Superannuation
Maximum super contribution base
The maximum super contribution base is the cap on an employee's quarterly ordinary time earnings above which an employer is not required to pay super guarantee contributions.
The maximum super contribution base is a limit set under the super guarantee law. It is the maximum amount of an employee's ordinary time earnings in a quarter on which an employer must pay super guarantee. If an employee earns more than the base in a quarter, the employer does not have to pay SG on the excess, though they may choose to. The figure is set by the ATO, is indexed periodically, and should be checked on ato.gov.au each year, as it is not fixed.
The purpose of the cap is to stop mandatory contributions from growing without limit as salaries rise. It applies per employer, per employee, per quarter, which means it is assessed against the earnings with that employer in that three month period. It does not take account of the earnings an employee receives from other jobs. An employee with several employers might therefore receive more than the intended level of contributions overall, and may exceed the concessional contributions cap as a result.
Employers need to apply the cap when calculating SG. They first work out the OTE for the quarter, compare it with the base, and use whichever is lower to calculate the SG payable. Payroll software normally includes the current base, but the figure needs to be updated when it changes, typically at the start of a financial year. If it is wrong, an employer may overpay or underpay.
Employees who are high earners should pay attention to how SG interacts with the concessional contributions cap. Even with the maximum contribution base in place, SG, plus any salary sacrifice, can push a person near or above the concessional cap. In that case, the employee may want to adjust their arrangements. In some situations, employees can apply for an exemption certificate from SG with a particular employer, but only where they would exceed certain thresholds, and the rules are strict.
GST has no role in the maximum super contribution base. Super and wages are outside the GST system. However, super payments are a significant cash outflow for most businesses, so understanding the cap helps with budgeting and cash flow management alongside quarterly BAS obligations. The relevant SG due dates fall 28 days after each quarter ends, which are often close to BAS due dates.
A common misunderstanding is that the cap relates to annual salary. It is a quarterly measure. Another is that the cap stops an employer from paying more. It does not. An employer may pay more under an agreement or voluntarily, but the extra is not part of the compulsory SG.
This is general information only, so check the figure and rules with the ATO or a registered tax professional.
Worked example
Suppose the base for the quarter is $60,000, a figure used here only for illustration, and an employee earns $75,000 OTE in the quarter. The SG is calculated on $60,000, not $75,000. Using a hypothetical 10% rate to show the arithmetic, SG is $60,000 x 10% = $6,000. The employer does not have to pay on the extra $15,000, though they may if their contract says so.
Practical tips
- Update your payroll software with the current maximum contribution base each financial year.
- Monitor high earners across all jobs, because several employers each paying SG up to the base can push total contributions over the concessional cap.
- Check the ATO website for the current base rather than relying on last year's figure.