Question about Super Contributions

[agent007]

Hi forumates,

I have a Super contribution question under the following scenario:

The tax payer is a 40 years old male and his wages income is $500,000 pa. Thus, the minimum Super contribution of 9% amounts to $45,000 pa. Therefore, the question is how could it be possible if the maximum allowed Super contribution for under 55 is $25,000 pa and the minimum Super contribution is 9% of yearly income? Am I missing something?

Thanks!

 

[Rob G.]

Am I missing something?

Yep ...

Why not start by reading the SGAA definition of OTE ?

Cheers,

Rob

 

[rosehill]

Concessional contributions cap was $50,000 for income year 2008/09 and reduced to $25,000 from 2009/10

http://www.ato.gov.au/super/content.asp?doc=/content/60489.htm&page=3&H3

 

[Kris_Evolved]

Based on the scenario you have given (assuming the full $500k is OTE) then $20k of the $45k will be assessed as excess contributions.

There is currently no ability for anyone to opt-out of the 9% SGC

Some industry groups, such as SPAA are pushing for this to be changed.

There is a recent media release here you can read more about this(PDF).

Kris

 

[rosehill]

Excess concessional contributions tax of 31.5% will be charged on contribution amounts over cap (i.e. total 46.5%).

http://www.ato.gov.au/super/content.asp?doc=/content/00106372.htm

 

[Rob G.]

All this worry can be put to rest by reading the legislation first.

Look up the definition of 'ordinary time earnings' in SGAA92.

Cheers,

Rob

 

[Hillview]

Super maximums

Hi,

The employer does not have to pay super on $500,000, the max super an employer has to pay is $40,170 per quarter for 2010, and increased in 2011. See the blurb:

The maximum super contribution base is used to determine the maximum limit on any individual employee's earnings base for each quarter of any financial year. You do not have to provide the minimum support for the part of earnings above this limit.

 

[Rob G.]

Hi,

The employer does not have to pay super on $500,000, the max super an employer has to pay is $40,170 per quarter for 2010, and increased in 2011. See the blurb:

The maximum super contribution base is used to determine the maximum limit on any individual employee's earnings base for each quarter of any financial year. You do not have to provide the minimum support for the part of earnings above this limit.

You have to provide the 9% minimum of ordinary time earnings.

The question is: what is ordinary time earnings ?

This is subject to the limit in s.6(1)(b) SGAA92


" (b) if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter--the maximum contribution base. "

Hopefully we have answered agent007's assignment.

Cheers,

Rob

 

[GGA Accountants]

Hi forumates,

I have a Super contribution question under the following scenario:

The tax payer is a 40 years old male and his wages income is $500,000 pa. Thus, the minimum Super contribution of 9% amounts to $45,000 pa. Therefore, the question is how could it be possible if the maximum allowed Super contribution for under 55 is $25,000 pa and the minimum Super contribution is 9% of yearly income? Am I missing something?

Thanks!

Dear Mr Bond,

The maximum Super Contributions that an Employer is responsible for under the SG Laws is $15,200 for the 2011 Financial Year no matter what salary the employee is on. It's quite simple.

 

[Mry]

To give a practical example, lets say super earner earned $200,000 between July to September 2010 and you have to pay their super.

You go here and look up "Maximum super contribution base" for 2011.

Note the description "The maximum super contribution base is used to determine the maximum limit on any individual employee's earnings base for each quarter of any financial year. You do not have to provide the minimum support for the part of earnings above this limit."

Even though I paid super earner $200,000, the maximum super contribution base I need to support is $42,220 per quarter, so I only need to pay 9% of that, or $3,799.80.

As a result, no one under superannuation guarantee law is required to pay any more super to an employee than $3,799.80 x 4 per annum for the 2011 year. You would want to make sure that employers aren't telling high income earners that they are paying 9% of super on their salary, they should be saying that they will meet their superannuation obligations on their salary.