My employee's income exceeded the maximum super contribution base of $62,270 per quarter for F2023-24 in Q3. The advice on the ATO site is if an employee's income exceeds this max amount for the quarter, we can stop making super contributions on anything they earn above the $62,270. Does this max amount reset each quarter?
Hiya @etomer2620 👋
Yes, the concept of the MCB per quarter is that OTE payments you make to your employee are capped at the MCB amount for each quarter. The first pay in the next quarter contributes to the next quarter's MCB.
Deanne
Hiya @etomer2620 👋
Yes, the concept of the MCB per quarter is that OTE payments you make to your employee are capped at the MCB amount for each quarter. The first pay in the next quarter contributes to the next quarter's MCB.
Deanne
Hi, what should an employer do if an employee's OTE is above MCB? how to adjust super then ?
What do you mean, @Iramshafiq? If you don't have any additional SG obligations in your industrial instruments and therefore you ONLY pay the minimum SG obligations, then you cap the OTE for the quarter at the MCB amount.
For example, if you had a monthly pay where OTE each pay was $25,000, then pay 1 in the qtr, OTE = 25,000. Pay 2 OTE = 25,000 (QTD = 50,000). Pay 3 OTE = 25,000, capped to the MCB (62,270 - 50,000) = 12,270
If you have additional SG obligations in the industrial instruments, you don't include those amounts in the OTE that you cap at the MCB. For example, if $2,500 of the OTE in the above example was for paid parental leave (not legislated OTE), then it would be: pay 1 OTE 25,000 (QTD for MCB = 22,500), pay 2 OTE = 25,000 (QTD/MCB = 45,000), pay 3 OTE = 25,000 (QTD/MCB = 67,500) capped to (62,270 - 67,500 = -5,230) so 25,000 reduced by 5,230 = 19,770.
Deanne
@py_deanne Thanks for response.
If the monthly pay (OTE) is $28,000 which makes quarterly pay as $84,000 and i pay 11% super ($9,240) on $84,000. Is it correct practice?
what should I do in this regard for the amount above 62,270? should i set super at fixed amount or how should i approach this?
Waiting for your response
Hiya @Iramshafiq 👋
I've explained that OTE and SG is not so simple, in that there is the legislated OTE that is capped at the MCB. But there may ALSO be additional SG obligations defined in your industrial instruments. To address your question, I need to understand what the SG obligations are of the employer in relation to this employee: only the legislated minimum obligation, or in excess? It's not a one-size-fits-all obligation. Many employers pay in excess of the minimum obligation.
What does the industrial instrument define as your approach to OTE and MCB?
You cannot factor the MCB cap, if you are applying this minimum obligation to the legislated OTE amount. That is, you cannot ASSUME that the employee will be paid the same each pay and therefore reduce the SG in anticipation of that expectation.
That is, see the following example that I have already outlined previously, for SG liability calculated EACH PAY if you ONLY pay the minimum legislative SG obligation:
That is, quarterly OTE would have been 84,000 but has been capped at 62,270 and therefore SG of 6,849.70. This is IF you only pay the legislated minimum. Is that what the employment contract states for that employee?
What you are now describing in your latest question is that your SG obligation (from industrial instruments) is in excess of the minimum legislative obligations. Sure, that is a totally appropriate option if that is your industrial obligation. You are not REQUIRED to cap OTE, it is the LEGISLATED MINIMUM OBLIGATION only. You can absolutely pay in excess of the minimum.
In which case, why were you asking about MCB if you don't limit your contributions?
Let me expand on what I mean by "industrial instruments": employment Award, Agreement or Business Policy that stipulates additional SG obligations that are in excess of the legislated minimums.
If that is the case, and your industrial instruments define that you will not cap your OTE to the MCB, then go ahead and action that. Nothing is preventing you from doing so.
It would be helpful if you were clearer in what you really wanted to know instead of asking about something that doesn't apply to your real issue 😉 It's been very confusing to understand what you are really asking. 🥴
Deanne
Thanks for all this info @py_deanne. For Senior Execs on individual contracts with a Total Fixed Remuneration package and super obligation in excess of the SG rate (12.75%), does it need to be a quarter-by-quarter arrangement of meeting the obligation and then stopping super contributions (if requested by the employee)? ...or can we just pay until they meet the annual cap and then stop for the rest of the financial year? Is there a specific ATO form required, or can this just be done in writing by the employee? TIA
@PayrollDeanne @AnitaATO @ato-community
Can you help clarify this situation?
We have a high-income earner in our company who receives quarterly bonuses, and in some quarters, we unknowingly paid super on earnings exceeding the $65k quarterly cap.
Here’s the breakdown of their total super payments so far:
• Q1: $6,452
• Q2: $17,952
• Q3: $3,951 (with one more month to go)
• Q4: $6,452 (forecasted)
Total: $37,306
Given the $30k concessional cap, can we stop paying super in Q4 to prevent the employee from exceeding the limit?
Also, are there any ATO resources that confirm whether we are legally required to continue paying SG even if the employee is over the cap?
Finally, if the employee requests that we stop contributing to avoid the extra tax, what’s the best way to handle this? I understand that continuing contributions is generally in their best interest, but I want to ensure we are following the correct process.
Hiya @Payroll438210 👋
I can see why you are confused, when you refer to "Super caps" and are focussing on a "30k cap" that doesn't apply to employers!
There is the concessional cap that is ONLY relevant to the taxpayer and isn't relevant to your employer superannuation guarantee obligations. This is why the explanation of concessional caps can only be found under ATO guidance for Individuals. It isn't an employer obligation.
The ATO resources on their website for employer super obligations are extensive, detailed and are found under ATO guidance for Businesses and Organisations.
One of the key factors to understand if you are to avoid receiving the Super Guarantee Charge (hefty penalty) is that requests or advice from your employees cannot and must not prevent you from meeting your employer super guarantee obligations.
There is a terrific page on how much super to pay that explains what ordinary time earnings up to the maximum contribution base is: your minimum legislated obligation. It also explains that this is ONLY in relation to the minimum obligations you have under the Superannuation Guarantee (Administration) Act 1992 and that you may have additional superannuation obligations from the industrial instruments such as Awards, Agreements etc.
There are big changes proposed by the current government that will change the way this works: I wouldn't say those changes make it easier!
Deanne
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