Join our investing community

compulsory employer superannuation contributions

Discussion in 'Accounting, Tax & Legal' started by chris_qld, 2nd Jun, 2009.

  1. chris_qld

    chris_qld Active Member

    Joined:
    21st Jan, 2008
    Posts:
    44
    Location:
    brisbane
    I know the minimal compulsory employer superannuation contribution is 9%. i wonder what's the maximal employer contribtion rate? I heard it could be as high as 45% but I couldn't find more info.

    Can my company (sole director) contribute (for example) 20%, which is $30,000 and I contribute $ 20,000. Are there any benefits If increasing employer contribution from 9% to 20%? I'm doing salary sacrifice as well.

    Thanks in advance for your input.
     
    Last edited by a moderator: 4th Jun, 2009
  2. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    The limits are dollar values not percentages.

    $50k for the year ending 30 June 2009
    $25k for the years ending 30 June 2010 and beyond

    The amounts are double if the person on behalf the contributions are paid is over 50.

    The benefit if the contributions will be taxed at 15% by your fund, rather than your personal income tax rate which will be higher if you are earning more than $34k per year.

    Increasing you super contributions above the 9% (i.e. to 20%) is salary sacrifice - i.e. you are taking the benefit as super contributions rather than wages or directors fee.

    Does that answer your questions?
     
  3. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    No limits on your employer making contributions and claiming deductions.

    However, if these breach your concessional limit they will attract extra tax to the fund and then count towards your non-concessional limit. If this is breached as well then there is further tax.

    So effectively for tax purposes the limits are your personal limits.

    Cheers,

    Rob
     
  4. chris_qld

    chris_qld Active Member

    Joined:
    21st Jan, 2008
    Posts:
    44
    Location:
    brisbane
    Thanks Rob and Superman.

    You said "Increasing you super contributions above the 9% (i.e. to 20%) is salary sacrifice." Did you mean "Increasing your employer super contribution above the 9% is Salary sacrifice"? If so, then I can let my company contribute $50,000 (and I, as an employee of the company, contribute $0).

    "No limits on your employer making contributions" I heard the upper limit is 45%. But I'm not sure it's true or not.
     
    Last edited by a moderator: 4th Jun, 2009
  5. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Chris,

    If someone is self-employed it is all classed "salary sacrificing", the main reason is that as an owner of the business, you get to choose how much is sacrificed into superannuation (directors could choose to get paid nil depending on cash flow).

    For an employee, the employer pays 9% super (some pay more) and then the employee can choose to salary sacrifice extra amounts in which would come out of their take home pay.

    As Superman said, if you are over 50 with the new concessional contributions your super fund could receive $50,000 per annum after 1st July 2009, if you are under 50 then $25,000 per annum after 1st July 2009.

    As Rob alluded to, if you breach the concessional contribution caps, eg, if I was over age 50 and in 2009/2010 my super fund received $60,000, the additional amount of $10,000 would be taxed an additional 31.5% on top of whole amount being taxed 15% contributions tax...

    For that last $10,000 why would I want to be taxed at 46.5% and lock it up in super? I might as well take it in the hand and get taxed either at the same or lower marginal tax rate and be able to use the money rather than being locked up in superannuation until meeting a condition of release.

    Cheers,

    Dan

    PS Speak to your FPA registered Financial Planner before making an investment decision.
     
  6. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    There is still no limit on the employer's deductions.

    However, I could only imagine weird scenarios where you might want to "sacrifice" excessive amounts.

    Cheers,

    Rob
     
  7. chris_qld

    chris_qld Active Member

    Joined:
    21st Jan, 2008
    Posts:
    44
    Location:
    brisbane
    Thanks Rod, Superman and Asxbroker.

    My business structure is: I am a sole director / employee of my company, providing personal service. Of course I won't put more than $50,000 into my super. What I want to do is put maximal amount, which is $50,000, into my super and also salary sacrifice it.
     
  8. handyandy

    handyandy Well-Known Member

    Joined:
    6th Jun, 2006
    Posts:
    312
    Location:
    Sydney Nsw
    What about if you earn $277k+ where even 9% compulsory contribution takes you over the $25k limit?

    They may have removed the super surcharge and replaced it with something just as vile. (surprise surprise)

    cheers
     
  9. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi HandyAndy,

    There is a quarterly maximum "9%" payable per quarter which is about $12,000 pq or so. You can google it ;)

    As Rob keeps on saying, there are no limits, but do you really want to get hit up for HUGE excessive tax?

    If you go over your non-concessional cap you get taxed an additional 31.5% on top of the already taxed 46.5 (15% contributions tax plus 31.5% above the concessional cap).

    Please put your hand up if you want to pay 78% tax vs 46.5% tax...

    No hands up? Not surprised...

    Saying this, using the 3 year bring forward rule you'd have to contribute more than $500,000 in one financial year to pay 78% tax on every dollar above $500,000...

    Cheers,

    Dan

    PS Before making a superannuation decision speak to your FPA registered Financial Planner.