Super contributions fall into two main categories, Concessional Contributions and Non-concessional Contributions. Concessional Contributions are typically pre-tax contributions made on your behalf by your employer. These contributions are taxed within the fund at a lower “concessional” rate of 15%. Non-concessional Contributions are typically after-tax contributions made by yourself or your spouse. Non-concessional Contributions are not taxed within the fund. Contribution Caps are important legislative contribution limits which you should understand before making a contribution. Contribution Caps are explained in Contribution Rules & Caps.
Legislation generally requires your employer to make Superannuation Guarantee (SG) Contributions based on a percentage of your pay. In 2009/10 SG Contributions must be 9% of your gross ordinary time earnings1.
Salary sacrificing involves your employer agreeing to and making pre-tax contributions into your super in lieu of part of your gross salary. By salary sacrificing, you may benefit from a reduction in income tax. When considering a Salary Sacrifice arrangement it is generally beneficial to discuss the strategy with a financial planner.
Your employer may make other pre-tax contributions to your super in addition to any SG, award or Salary Sacrifice contributions. For example, your employer may agree to contribute 12% superannuation instead of the SG rate of 9%. In this instance, 9% of this contribution is a SG Contribution while the remaining 3% would be classified as an Other Employer Contribution.
Your employer may be required to make contributions under an agreement or award certified by an industrial authority. Award contributions count toward meeting the SG. Contributions must meet both the SG and the award but are not additive (for example, a 3% award obligation and a 9% SG obligation requires a 9% contribution, not a 12% contribution).
If you are self-employed or substantially self employed (where less than 10% of your total assessable income is from employment), you can usually make tax-deductible contributions for yourself. You may claim a deduction for the full amount contributed in a financial year.
You may decide to make voluntary, after-tax contributions to your super. You can either make the payment yourself, or your employer may agree to make the payment on your behalf from your after-tax pay.
If your income is less than $61,920 (in 2009/10) you may be eligible for the Government Super Co-contribution, a payment made by the Government into your super to match Personal Contributions that you make during the financial year. Refer to Super Co-Contribution Factsheet for further details.
Your spouse (married or de facto, including same sex couples) may contribute to your super on your behalf, regardless of their work status. The level of income earned by your spouse does not limit what you can contribute, however spouse contributions do count toward the Non-concessional Contribution Cap. Contributions cannot be made by your spouse if he/she is your employer.
1 Ordinary times earnings includes over-award payments, shift loadings, allowances, commissions, annual and sick leave. It does not include overtime, employment termination payments and fringe benefits.