SG (superannuation Guarantee) contributions are compulsory superannuation contributions employers have to make on behalf of employees. From July 2014 this has been 9.5% of the employees salary. This rate will be maintained for the next 5 years increasing as shown in the table below. A Labour government will introduce a faster increase, reaching 12% in 2019/2020.
What is the Superannuation Guarantee?
An employer has to pay the required rate by the quarterly date or be subject to the Superannuation Guarantee Charge (SGC) which is a penalty to the tax office. The SGC includes the SG owing, interest on the outstanding SG and an administration fee.
In most cases the SG is paid into the complying fund chosen by the employee but in some cases it is paid into a fund dictated by a workplace agreement or public sector fund run by state or fedral government. If an employee doesnt specify a fund then the SG will be paid into a default fund with a MySuper option. MySuper is a low cost fund with restricted options.
Employees earning less than $450 per calandar month and those under age 18 working less than 30 hours a week are exempt.
SG contributions are taxed at 15%.
John earns $50,000 pa. For the 2017-2018 tax year his employer must contribute $50,000 * 9.5% ($4,750). 15% tax will be deducted and so $4,038 will be paid into his superannuation account (less fees).