The maximum superannuation contribution base can limit the amount of contributions that you receive from your employer, but it can also create an opportunity to contribute more.
The maximum contribution base changes every year, so let’s take a look at what it is, how it works and a few examples.
What is the Maximum Contribution Base?
The maximum super contribution base is the maximum income earned by you that your employer must pay employer super contributions on.
Employer superannuation guarantee (SG) payments are mandated contributions that your employer must pay into your superannuation account on at least a quarterly basis.
The current SG rate is equal to 11% of your wage or salary.
Maximum Contribution Base 2023 / 2024
The maximum super contribution base for the 2023/24 financial year and prior financial years is shown in the table, below.
Financial Year Income Per Quarter 1 July 2023 - 30 June 2024 $62,270 1 July 2022 - 30 June 2023 $60,220 1 July 2021 - 30 June 2022 $58,920 1 July 2020 - 30 June 2021 $57,090 1 July 2019 - 30 June 2020 $55,270 1 July 2018 - 30 June 2019 $54,030
As you can see, the maximum contribution base increases each financial year.
Maximum Contribution Base Explained
The maximum super contribution base is a quarterly income amount that caps the level of income your employer must pay mandated SG contribution on.
An employer is not required to make mandated employer super contributions on the portion of your quarterly wage that exceeds the maximum contribution base for any given quarter.
The maximum contribution base is assessed on a quarterly basis – not annual or any other timeframe. It will also impact how much you can salary sacrifice. This video explains how your salary sacrifice limits are calculated:
Is Your Employer Restricted by the Maximum Contribution Base?
While the maximum superannuation contribution base does limit the amount of employer super contributions that your employer must pay into your account, it does not restrict them from paying more. Your employer is able to pay as much into your super as they like.
What Happens If My Employer Super Contributions Exceed the Contribution Cap
If your employer makes the required mandated super contributions into your super account up to the maximum contribution base, you will not be at risk of exceeding the concessional contribution cap – unless you are considering increasing super contributions by making additional voluntary super contributions such as salary sacrifice or personal concessional contributions.
If your employer chooses to make super contributions in excess of the maximum contribution cap, neither you nor your employer are penalised in any way for doing so.
If the act of your employer making contributions into your super account in excess of the maximum contribution base causes you to exceed the concessional contribution cap, you will receive a notification from the ATO stating that your concessional contribution cap has been exceeded and the excess amount will be taxed at your individual tax rate – just as it would have been if you had received the excess amount as ordinary wages.
You will also be permitted to withdraw the after-tax excess contribution amount from super, which can be used to assist with any additional personal income taxes.
Maximum Super Contribution Base Examples
Your employer must pay the required SG contributions on all ordinary time earnings. Here is a list of payments that are considered ordinary time earnings (OTE).
Here are a few examples of how the superannuation contribution base is applied in various scenarios:
Let’s say you earn $150,000 per annum, with your wage paid equally over each month.
Your salary would be $37,500 per quarter, which is below the maximum contribution base of $62,270 per quarter.
Therefore, your employer is required to pay mandated employer contributions equal to 11% on your total wage of $37,500 per quarter – being $4,125 per quarter.
Let’s say you earn $400,000 per annum, with your wage paid equally over each month.
Your salary would be $100,000 per quarter, which exceeds the maximum contribution base of $62,270 per quarter.
Therefore, your employer is only required to pay mandated employer contributions equal to 11% on the maximum contribution base of $62,270 per quarter – being $6,850 per quarter.
Your employer is not required to pay mandated contributions on the $37,730 per quarter of your wage that exceeds the maximum contribution base. Yet, they can if they like.
Let’s say you earn $400,000 over the course of a financial year, earned as follows:
September Qtr: $50,000
December Qtr: $150,000 (possible significant increase due to bonus)
March Qtr: $50,000
June Qtr: $150,000
In the September and March quarters, your quarterly wage is below the maximum contribution base of $62,270, meaning your employer is required to pay employer super contributions on the full wage, which is equal to 11% of $50,000, being $5,500.
However, due to the maximum contribution being applied in the December and June quarters, your employer is only required to pay super contributions up to the maximum contribution base of $62,270. Therefore, in these quarters, the SG contributions received would be $62,270 x 11% = $6,850 per quarter.
Maximum Super Contribution Base Anomalies
As you can see in the examples above, earning the same amount over the course of a year (Examples 2 and 3) does not necessarily translate into receiving the same SG employer contributions, because of the maximum super contribution base being assessed on a quarterly basis. In this instance, inconsistent earnings or large bonuses in any one quarter can reduce the employer contributions received compared to smoother earnings over a year.
If there’s any silver lining, the lower the level of employer contributions received, the greater scope there is to make salary sacrifice or personal concessional contributions into super, in order to reduce personal income tax.
There are various strategies to maxmise your superannuation contributions and minimise your tax, especially in the years leading up to retirement. If you are nearing retirement, you might consider having a professional assist with your retirement plan. Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
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