Update: On 1 July 2022, the Superannuation Guarantee rate increased from 10% to 10.5% and will continue to increase annually until it reaches 12% on 1 July 2025.
Superannuation contribution rate
Effective 1 July 2021, employer contributions to the Superannuation Guarantee (SG) increased from 9.5% to 10% of employee’s wages, up to a quarterly limit of AUD 58,920 for 2021-22. Employers are not mandated to contribute to the SG for the portion of the employee’s earnings above the quarterly limit – also known as the maximum superannuation contribution base.
Therefore, the maximum mandatory SG contribution per quarter increased from AUD 5,423.55 to AUD 5,892 based on the new SG contribution rate and maximum super contribution base.
Concessional contributions caps
Concessional contributions are before-tax contributions made into an individual super fund from the employee’s earnings. These include employer contributions (SG and salary sacrifice), as well as personal contributions from a member for which an income tax deduction is claimed. From 1 July 2021, the concessional contributions cap increased from AUD 25,000 to AUD 27,500, regardless of employee age. The annual concessional cap is indexed in line with Average Weekly Ordinary Time Earnings (AWOTE) in Australia.
Contributions above the new limit are included in the employee’s taxable income. Concessional contribution caps may be higher if the full amount of the cap was not been used in earlier years This carry-forward of concessional contributions is possible for a maximum of five years and so long as the total superannuation balance is less than AUD 500,000 on 30 June of the previous financial year.
Contributions exceeding the concessional contributions cap that are left in the SG fund are known as non-concessional contributions. These after-tax contributions are also subject to a cap, which increased as of 1 July 2021 from AUD 100,000 to AUD 110,000. Members under the age of 65 may be able to contribute up to three times the annual non-concessional contribution cap by bringing forward the next two years’ contribution cap (one larger contribution the first year and no contributions the following two years). Bring forward non-concessional contributions are capped at AUD 330,000 if the total super balance on 30 June of the previous financial year is less than AUD 1.48 million and are capped at AUD 220,000 if the balance is between AUD 1.48 million and AUD 1.59 million. There is no bring forward option available when the total super balance is AUD 1.59 million or above. It should be noted that non-concessional contributions are not available if the super balance is AUD 1.7 million or more as of 30 June of the previous financial year.
Employers should review their contribution rates and update their payroll and accounting systems accordingly. Employers may use the Australian government’s SG contribution calculator to determine their new contribution rate for eligible employees. Employers should be aware that the SG rate is scheduled to increase by 0.5% each year until it reaches 12% of employees’ wages in July 2025.