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A. What to consider as an employer

SG threshold

Section: 1.3

While an individual or company (on behalf of its employees) may contribute any amount into superannuation there is a limit to which those contributions attract a tax deduction. Moreover, the Australian Government requires all employers to provide a minimum level of superannuation for their employees. For each quarter of the 2020-21nancial year, an amount equal to 9.5% of each eligible employee's ordinary time earnings (OTE) must be paid to a complying super fund.

The SG payment rate is legislated to slowly increase to 12% by 1 July 2025 as follows:

Financial year  SG rate (%)
2017-2018 9.5
2018-2019 9.5
2019-2020 9.5
2020-2021 9.5
2021-2022 10
2022-2023 10.5
2023-2024 11
2024-2025 11.5
2025-26 and future years 12
The new SG regime from 1 January 2020

From 1 January 2020, the salary sacrifice contribution will no longer be considered super guarantee contributions by employers. For instance, if an employee elect to salary sacrifice 5% into their superannuation, the employer will still be required to pay 9.5% or more of employees ordinary time earnings base, including the salary sacrifice amount, into employee super to avoid the super guarantee charge.

Example: David earns $3,000 a week and has an effective salary arrangement with his employer to sacrifice $350 to his superannuation fund each week. David's salary only comprises ordinary time earnings (OTE) amounts.

David's employer previously calculated his SG liability on David's after salary sacrifice wage as follows:

  • $3,000 - $350= $2650
  • $2650 x 9.5% = $$251.75 SG liability

From 1 January 2020, David's employer must calculate the SG liability on David's OTE base which includes the salary sacrificed OTE amounts. The calculation is:

  • $3,000 x 9.5% = $284.00

This is in addition to the $350 David salary sacrifices each week.

David's employer makes the following payments to his super fund:

  • salary sacrificed amounts of $350 each week (as per arrangement)
  • SG contributions of $3,692 each quarter ($284 x 13 weeks)

When a due date falls on a weekend or public holiday, the employer can make the payment on the next working.

While SG contributions made between 1 July 2020 and 28 July 2020 may count towards the employer's SG obligations for the April to June 2020 quarter, any SG contributions made between 1 July 2020 and 28 July 2020 will count towards the employee's concessional contributions cap for 2020-21.

Last modified: Monday, October 26, 2020