Is super calculated on gross or net income?

Question

If my employer contributes the minimum (9.5%) and I earn $100K, should I receive $9,500 per year, or is the 9.5% calculated on my net income?

Answer

Super is calculated on gross income

Answer

In Australia, the Superannuation Guarantee (SG) requires employers to contribute a minimum percentage of an employee’s ordinary time earnings to their superannuation fund. As of your scenario, where the SG rate is 9.5%, this percentage is calculated on your gross earnings, not on your net income. Therefore, if you earn $100,000 per year, your employer should contribute 9.5% of this amount, which equals $9,500 per year, to your superannuation fund.

This contribution is based on your total earnings before tax is deducted, including bonuses, commissions, and loadings. However, it does not include overtime payments. It’s important to regularly check your superannuation statements to ensure that the correct amounts are being contributed by your employer.

Considering the importance of maximizing your superannuation for retirement, you might also think about making additional contributions, such as salary sacrifice. This involves contributing part of your pre-tax salary to your super, which can be a tax-effective way to boost your super balance. As mentioned, these contributions are taxed at a concessional rate of 15%, which might be lower than your marginal tax rate.

Platforms like Pearler can help you manage your investments and plan for the future, including strategies for enhancing your superannuation. Pearler focuses on long-term investing, providing tools and resources that can assist you in making informed decisions about your financial future, including how to effectively grow your superannuation fund.

You can find out more about this topic here: Contribute Extra To Super

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

Answer

In simple terms, the Superannuation Guarantee requires that the minimum super an employer needs to pay an employee is 11.5% of that employee’s gross salary. This rate will increase to 12% on 1 July 2025. However, it’s often more complex than that, as Ordinary Time Earnings (OTE) must be used in calculations when working out the minimum amount of super payable.

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