Understand Australian superannuation: Consider it as overtime

Superannuation would be easier to understand if you look at it the same way you look at your overtime payments. Here is how.

Understand Australian superannuation

For some people, especially those who are new to Australia, it’s difficult to understand the intricacies behind the Superannuation Guarantee. No doubt it’s a complex and mind-boggling subject. However, it can be understood with a bit of simplifying and research.

The Superannuation Guarantee

The Superannuation Guarantee (SG), also known as compulsory employer contributions, is a scheme which requires all employers to pay the equivalent of 9.5% of each employee’s ordinary time earnings into a super fund on their behalf, at least every quarter.

Simplify the concept of Superannuation

One way to simplify the concept is to think of superannuation as overtime payments you would receive for working outside normal hours. If you were expecting overtime to accumulate every week, you would research how your company paid overtime, how you get entitled and when you would get paid.

Assume that your annual salary is $60,000, and that you worked four hours of paid overtime per week for an year, which would entitle you to an annual overtime payment of $5,700. This amount, taken as SG, works out to 9.5% of your ordinary time earnings. This is almost equal to 52 hours’ of overtime, paid into your super fund once every three months, based on a 40-hour week.

Or, that your annual salary is $90,000, and having worked just under four hours of paid overtime every week, that you would be entitled to $8,550 (after 15% super contributions tax deductions). This amount would be paid annually to your super fund.

This is a substantial amount and tax is deducted only when the contributions enter the super fund. The tax deducted would also be a lot less than when you are paid cash for overtime. Over an year, this accumulates to almost five weeks’ pay. And the best part is, you don’t even have to work overtime to earn this money!

Did you work in Australia as a sponsored migrant or on a working holiday visa?

Apply for a Superannuation Refund

Find out how to claim back superannuation from Australia

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