For most people, the contributions they receive to their superannuation fund from their employer will make up a significant portion of their retirement savings. Which makes recent research from Industry Super Australia and Cbus Super even scarier to think about… they found that employers across Australian have kept $3.6 billion per year in super entitlements from 2.4 million workers. This is around a third of all employees in Australia!
Your employer is legally required to pay superannuation guarantee contributions into your super fund. The amount they are legally required to pay is currently 9.5% of your ordinary times earnings.
The most obvious way people can miss out on superannuation is their employer simply not paying into their nominated fund. However, be aware that just because your payslip has super contributions on it doesn’t mean that your employer is paying into the fund on the same day. The legal obligation is only to pay each quarter. If you haven’t received a contribution into your super fund for 3 months, your employer may not be up to date. Given the business climate over the last few years, and the effect that this has had on the cash flow of some businesses, this is a very common problem we see.
The second most common way we see people missing out is for those who are salary sacrificing a portion of their pay into superannuation. As the legislation stands right now, your employer can legally reduce the income that they have to pay super on to the net income after the salary sacrifice.
For example, if someone earns a gross income of $80,000 per year, they are currently entitled to $7,600 (9.5% x $80,000) of superannuation guarantee contributions, paid by their employer. If they salary sacrifice $20,000 per year, their employer is legally allowed to reduce their contributions to $5,700 (9.5% x $60,000). In this case, you would be missing out on $1,900 just for trying to boost your super balance.
Most employers don’t intend to reduce this contribution, as it doesn’t really have any effect on them if their employee wants to salary sacrifice some of their income. However, what we have seen a few times is that some payroll systems will automatically reduce these contributions, unless the employee notices and gets them to manually override this.
So to wrap up, make sure you are checking that you are actually receiving your contributions to your super fund, and if you are salary sacrificing make sure your employer isn’t reducing your superannuation guarantee contributions at the same time. And if you’re not sure what is happening or would like a hand to check, feel free to give us a call.
Written by Dallas Davison.
Dallas Davison, Michael Hogue and Ali Hogue.