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Superannuation Contributions – A Refresher

Superannuation Contributions – A Refresher

We are currently seeing an increase in ATO compliance activity for late employer superannuation contributions. So this seems like a good time for a refresher of some of the main superannuation rules.

Contributions by Employers

It’s compulsory for employers to pay eligible employees Super Guarantee (SG) at least quarterly. The minimum SG rate you must pay each employee is 11.5% from 1st July 2024 of their Ordinary Times Earnings (OTE). The rate will increase to 12% from 1st July 2025.

Payments are due into the employee’s super account by 28 days after the end of each financial quarter: 28th October, 28th January, 28th April, 28th July. You can pay sooner (ie monthly) but need to have completed all payments for the quarter by the 28 day deadline. Be aware that the use of super clearing houses can cause delays and we suggest making submissions & payments at least 7 days prior to allow processing time between the clearing house & employee’s superfund.

Super is tax deductible when paid. While the June quarter contribution is due 28th July you will need to make payment prior to 30th June if you want it available as a tax deduction in that financial year.

For new employees that have failed to provide super details you still need to make payment by the 28 day deadline. This should be made to your default fund, who then set up a new member account for the employee & contact them. It’s then the employee’s responsibility to complete the set up process & administer a rollover if they choose.

The concessional contribution cap for the 2024/25 year is $30,000. If you have higher income employees being paid over $260,300 annually which would cause this cap to be exceeded then you can cap contributions at 11.5% of the quarterly Maximum Contributions Base of $65,070 earnings and still meet your SG obligations. Note there may be other obligations to pay super above this amount such as requirements under an award, agreement or contract. In those situations the employee will exceed their contribution cap & they will need to deal with the consequences with their superannuation fund & the ATO after the end of the financial year.

The 11.5% rate is applied to Ordinary Times Earnings. This includes ordinary hours worked, commissions, bonuses, shift & leave loading, and some allowances. If you are unclear of what’s included refer to the ATO website or contact our office for more detail.

If super isn’t paid on time & in full by 28 days after quarter end you instead pay a Super Guarantee Charge (SGC). This will be calculated as a higher amount of 11.5% on a much broader definition of wages & salary (including overtime), plus a nominal interest charge of 10% and an administration fee. The total SGC amount is not tax deductible, meaning the business gets no tax benefit for the payment.

Personal Contributions

You can make personal contributions to your superfund and claim this as a tax deduction on your annual tax return providing certain criteria are met. This includes ensuring contributions fit within your annual concessional cap after taking into account any employer contributions, and completing the relevant notice forms with your superfund.

Concessional contributions are taxed at 15% as they are received into the fund so consider your marginal rate when deciding to make deductible contributions.

Note when considering to pay extra super that if you are close to your annual cap amount its best to first check with your employer as to intended timing of April – June quarter contribution payments as employers have until 28th July to make payment but many pay prior to 30th June to get the tax deduction, so the April – June quarter contributions could potentially land in either financial year.

Your available cap may be higher than the $30,000 annual cap if you meet the rules to carry forward unused Concessional Caps. This applies where you have a Total Super Balance of less than $500,000 at the end of the previous financial year and you have unused cap amounts left over from any of the previous 5 prior years that can be utilised as an extra cap amount in the current year. You can access super employer contributions, total super balances, and unused cap information on ATO online services/MyGov or by contacting our office. Unused cap amounts are applied automatically by the ATO in the order of oldest available cap forwards once your $30,000 annual cap is exceeded in a year, there is no action required by you to have this applied.

Division 293 Tax for higher income earners

If your annual income and concessional super contributions total more than $250,000 you may need to pay Division 293 tax. When $250,000 is exceeded Division 293 imposes an additional 15% tax on the concessional contributions, or the excess over the cap, whichever is lower. Division 293 income is made up of taxable income, reportable Fringe Benefits, and add backs of investment & rental losses. Note you may normally be below the threshold but have a capital gain or large concessional contribution using unused caps which causes Division 293 to become applicable. If you need require assistance in assessing the likely tax impacts of making contributions please contact our office to discuss further.

Contributed by Kyra Gonsal.

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