Employer super contributions¶

Most money that goes into a person's super comes from their employer. There are two kinds of employer contribution. The first is the compulsory one, called the super guarantee. The second is any extra amount an employer chooses to pay on top.

Both kinds share the same tax nature, and both count towards the same yearly limit. This lesson explains what they are and why that matters.

In one line

Employer contributions are the compulsory super guarantee plus any extra the employer pays. They are before-tax (concessional) contributions and count towards the concessional cap.

Why this matters¶

For an employee, employer contributions are usually the largest source of their super. For an employer, paying them correctly is a legal duty. Knowing what counts as an employer contribution helps both sides read a super statement and understand the yearly limit that applies.

What you will learn¶

What employer super contributions are
Why they are called concessional (before-tax) contributions
How they count towards the concessional cap

Understanding the concept¶

An employer contribution is super an employer pays into an employee's super fund.

The main one is the super guarantee (often shortened to SG). This is the compulsory amount an employer must pay for eligible employees. The ATO sets the rules for how much and how often.

An employer can also pay extra on top of the super guarantee — for example, as part of a workplace agreement. That extra amount is still an employer contribution.

Employer contributions are concessional contributions. The ATO uses the word concessional for contributions made from before-tax money — money that has not already been taxed as the employee's income. Because of this, concessional contributions are taxed inside the super fund at a concessional (lower) rate, rather than at the employee's own income tax rate. The exact rate is set by the ATO.

Concessional contributions count towards the concessional contributions cap — a yearly limit on how much before-tax money can go into super at the concessional rate. Employer contributions use up part of that cap. See the caps lesson for how the cap works and what happens if it is exceeded.

For accountants & bookkeepers

The ATO groups employer contributions to report as super guarantee contributions and any additional employer contributions, together with super guarantee charge shortfall amounts where they apply. All are concessional and count towards the member's concessional contributions cap. The concessional treatment reflects that the amounts are paid from before-tax income and taxed in the fund at the concessional rate the ATO sets, not at the member's marginal rate.

Example¶

Mia works for a small business. Each pay, her employer works out her super guarantee and pays it to her super fund. Her employer also agreed to pay a little extra super as part of her role, so that amount goes to the fund too.

Both amounts are employer contributions. Both are concessional (before-tax) contributions, so both count towards Mia's concessional cap for the year. When Mia checks her super statement, she can see the employer contributions listed there.

Common mistakes¶

Thinking only the compulsory super guarantee counts — extra employer super counts too.
Forgetting that employer contributions use up part of the concessional cap.
Assuming employer contributions are taxed at the employee's income tax rate — they are taxed in the fund at the concessional rate the ATO sets.

How this works in myaccountant¶

In the app — when you run a pay run, myaccountant works out each employee's employer super and shows it on the pay run and payslip. myaccountant then pays those employer contributions to the employee's fund and reports them, so the amounts appear against the right employee.

Key points¶

Employer contributions are the super guarantee plus any extra the employer pays.
The super guarantee is the compulsory part; the extra is optional.
Employer contributions are concessional (before-tax) contributions.
They are taxed in the fund at a concessional (lower) rate set by the ATO.
They count towards the concessional contributions cap.

Learn next¶

General information only — not tax, super or financial advice.

Did this answer your question?