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What are reportable super contributions, and how do they affect you?

Published On: January 28, 2021Categories: Accounting, Support

Super contributions: everyone has them.

Unfortunately, for many everyday Australians, that’s where their knowledge and understanding of superannuation contributions begins and ends!

As your main source of income when you retire, it’s crucial that you take good care of your super, and carefully plan your investments.

That means paying close attention to your superannuation contributions.

Of course, first you’ll need to understand how they work – and that includes having a working knowledge of reportable superannuation contributions.

Super 101: reportable superannuation contributions definitions

Before we talk about reportable superannuation contributions and what they are, we need to talk about what they aren’t first.

You’re well aware that your employer makes contributions to your superannuation fund each quarter as part of your salary package – what we refer to as Superannuation Guarantee contributions.

Any additional payments on top of the legally-mandated super guarantee are categorised as reportable superannuation contributions. This includes the total sum of both additional employer contributions and reportable deductible super contributions of your own.

As with all things super-related, it isn’t quite this straightforward – that having been said, that’s the gist of it!

Reportable employer superannuation contributions

While employers are only legally required to contribute 9.5% of your total salary package towards your super, that doesn’t mean that they can’t go further.

Whether it’s because of benevolent management, an agreement you negotiated with your employer or as part of some sort of salary swap deal, many employers will choose to make additional super contributions on behalf of their employees.

Personal deductible superannuation contributions

Perhaps you’re worried that your super balance is a little low. Maybe you’re doing so on the advice of your personal accountant or super manager. It might even be part of an effort to reduce the amount of tax you pay each financial year.

Either way, employers aren’t the only people who can choose to contribute more than is legally-required into your super – if you want, you can deposit money directly into your super.

These are what we refer to as personal deductible superannuation contributions, and they count towards your reportable super contributions.

Why reportable superannuation contributions matter

Okay, so we’ve covered what reportable superannuation contributions are – but what about the why?

There are many reasons your super fund might receive additional contributions, some of which we referenced above.

For example, many employers offer salary sacrifice arrangements.

These are agreements where employees can agree to give up part of their regular salary in exchange for some other equivalent form of payment. This includes usage of company assets, non-financial benefits and – you guessed it – extra super contributions.

Other times, you might choose to make reportable contributions yourself because you want to increase the size of your nest egg, or plan on buying property using your super (and you therefore need a larger super balance).

Whatever the reason, making voluntary contributions has a range of impacts on your financial situation such as…

Affecting how much tax you pay

One of the benefits of making additional contributions to your superannuation is a lower assessable income – and that in turn results in a lower tax burden.

Additionally, reportable super contributions can also affect the income tests for certain tax breaks, surcharges, levies, benefits and concessions.

When agreeing to reportable employee super contributions or making voluntary contributions of your own, it’s important that you take into consideration how it’ll affect each of these things.

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It can help you make your super investments

Individuals with self-managed super funds in particular often use them to invest in assets like property which require a large super balance.

Many choose to make reportable super contributions in order to increase their portfolio’s investing power. As with all things SMSF-related however, it’s crucial that you seek out professional advice before making such a large move.

What should you do?

Should you contribute more than your compulsory contributions?

While you’re required to contribute 9.5% towards every employee’s super fund, there’s nothing stopping you from going above and beyond by making reportable employer super contributions.

If you do choose to make these extra contributions, you’ll need to report them to the ATO, either through single-touch payroll (STP) or by submitting a payment summary if:

The contributions are more than you’re required to pay by law, industrial agreement or the super fund’s governing rules
The employee has the capacity to influence the amount you contributed.

When reporting, you will need to list the extra contributions, not the amount contributed as part of the super guarantee – that’s what we refer to when we say “reportable” super contribution.

Should you accept your employer’s offer?

The truth is, it depends!

As with all financial decisions, it all comes down to your circumstances – the current size of our super, your tax bracket, how much you can comfortably contribute as voluntary super payments…

It’s a lot to take in – if you’re confused, don’t be afraid to talk to a professional about it.

Unsure if you should accept that salary sacrifice agreement? Worried that bolstering your super fund yourself will negatively impact your tax situation?

If so, there’s only one thing to do…

Call our personal accountants in Melbourne for tax, super and other financial advice

When it comes to your nest egg, it’s important that you make a decision for your future – luckily, that’s something that our personal accountants can help you out with.

Our accounting team will advise you about your financial situation, as well as how your superannuation falls into it. While we may not be able to tell you what to invest in, we can tell you how reportable super contributions will affect it.

Of course, super is just one part of your personal finances – a major one, to be sure, but not the only one. You’ll also need to think about: