Super Guarantee: Thresholds, caps and limitations

Employers are required under Superannuation Guarantee (SG) legislation, to make super contributions on behalf of their employees, and at the correct rate. Anyone with a super account can also make voluntary contributions to their account.

There are some limits and terminology to be aware of.

Concessional contributions

This means the before-tax contributions made to a super fund – these are taxed at a lower (i.e. concessional) rate of tax. The tax rate is only 15%, which is much lower than income tax for most people.

Concessional contributions cap

There is a limit to the amount you can contribute to super from your before-tax income in order to benefit from the concessional tax rate.

Currently, the cap – which includes contributions made by your employer under the Super Guarantee scheme – is set at:

• $30,000 per year if you’re under 50 years of age
• $35,000 per year if you’re 50 years of age or over during this financial year

If total before-tax contributions exceed the cap, you will be required to pay a higher tax rate on the excess amount.

Non-concessional contribution cap

Non-concessional means from after-tax income. Even though after-tax voluntary contributions have been taxed at your normal rate of income tax, there are still limits to the amount you can contribute to your super.

Currently, the cap is set at $180,000 per year, regardless of age.

If total after-tax contributions exceed the cap, you will be required to pay a higher tax rate on the excess amount.

Maximum Superannuation Contribution Base

This is the sum, set by the Federal Government each year, which is the maximum income on which employers must pay the Super Guarantee. In 2016/17 it is $51,620 per quarter ($206,480 per year).

Super Guarantee Contribution (SGC) threshold

This is calculated by taking the Maximum Superannuation Contribution Base (currently $51,620 per quarter) and multiplying by the super guarantee rate, currently 9.5%.  This means that the maximum amount of super an employer must contribute for an employee under the SG scheme is $4,903.90 per quarter.