Mandated employer contributions such as super guarantee (SG), have different rules and requirements than other types of employer contributions.
In this article, we examine some key rules and address some commonly asked questions.
Recap of Employer Super contributions
Employer super contributions can be grouped into two general categories:
- Mandated employer contributions; and
- Other employer contributions
Mandated employer contributions
Mandated employer contributions are compulsory contributions made for the benefit of eligible employees, which are required under:
- The Superannuation Guarantee (Administration) Act 1992 - employers must contribute the legislative minimum1 to satisfy their SG obligations and avoid the SG Charge2.
- An industry award or certified enterprise agreement by an industry authority - mandated employer contributions are typically set at a higher percentage than what is required under SG.
Other employer contributions
- Other employer contributions include all employer super contributions that are not mandated employer contributions.
- Examples include salary sacrifice and voluntary employer contributions that exceed the employer’s SG obligations. It’s important to understand whether or not a contribution is a mandated employer contribution, as there are differences in the contribution rules and requirements
Mandated employer contributions – what are the rules?
- No maximum age limit – mandated employer contributions can be accepted at any age, there is no maximum age limit.
- Superannuation guarantee amount – an employer is obliged to pay superannuation guarantee of 11% (2023–24) on an employee’s ordinary time earnings base, up to a maximum superannuation contribution base of $62,270 per quarter ($249,080 p.a.) for the 2023–24 financial year.
- Superannuation guarantee timing – For superannuation guarantee contributions to count towards meeting an employer’s SG liability during a quarter they must be made by no later than 28 days after the end of each quarter.
Commonly asked questions
1. My client is 76 years old and receives an employer super contribution of 13% of his salary. Can the super fund accept contributions that exceed super guarantee of 11%?
Under the SIS regulations (reg 7.04), only two types of super contributions can be made for members over age 75:
- Mandated employer contributions; and
- Downsizer contributions.
Assuming the employer is not required to make employer contributions exceeding SG under an industry award or certified enterprise agreement, then the level of mandated employer contributions they are required to make is super guarantee of 11%3 of his salary that are ordinary time earnings.
The additional employer contributions of 2% would not be classified as mandated employer contributions, and as a result the super fund would not be able to accept them.
In this case, the super fund must return them within 30 days of the trustee becoming aware of the contribution.
2. My client is earning $300,000 p.a. and receiving 11% employer contributions on his full salary. As a result, my client is going to exceed his concessional contributions cap. Is there anything we can do about it?
To satisfy their SG obligation, an employer has to pay SG contributions of 11% of an employee’s ordinary time earnings (OTE) up to the maximum super contribution base4. This maximum super contribution base for 2023/24 is $62,270 per quarter or $249,080 for the year.
This means that the employer is only required to pay maximum mandated SG contributions of $27,398.80, which on their own, do not exceed the standard concessional cap of $27,500.
If employers decide to make contributions based on OTE (plus amounts salary sacrificed to super) exceeding the maximum contribution base, these amounts are voluntary employer contributions. Where the additional voluntary contributions cause the client to exceed their concessional contribution cap, they may wish to consult with their employer as to whether the extra contributions can be converted into salary and wages to avoid going through the process of dealing with the ATO’s excess concessional contribution determination letter5.
The SG maximum earnings base applies per employer, hence a client with multiple employers may unintentionally exceed their concessional contributions cap due only to SG contributions (from multiple employers).
To allow clients in this situation to prevent concessional cap breaches, clients with multiple employers can apply to the ATO for an employer shortfall exemption certificate for one or more of their employers. This certificate exempts an employer from having to make SG contributions for the quarters specified in the certificate.
FIRSTTECH COMMENT
Advisers should check if their client can qualify to use the carry-forward concessional contributions rules. If eligible, this may help avoid excess concessional contributions.
3. My client is receiving super guarantee and salary sacrifice contributions at different time intervals. Is this acceptable?
Under SG law, for SG contributions to count towards meeting an employer’s SG liability during a quarter they must be made by no later than 28 days after the end of each quarter, as shown in the following table.
28 October
28 January
28 April
28 July
However this requirement does not extend to other employer contributions such as salary sacrifice. An employer may therefore choose to pay salary sacrifice contributions at different time intervals.
When entering into a salary sacrifice to super agreement, it is important for the agreement to address the specific timeframe that the employer needs to pay the salary sacrificed amount to the client’s super.
FIRSTTECH COMMENT - Employers to be required to pay SG at same time as salary and wages from 1 July 2026
The government has announced a proposal to require employers to pay their employees’ super contributions at the same time as their salary and wages. Currently, employers are required to pay their employees’ superannuation guarantee contributions on a quarterly basis. At the time of writing a consultation paper had been released by Treasury, but no further detail is available on this proposed measure.
Endnotes
1. Section 19 of the Superannuation Guarantee (Administration) Act 1992.
2. The SG Charge includes the following components: The sum of an employer’s individual SG shortfall amounts for each employee, interest component and a fixed administration fee
3. Increasing to 11.5% next financial year and then to 12% for the 2025–26 and future years.
4. Subsection 19(4) of the SGAA 1992
5. FirstTech article Excess concessional contributions - release or keep in super?:
6. Where a cut-off date falls on a day that is not business day (i.e. the cut-off date is a Saturday, Sunday or public holiday), SG contributions can instead be made by the first following business day
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The information contained in this update is based on the understanding Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) and Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) has of the relevant Australian laws as at the article date. As these laws are subject to change you should refer to our website at www.cfs.com.au or talk to a professional adviser for the most up-to-date information. The information is for adviser use only and is not a substitute for investors seeking advice. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), no person, including AIL, nor CFSIL, accepts responsibility for any loss suffered by any person arising from reliance on this information. This update is not financial product advice and does not take into account any individual’s objectives, financial situation or needs. Any examples are for illustrative purposes only and actual risks and benefits will vary depending on each investor’s individual circumstances. You should form your own opinion and take your own legal, taxation and financial advice on the application of the information to your business and your clients.
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