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Where I come from the employer must deduct 9.5% of your gross wage pre tax, to pay into a fund we call superannuation.

My daily gross rate is 450 before tax. 9.5% of 450 is 42.75. I get paid fortnightly so 42.75 * 10 working days = 427.50 paid into my super account per fortnight.

I contacted my employer about this and he said that I am calculating superannuation wrong. In his own words: 

450 / 1.095 = 410.96
450 - 410.96 = 39.04
39.04 * 10 working days = 390.40

The 390.40 is what is on my payslip each fortnight. I don't understand how 9.5 percent of 450 can be 42.75 but 450 - (450 / 1.095) = 39.04.

Is 450 / 1.095 the correct way to calculate 9.5 percent of 450?

Interestingly, the government tool I am using to check this: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/employer-contributions-calculator comes up with the same answer as me.

Help please :S

chap
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    e.g. $\frac{10}{1.095} =/= 10*0.095$. To me at a cursory glance it seems your employer is doing it incorrectly. – Rivasa May 30 '18 at 14:55
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    It depends. If your gross amount already has incalculated the superannuation and it needs to be "extracted", then your employer could be right. You see, $450/1.095=410.96$ so your gross income without superannuation factored in, is 410.96. Now if you add $9.5$% onto that, you get your $450$ back. You need to check the law as to how superannuation is determined – imranfat May 30 '18 at 15:02
  • @imranfat Yes this seems to be what is happening, although I'm not sure what you mean by "If your gross amount already has incalculated". Could you explain please? The contract states "450 per day inclusive of super." It is clear that 9.5 percent of 450 is 42.75 and 39.04 is 9.5 percent of 410.96. Is he just using 1.095 to calculate the base rate? At the end of the day the total package is still 450 but the contract does not make the base rate clear. – chap May 30 '18 at 15:45
  • @chap See Ingix answer! – imranfat May 30 '18 at 18:00

2 Answers2

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I'm referring to the following written by chap in a comment above:

The contract states "450 per day inclusive of super."

In that case, your employer seems to be right. You get compensation in 2 forms: The daily gross rate ($g$) and the payment to the superannuation fund ($f$). What you and your employer agree on is that:

$$ f=0.095g$$

What you disagree on is what value correspondes to the 450$/d (I assume that currency just to have a meaningful unit).

You think $g = 450\$/d$ (450 Dollar per day). They think (and calculate) $g+f = 450\$/d$. Because the contract says "inclusive of super(annuation)", I'd say they are right.

Ingix
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Imagine it were $£100$. $9.5$% of this is clearly $£9.50$. Yet via the employer's method, $$\frac{100}{1.095}=£91.3242...\to £91.34$$ Considering that this value is being subtracted, you're losing rather a lot.

Rhys Hughes
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  • The contribution to superannuation would be $100$ minus $91.34$. It is a small difference between two methods, but upon learning how superannuation is determined, the employer is correct. – imranfat May 30 '18 at 18:02