• Superannuation basics for employers

    A basic guide to what superannuation is, your superannuation obligations as an employer and how to meet these obligations.

    What is superannuation?

    Superannuation, often called super, is money saved in a fund over a person’s working life to live on when they retire from work.

    As an employer, you’re required to contribute money to your employee’s super fund, and this is called the super guarantee.

    You’re considered an employer if you employ a person under a verbal or written employment contract on a full-time, part-time or casual basis.

    Which employees do I pay super for?

    Generally, you have to pay super for your employees if they are:

    • 18 years old or over, and are paid $450 or more (before tax) in a calendar month
    • under 18 years old, being paid $450 or more (before tax) in a calendar month and work more than 30 hours in a week.

    This applies whether they work casual, part-time or full-time hours, and if they are a temporary resident. You also have to pay super for contractors if the contract is mainly for their labour, even if the contractor has an Australian business number (ABN).

    Danger

    If you don’t meet your super obligations, you will have to pay a larger amount to us.

    End of danger

    What if I’m self-employed?

    If you’re self-employed, you don’t have to make super contributions to a super fund for yourself. However, you can choose to make super payments as a way of saving for your retirement.

    Most self-employed people can claim a tax deduction for contributions they make to their own super.

    How much super do I pay?

    The amount of super you pay is a percentage of the amount your employees earn for their ordinary hours of work. This is called the ‘super guarantee’.

    From 1 July 2014, you need to pay a minimum of 9.50% of each eligible employee’s ordinary time earnings; this is set to gradually rise over the coming years.

    Ordinary time earnings are generally what your employees earn for their ordinary hours of work, including over-award payments, commissions, shift loading, and certain bonuses and allowances. Payments for overtime hours are generally not ordinary time earnings.

    Find out more

    About how much super you must pay for your employees, visit ato.gov.au/otherlanguages

    End of find out more

    Where do I pay super contributions?

    You need to pay contributions into a complying super fund or retirement savings account. Your employees may be able to choose the super fund you pay their super contributions into.

    You need to provide a Standard choice form to new employees who are eligible to choose a super fund, so they can make their choice in writing. You need to provide this form to them within 28 days of the day they start working for you.

    A default fund account is one chosen by you for an employee who does not make their own choice of super fund. Super funds are replacing existing default accounts with a new simple type of account called ‘MySuper’. From 1 January 2014, you will need to make payments to a fund that offers a MySuper account if your employee does not choose a fund.

    It’s a good idea to check if your current default fund offers a MySuper product.

    Attention

    Don’t forget to pass on your employee’s tax file number (TFN) to their super fund – this is important because it will make it easier for them to keep track of their super.

    End of attention

    When do I pay super contributions?

    You have to pay money at least four times a year into the super account of an eligible employee. Payments must be made by the following quarterly due dates:

    Table 1

    Quarter

    Due date for payment

    1 (July – September)

    28 October

    2 (October – December)

    28 January

    3 (January – March)

    28 April

    4 (April – June)

    28 July

    When the due date for payment falls on a Saturday, Sunday or public holiday, you can make your payment on the next working day after that date.

    If you don’t make your super contributions on time, you will have to pay the super guarantee charge to us.

    Example: Ninh’s café

    After moving to Australia, I decided to start my own business and opened up a café. There’s a lot to learn when starting your own business, and one of the things I had to learn about was paying super and the super guarantee.

    I have one full-time employee and a couple of casual employees. I pay contributions into their nominated super funds four times a year. The amount I pay is a percentage of their earnings. From 1 July 2014 it is 9.50% of their ordinary time earnings and it’s slowly going up over the coming years. I’ll need to make sure my payroll system is updated so I’m paying the correct amount.

    End of example

    Can an employee add to their own super?

    Your employees can add to their own super from their before-tax (salary sacrifice) or after-tax income.

    Salary sacrifice is an arrangement where you, on behalf of your employee, contribute to their super from their before-tax income.

    Find out more

    If you’re considering offering salary sacrifice arrangements to your employees, you may wish to speak to a qualified professional. There is no legal requirement for you to offer a salary sacrifice arrangement to your employees.

    End of find out more
    Attention

    Remember, payments your employees make from their after-tax income to their super fund don’t count towards the super you have to pay.

    End of attention

    However, payments you make because of a salary sacrifice arrangement can count.

    There are limits to how much an employee can add to their super each year without having to pay additional tax.

    What is the Small Business Superannuation Clearing House?

    Businesses with 19 or fewer employees can use the free Small Business Superannuation Clearing House (clearing house) service. It’s an optional service and will help you pay your super guarantee contributions to a single location in one simple electronic transaction.

    Small businesses that register to use the service will have their super guarantee obligation discharged if all of the following apply:

    • they pay the correct amount
    • they pay by the super due date
    • the payment is accepted by the clearing house
    • the payment is not rejected by the super fund.

    Employers who receive an employee’s choice of fund nomination have 21 days to pass the information to the clearing house.

    You can find out more or register for the service by:

    Example: Ninh’s café, revisited

    One of my friends told me the Small Business Superannuation Clearing House can help small businesses like mine comply with my super guarantee obligations.

    It’s quite handy – before, I used to make separate super guarantee payments to each of my employee’s different super funds; but by going through the Clearing House, I can just do it all in one transaction online. It’s saved me so much time.

    End of example

    What if I haven’t paid super correctly?

    If you haven’t met your super obligations as an employer, you have to lodge a Superannuation guarantee charge statement – quarterly and pay a superannuation guarantee charge to us.

    Get it done

    To obtain a copy of the statement and instructions:

    End of get it done

    Can I claim a tax deduction?

    Generally, super contributions are tax deductible in the financial year you pay them.

    You are unable to claim a tax deduction for the super guarantee charge, because you failed to meet your super obligations by the due dates.

    What records do I need to keep?

    You need to keep records for five years that show:

    • the date and amount of super you paid for each employee
    • how you worked out the level of super you paid
    • that you have offered your eligible employees a choice of super fund
    • the details of the super fund that you paid your employee’s super into.
    Attention

    Your records must be written in English or in a format that can be easily accessed and converted into written English.

    End of attention

    Useful tools

    The ATO website provides a number of web-based decision tools and calculators to help you meet your super obligations. To access these tools, visit ato.gov.au/payingsuper

    Find out more

    Visit our website at ato.gov.au/payingsuper or phone us on 13 10 20.

    If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service on 13 14 50 for help with your call.

    You can also phone us on 1300 720 092 for copies of our publications.

    End of find out more
      Last modified: 31 Mar 2015QC 38462