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Super guarantee 101

Heard of super guarantee payments but not sure what they are? Here’s what you need to know.

Putting money into super is a great way to build up your retirement savings. Over the course of your working life, your super fund invests your money so that your nest egg can keep growing until it’s time for you to retire.

 

To help maximise your super, the federal government has made it compulsory for your employer to make regular contributions to your super. These contributions are called super guarantee (SG) payments — here’s what you need to know about them.

 

How much are my SG payments?

 

Usually, your employer has to make SG payments into your super equal to 9.5% of your pre-tax salary. This salary amount is what you earn for your ordinary work hours, and doesn’t include things like overtime, travel costs or other expenses. Find out when your employer doesn’t have to make these payments.

 

Even though these SG payments are calculated based on your pre-tax salary, they don’t affect your take-home pay. So, if you earn $1,000 a week before tax, your employer also has to pay $95 into your super.

 

How are SG payments made?

 

The SG is an arrangement between your employer and your super fund, so you don’t need to do anything to receive SG payments.

 

Your employer makes SG contributions directly into your fund, using the super account details you’ve provided. If you don’t give your employer this information about your super account — or if you don’t have one yet — they’ll set one up for you with their own super provider.

 

Generally, your employer sets aside SG payments for you whenever you get paid, which could be weekly, fortnightly or monthly. Your employer must then make these payments into your super account at least once every three months.

 

How are they taxed?

 

SG payments are taxed at a rate of 15%, which is deducted when your employer makes the contribution into your super fund. Because SG payments aren’t part of your assessable income ― but are paid on top of what you already earn ― you don’t need to factor them in when doing your tax return.

 

However, if your income is above $300,0001 a year, an additional 15% tax may be deducted from your super after you’ve lodged your tax return. This means the SG contributions your employer makes for you will be taxed at 30%.

 

When can I access them?

 

The aim of super is to fund your retirement, so you generally can’t withdraw the money until you finish working or reach your ‘preservation age’. Your super is held (or preserved) in your account until you reach this age and can start accessing your money. The preservation age is currently between the ages of 55 and 60, depending on the year you were born. To find out your preservation age, visit the Australian Taxation Office website.

 

You can also access your super when you turn 65, regardless of whether or not you’re still working ― although this was proposed to rise to age 67 by 2023.

 

We can help

 

If you’re not familiar with how super works, a financial adviser can break it down for you ― giving you the information you need to make better financial decisions.

Disclaimer
Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on 13 13 36.