Super and high-income earners

Super offers a valuable opportunity for high-income earners to grow their retirement savings. However, for individuals with qualifying income and super contributions over $250,000, there may be implications to super contributions and tax benefits.

As an employer, understanding the concessional contributions cap, the maximum super contribution base (MSCB), and Division 293 tax, is important to be able to support your higher earning employees.
 

What's on this page?

• Concessional contributions cap
• Maximum super contributions base (MSCB)
• Division 293 tax
• What you could do
   

Concessional contributions cap

Concessional contributions are ‘before-tax’ contributions to super. They include:

• employer SG contributions,
• any ‘salary sacrifice’ contributions, and
• employer contributions to an employee’s super that subsidise insurance premiums or fees.

The cap for concessional contributions for the 2024/2025 financial year is $30,000.
 

Why it’s important to keep contributions within the concessional contributions cap?
 

You’re required to pay SG on your employees’ earnings to the maximum super contributions base (see below).

NOTE: Generally anything above this will see the employee exceeding their cap, resulting in additional tax liabilities for them.

It’s a good idea to monitor total concessional contributions for all your employees, and suggest that they speak with a financial adviser to potentially adjust any salary sacrifice arrangements which can help them avoid exceeding the cap.

What is a high-income earner?

In the context of super, generally someone whose income exceeds thresholds set by the government, which have implications for super contributions and tax benefits.

High-income earners with qualifying income and super contributions exceeding $250,000 per annum are subject to an additional 15% tax on the concessional contributions that exceed the cap, known as Division 293 tax.

If someone earns more than $65,070 per quarter, their employer is only required to pay SG on earnings up to the MSCB for the 2024/2025 financial year.

Read more on the ATO website >
 

Maximum super contributions base (MSCB)
 

The MSCB is the maximum salary amount upon which you need to pay your employer Superannuation Guarantee (SG) contributions. The Australian government sets this limit.

For the 2024/2025 financial year, the amount is $65,070 per quarter.

If an employee receives nothing other than SG contributions, this base will ensure they will not exceed the Concessional Contributions Cap.

As an example, for the financial year 2024/2025, it will be $29,932.20 ($65,070 x 4 x 0.115).
 

Other considerations
 

Changes in salary for your employees
 

Even if your employees at the start of a financial year appear to not be earning close to the MSCB, it’s important to monitor their earnings throughout the year.

For example, should any of your employees be given a pay rise, paid a salary bonus, or face similar instances which increase their earnings, it’s worth in particular, monitoring their quarterly earnings. This is because salary changes may mean the rate at which you’re required to pay SG also changes.

It’s important to note that your employees may apply for an SG exemption certificate via the Australian Taxation Office (ATO) if the excess contributions arise from a high-income earner who has more than one employer.  The ATO will treat these situations on a case-by-case basis.
 

Changes in employment
 

If any of your employees have changed employers throughout the year, it is unlikely you will have visibility over their previous contributions to date for the financial year.

This means you may not be able to alert them if it looks like they may exceed the concessional contributions cap. In such instances, it’s a good idea to talk with your high-income earning employees about the concessional contributions cap so they can ensure the cap is top of mind.
 

Employer subsidised insurance or fees
 

Did you know that for the financial year 2024/2025, the gap between the SG contributions for an employee earning above the maximum super contributions base ($65,070 per quarter) and the concessional contributions cap ($30,000 per year) is only $67.80? This leaves limited room for extra contributions – some of which can often be forgotten about, like employer-subsidised insurance premiums or fees.

Remember, employer contributions that are deposited into an employee’s super account to cover employer-subsidised insurance premiums or fees are counted towards the employee’s annual concessional contributions cap.

How to pay employee super contributions

Learn how you can help simplify and enhance the management of your employer super contributions.

Explore features >
 

Division 293 tax
 

Some of your high-income earning employees may be subject to Division 293 tax which adds an additional 15% tax on concessional super contributions where an employee’s combined qualifying income and concessional contributions exceed $250,000 in a financial year.

For example, if an employee earns $245,000, receives $26,950 in SG contributions, and salary sacrifices another $550, the combined ‘income’ total is $272,500, meaning Division 293 tax will be applied to the $22,500 that exceeds the $250,000 limit, at a rate of 15%.

It may be worth letting any affected employees know about the Division 293 tax implications, and of course, consider the impact of this tax when discussing salary sacrifice arrangements with them.

Impacted employees are able to fund any Division 293 liability through their super fund or pay it directly. For more information please refer to the Division 293 tax on concessional contributions by high-income earners on the Australian Taxation Office’s website.

What you could do
 

• Speak with your employees about any salary sacrifice arrangements they may have and ensure they’re aware of their concessional contributions cap.
  
  
• Assess whether you have any employer contributions going to your employees that are intended to subsidise insurance premiums or fees, and see if there may be an impact for your high-income earners.
  
  
• Some employees may wish to negotiate salary packaging options.
  
  
• If any of your employees have concessional contributions that go over the cap, it could result in additional tax liabilities for them, and therefore it’s worth them speaking with a financial or taxation adviser about their options.
  

Are SG and salary sacrifice considered ‘income’?

While SG and salary sacrifice contributions are not considered income in terms of discretionary take-home pay or taxable income, they are included in calculations that determine eligibility for certain tax offsets, government benefits, and in some cases, Division 293 tax.

Read more on the ATO website >