Your employer sets aside a portion of your income as superannuation, for you to access when you retire. Strict superannuation rules and mandatory fund contributions have put Australians’ retirement savings ahead of people in many other counties that have no required retirement contributions.
Superannuation is fairly straightforward for most of us who earn a wage or salary because it comes out of our pay, and that’s the last we think about it.
But as soon as you start digging deeper into superannuation and tax rules as well as trying to work out if you’ll have enough when you retire, it becomes quite complicated.
Below, we cover details of your employers obligations that you should be aware of as well as a few options for topping up your super with your own contributions.
Will your retirement be as comfortable as your parents or grandparents? Probably not, unless you prioritise your superannuation savings.
First, the basics of superannuation rules…
How much super does your employer need to pay?
Every employer has to pay a minimum 11.5% of their employee’s total earnings (from 1 July 2024) into superannuation, known as the Super Guarantee (SG). For example, if your ordinary time earnings for the year are $65,000, your employer must pay $7,475 into your super account.
- The minimum contribution has had an increase of 0.5% each year since 2020 until it reaches a target of 12% on 1 July 2025.
- They calculate the 11.5% from your normal pay or salary, plus all allowances, commissions, and leave loading. It doesn’t include dividends or performance-related bonuses.
Superannuation criteria
You must qualify to receive employer superannuation contributions. For example, you need to be under 70 years of age, working either on a full-time, part-time or casual basis. Before 2022, you used to have to be paid over $450 (before tax) per calendar month to be eligible but that is no longer the case. However, if you’re under 18, to be eligible for employer contributions, you also have to be working more than 30 hours a week.
Superannuation standards, rules and compliance
All superannuation funds have to be ‘complying’ and meet legal standards. If you want to check that your fund is a ‘complying’ super fund, you can go to the Government’s free register of complying funds called ‘Super Fund Lookup’: http://superfundlookup.gov.au/
What if I’m self employed?
If you’re self-employed, you decide if you want to join and contribute to a fund. Most self-employed people can claim a full tax deduction for contributions they make to their super until the age of 75.
What happens to my super contributions?
Your super fund invests the money in your superannuation account. Most super funds offer a variety of investment options that may include shares, property, currency and more complex investment products. With help choosing investment options, consult your super provider and/or get expert advice.
The Tax Office advises that you should check your superannuation situation each year at the same time as you do your tax. To help, they’ve put together a five-step checklist.
Superannuation Contribution Rules and Limits
You can’t put all of your extra money into superannuation. The ATO has a cap on both concessional (before tax) contributions and non-concessional (after tax) contributions.
‘Before-tax’ contributions
Concessional contributions are pre-tax contributions made to your superannuation fund.
They include both your employer’s required contribution, plus any additional contributions you make by pre-tax salary sacrifice arrangements with your employer.
Most people can make pre-tax contributions of $30,000 per year (in 2024).
The ATO taxes ‘concessional contributions’ at a rate of 15%, which is much lower than the tax rate most of us pay on our income. Your super fund will usually handle the tax payments on your super. They usually subtract this tax amount from your super account and you’ll see this on your super statement.
Concessional Contributions Example
Mark is a laboratory technician who earns $80,000 per year. Mark’s employer makes mandatory superannuation contributions of 11.5% of his salary each year. ($80,000 x 11.5% = $9,200).
Mark also has a salary sacrifice arrangement with his employer where he contributes an additional $75 per week of his income to his fund ($75 x 52 weeks = $3,900).
Mark’s yearly concessional contribution is therefore $9,200 + $3,900 = $13,100 per year. This is well below the cap of $30,000 per year, so Mark can make further contributions of $16,900 during the year.
‘After-tax’ contributions (non-concessional contributions)
Non-concessional contributions are post-tax contributions you make to your super fund.
However, the Tax Office has put limits on how much you can contribute each financial year.
Currently, most people (again, depending on your age) can make a non-concessional contribution of up to $120,000.
Above the limit, you have to pay even more tax on this money. Currently, above cap, non-concessional contributions are taxed at the highest marginal tax rate.
That being said, after-tax contributions can really boost your super balance, especially now that you might be able to claim a deduction for these contributions on your tax return…
How to claim a deduction for after-tax superannuation contributions
You can claim a tax deduction for after-tax super contributions. These are claimed in the Personal Superannuation Contributions section of your tax return.
If you wish to claim this deduction on your tax return you must first tick of these two items:
- Told your superannuation fund via a “Notice of intent to claim” that you intend to claim your after-tax contributions, AND
- Received acknowledgement back from your superannuation fund.
However, please keep in mind that if you claim an after-tax superannuation contribution on your tax return it is effectively converted to a ‘before tax’ concessional contribution and is included in your $30,000 yearly limit.
You can read more about this by reading our detailed how to claim personal superannuation contributions article.
