Since 1992 with the introduction of the ‘Superannuation Guarantee’ (SG) legislation, your employer must make contributions for you.
Generally, under these rules, your employer must pay in 9% of your ordinary time earnings into super. Some employers choose to pay more than this as part of their salary packaging arrangements.
‘Ordinary time earnings’ generally means what you earn for your ordinary hours of work, including:
- over-award payments
- commissions
- allowances (except reimbursements or expense allowance)
- paid annual leave.
Ordinary time earnings does not include overtime (subject to certain exceptions). This ensures all eligible employees are treated the same for SG purposes.
SG law applies to most working Australians. Exceptions include those earning less than $450 per month, or aged under 18 (working part time) or those over 70 (until such a time as the maximum SG age is increased). Individuals can choose to make extra voluntary contributions to their super and potentially receive tax benefits for doing so. For more detailed information about SG contributions, including the meaning of 'ordinary time earninigs' go to www.ato.gov.au
Defined Benefit employer contributions
Special rules apply in relation to employers providing defined benefit arrangements. These are less common traditional employer funds, where benefits are determined by a formula usually based on final average salary and length of service. Essentially, instead of actually making minimum contributions each year, employers need to provide a minimum level of benefit. Employers providing defined benefit arrangements must also comply with SG legislation, however this is based on actuarial certification that the employer’s funding of benefits is consistent with minimum contributions. While Health Super no longer offers Defined Benefit accounts to new members, we have some members participating in defined benefit arrangements.