What is the Maximum Contribution Base?
The maximum superannuation contribution base (MSCB) is used to find the maximum contribution which an employer is required to make in Superannuation Guarantee (SG) fund under the super laws. The MSCB has changed in 2016-2017 and now it is $206,480 per annum or $51,620 per quarter, whereas in 2015-2016 it was $203240 per annum or $50810 per quarter.
All eligible employees in Australia have a right to have their employers contribute to SG, however the contribution to SG by employer is subject to their upper income limit of $206480, which is indexed every year. An employer is required to contribute 9.5% of an employee’s salary to Superannuation Guarantee (SG) fund up to a maximum quarterly income of an employee to be $51,620 or $206,480 per year. This makes an employer’s contribution of $4903.9 per quarter or $19615.60 per year maximum.
According to SG rules, the employer does not have to make contributions above this MSCB earnings limit. For any earnings above this MSCB, your employer is not legally bound to pay super contributions under the SG rules. For instance, if an employee earns $211480 a year plus Superannuation Guarantee, assuming the income is evenly distributed over each quarter, then the employer will be required to make contribution to SG at 9.5% of $206480 instead of $215,000 and an excess of $5000 will go without any contribution by the employer.
Although not legally bound, you can make private agreements with your employer to contribute 9.5% to SG without any maximum contribution base limit. The ideal time to negotiate with your employer is when you are starting a new job and making an agreement with your employer. If agreed, your employer will pay you super contribution in addition to the maximum SG base.
Many young employees start their jobs without getting into the technical and complex details related to the salary benefits and compensation packages, and so they end up with quite low contribution by the employers.
This is so interesting to know how it happens!! In various cases, the employees are offered super contributions as part of their salary package, especially those with higher income group. Therefore, they receive just a fraction of SG contribution which they could have otherwise received.
To be more cautious, you must check whether your salary is quoted in $salary plus super or $salary including super and how it affects your total remuneration package. How much your employer has agreed to contribute to your SG; the maximum MSCB or cover your full salary package.
Another important point to remember is that SG contribution base is adjusted each year according to the wage increase. Thus, there is a dire need that you are well aware of these facts and numbers to be in a better position to bargain with employers beforehand.