The superannuation guarantee (SG) is an integral part of ensuring Australians have enough money saved for their retirement. Knowing how this works and being mindful of any upcoming changes is essential for Australians as they plan for their future financial security. SG is your money and it’s important to know how this affects you and what you can do with it.
The superannuation guarantee is a mandatory payment set by the Australian Government that employers must make into their employees' super fund. As of 2022, employers must pay a minimum of 10.5% of an employee's ordinary time earnings into their chosen super fund. This contribution increases annually until 2025 when it will be 12%, so it’s important to stay up-to-date with these changes.
In addition to knowing about the annual increase in payments, understanding the taxes associated with SG can also be beneficial for individuals as they approach retirement. Currently, SG payments are taxed at 15%, which is lower than most people's marginal tax rate (the rate of tax paid on additional income). In other words, any additional funds you receive from SG contributions are likely to be taxed at a lower rate than if those monies had been earned through another source.
It's also important to understand that SG payments don't just benefit employees who are nearing retirement age - they can also benefit younger workers too. That's because any additional funds received now will have more time to grow, meaning larger savings later on in life. In addition, many Australians may also qualify for government co-contributions, which can add even more value to their nest eggs over time.