The amount of superannuation you get paid is not always as simple as, 9.5% of your income. The level of income you earn, and whether that exceeds what is called the maximum super contribution base will impact how much superannuation guarantee you are paid.
What is Maximum Super Contribution Base?
The maximum earnings base of an employee for which an employer is legally required to make superannuation guarantee (SG) contributions is $57,090 per quarter ($228,360 per annum) for the 2020/21FY ( this is indexed to AWOTE on 1 July each year).
This means that in the 2020/21FY, if you are earning $228,360 or more ($57,090 per quarter), an employer is only required to provide $21,694 in SG contributions over the year, based on the current maximum earnings base of $57,090 per quarter and current SG rate of 9.5%.
How does this impact my super and take-home pay?
The amount of $21,694 remains within the $25,000 concessional contributions cap, and you may choose to make additional contributions to maximise this cap.
Because you will no longer be paid superannuation on earning above the maximum super contribution base, you will need to ensure you clarify the terms of your remuneration package with your employer. You will want to be clear on whether they will provide any other benefits as taxed salary or other benefits. This can become a point of tension where you may have negotiated a remuneration package of $xx plus super.
An example of how the maximum super contribution base works
If you earned an income of $65,000 plus super in a quarter of the 2020/21 financial year, your employer would not have to pay the 9.5% super guarantee on the entire amount. Legally they would only be required to pay at most $5,423.55 a quarter, or 9.5% of the maximum contribution base for that income year which was $57,090.
Important to note:
If you have any questions about your personal circumstances then please get in touch and schedule a chat with myself or one of our advisers.
Pete is the co-founder and oversees the investment committee for Pekada. He is a qualified financial planner with 14 years of experience. Based in Melbourne, Pete is on a mission to help everyday Australians achieve financial independence and the lifestyle they dream of. Pete has been featured in Australian Financial Review, Money Magazine, Super Guide, Domain, American Express and Nest Egg.