For most people, superannuation or “super” begins when they start working and the employer starts paying a percentage of their wages and salary into a superfund account. The superfund then manages the account until their retirement. As an employee, there isn’t too much to do.
But what if you are the employer? Where do you start? What are your obligations? Well, worry no more we can help answer the most common questions employers have when it comes to super for their business.
How Do You Know if You Need to Pay Super?
If you are a bit confused about whether an employee is eligible for super, a general rule of thumb is all employees are eligible if they earn $450 or more (before tax) in salary or wages in a calendar month.
It doesn’t matter if the employee is:
- full-time, part-time or casual
- receiving a super pension or annuity while working (this includes employees transitioning into retirement)
- a temporary resident, such as a backpacker
- a company director
- a family member working in your business.
However, this is set to change 1st of July 2022. Employers will have to pay Super Guarantee on every dollar earnt, including the first $450. Previously, employers did not need to pay this if the employee did not earn $450 a month. This means that some employees will start receiving super contributions for the very first time.
Bookkeepers and BAS agents can help employers by preparing and budgeting for these changes. They can also help them to follow the steps that they need to ensure they are ATO compliant.
Where to Start with Setting up Super for Your Business?
As an employer, you need to set up your business to pay super into your eligible employees’ super fund. All employees must be offered a choice of superfund when they start. This can be done by providing them with a standard choice form which can be found here on the ATO website.
When offering employees, a choice of super fund you must also keep records that show you’ve done this. If you want to know more about why keeping accurate employee records is important, we have covered that too.
From 1 November 2021 in cases where employees don’t choose a super fund, you may need to request ‘stapled super fund’ details from the Australian Taxation Office (ATO). If your employee hasn’t made a choice and doesn’t have a stapled super fund, you can then contribute their super to your default super fund.
What is a stapled superfund? A stapled super fund is an existing super account linked, or ‘stapled’, to an individual employee so it can move with them as they change jobs making the super process easier. The aim is to reduce account fees by avoiding new super accounts being opened every time an employee starts a new job and having multiple accounts running at once.
You also need to provide your employee’s Tax File Number (TFN) to their fund and finally set up your systems to electronically pay into the right fund.
As an employer, you are required to pay super contributions for your eligible employees into a complying fund or retirement savings account to avoid the super guarantee charge (SGC).
The super guarantee charge is an additional amount you’d need to lodge and pay to the ATO if you don’t meet the following criteria:
- pay on time by the quarterly due date
- make payment at the new rate of 10%, or
- pay to the right fund (e.g., employee’s chosen fund).
How Much Super Do I Pay?
The minimum superannuation you must pay for each eligible employee is 10% of their ordinary time earnings (OTE). However, it is going to increase slowly to 12% by 2025.
How Do I Pay My Employee Contributions?
There are 3 ways to make your employee super payments
1. Through a SuperStream compliant system – SuperStream is the way all employers must pay employee superannuation guarantee contributions to super funds. With SuperStream, money and data are sent electronically in a standard format
2. If eligible through a commercial clearing house or the Small Business Superannuation Clearing House
3. Through the superfund, if it offers this service.
What Are the Due Dates for Contributions?
Payments into eligible super funds should be made at least 4 times a year. This applies from the day employees start working for you.
The due dates for each quarter are:
- 28 January
- 28 April
- 28 July
- 28 October.
Where the due date falls on a weekend or public holiday, the due date is the next business day. If you don’t make your superannuation contributions by these dates, you will face penalties.
What Do You Do if You Make a Payment Late or Miss it All Together?
In the unfortunate circumstances that you fail to pay a super guarantee by the right date, you will need to lodge the superannuation guarantee charge (SGC) statement and make payment to the ATO.
The way the SGC is calculated is also different from how much super guarantee you pay to your employees’ funds. The SGC is calculated on an employee’s total salary and wages (including overtime and some allowances) and includes interest and an administration fee of $20 per employee, per quarter.
If the eligibility requirements are met, late super payments can be managed in few different ways such as:
- used to offset the SGC
- pay super in the current quarter or
- put the payment towards future super payments.
When running a business, having employees means there are obligations and requirements you must meet that are constantly being changed or amended. Staying across it all can be stressful and overwhelming.
For a bookkeeper, it is their job to ensure they stay up to date with these changes. If you still have questions about your role and obligations regarding employee super, Sense in Numbers can help. We can help with all payroll services including Single Touch Payroll, PAYG withholding and super.