For many workers in Australia, the superannuation guarantee (SG) plays a critical role in saving for retirement.
The most common way to prepare for a comfortable retirement is by growing your super, and the SG ensures that you continue building your nest egg throughout your working life.
To learn more about the superannuation guarantee, we have prepared a guide on SG contributions and what they mean for you.
What is the superannuation guarantee (SG)?
The superannuation guarantee is the minimum contribution amount that your employer makes into your super fund on your behalf.
Employers are legally required to make SG contributions to eligible employees, which make up part of their remuneration.
The current SG rate is 10.5 per cent, which is determined by the Australian government and set to rise incrementally over time.
SG contributions are concessional contributions, which have an annual cap of $27,500 for the 2020-21 and 2022-23 financial years.
Who is eligible for the superannuation guarantee?
There are a range of employees who are eligible for the superannuation guarantee.
Now, even employees who earn less than $450 before tax in a calendar month are entitled to super guarantee contributions in addition to their wages.
Workers who are 18 or under, or classified as private or domestic workers, need to work more than 30 hours per week to be eligible for SG contributions.
What is the superannuation guarantee charge?
The superannuation guarantee charge is a penalty for employers that do not pay the minimum SG amount into the correct super fund by the due date.
The SG charge, which isn’t tax deductible, is made up of the SG shortfall amounts, interest on those amounts, and a $20 administration fee per employee, per quarter. The interest amount is currently 10 per cent.
Employers need to report and rectify any missed superannuation guarantee payments by lodging an SGC statement to the Australian Tax Office.
If you know that you are going to miss the due date for lodging the SGC statement, you should request an extension of time to lodge the statement.
Speak to your financial advisor if you have questions about the superannuation guarantee charge or need help lodging an SGC statement.
Speak to the superannuation experts at LDB
Your superannuation is one of the most important parts of your retirement, so it’s important to understand how your super works and what you need to do.
Have you read about the latest super contribution rules? How much do you know about catch-up concessional contributions or how the COVID-19 pandemic has impacted your super?
At LDB, our team of superannuation advisors will assist you with all of your super requirements and optimise your super to ensure that you’re on track for a comfortable retirement.
Give us a call on (03) 9875 2900 or fill in the form below, and one of our trusted super experts will be in touch.
