntary after-tax contributions to super from your income or savings. You can claim a tax deduction for personal super contributions subject to meeting relevant criteria.

It’s important to note that there are caps on the amount of contributions which can be made into your super account which attract a concessional tax treatment. Excess amounts above these caps may be subject to additional tax(es). Information on the contribution caps can be found on the  ATO site.

Remember that super contributions and their earnings are preserved, meaning they generally cannot be accessed until retirement after you reach preservation age (age 55-60 depending on your date of birth).

Can I choose what fund my Superannuation Guarantee (SG) contributions get paid to? 

While most employees can choose the super fund  to which their SG contributions are paid, there are some circumstances where contributions must be made to a specific super fund (eg for a member of a defined benefit fund). Check with your employer as to whether you have the ability to choose the super fund to which your SG contributions will be paid.

If you have the option of choosing your own fund, you can complete an approved Superannuation Choice of fund form and provide this to your employer.

It’s wise to check that your employer is paying the correct SG contribution rate on your ordinary time earnings. You can do this by checking your pay slip, and also your superannuation member statements.

Things you should know

This information is general advice only and does not constitute any recommendation or personal advice. It has been prepared without taking account of your objectives, financial situation or needs. It is current at the time of publication 1 July 2021, and is subject to change.

The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. It has not been prepared by a registered tax agent. You should seek independent professional tax advice from a registered tax agent about any liabilities, obligations or claim entitlements that arise, or could arise, under a taxation law.

Superannuation is a long-term investment. The Government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the Government has set a non-concessional contributions cap. For more detail, speak with a financial adviser or visit the ATO website.

This information may contain material provided by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. Information that has been provided by third parties has not been independently verified and the Westpac Group is not in any way responsible for such information.

© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714