Tax

Superannuation Obligations for Employers

super_contributions

As superannuation contributions are due to be paid by the end of each quarter, employers should make sure that they are aware of their responsibilities when it comes to their employee’s superannuation.

As an employer, it is your responsibility to contribute to each of your employee’s super funds. This is known as the super guarantee. You are deemed an employer if you employ a person under a written or verbal employment contract on a full-time, part-time or casual basis. Contributions are paid to an employee’s nominated fund or a default fund on their behalf.

You are required to pay super for employees that are:

  • 18 years or older 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

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

Common Mistakes to Avoid

The ATO reports the most common mistakes when it comes to paying super, which include:

  • not paying enough super
  • missing the due dates
  • not keeping accurate records
  • not passing on an employee’s tax file number to their super fund
  • not understanding when super should be paid for contractors

The laws surrounding Australian superannuation sets out various rules that employers must follow. The nine key ones are:

Rule 1 – Pay the Superannuation Guarantee

The amount that you need to pay is calculated as a percentage of an employee’s regular income and all employers must make payments at least quarterly.

From 30 June 2016 the new Super Stream rules come into effect for all employers, where a superannuation clearing house must be used for all payments to employee super funds. Contact us if you are not sure if you are Super Stream compliant.

Rule 2 – Offer a Choice of Super Funds

In most situations you must allow an employee to choose their own super fund. There are limited exceptions to this, such as an employee being a member of a “defined benefit fund”.

If an employee does not provide you with a super fund of their own choice then you must pay their super into a default fund that has a MySuper option for contributions.

Rule 3 – Provide a Standard Choice Form

This is an official document that an employee must complete advising you where they would like their super paid to. You have two months to start making payments once an employee has chosen their fund.

It is important to note that an employee must be a member of the fund in order for contributions to be received.

Rule 4 – Remain Unbiased

As an employer you must not try and influence an employee’s choice of super fund. You can however provide factual information about a fund or information regarding the default fund. You can also direct an employee to government websites where they can compare different super funds.

Rule 5 – Calculate Income Correctly

It is essential that an employee’s income is calculated correctly as the super guarantee contributions are based on their income.

Contributions are calculated as a percentage of regular “ordinary time earnings”. This includes an employee’s regular wage plus any shift loadings, paid leave, commissions and some allowances.

There are a number of items that are generally excluded from ordinary time earnings such as parental leave payments, annual leave loadings and redundancy payments.

Rule 6 – Keep Accurate Records

Keeping accurate records will assist in meeting your super guarantee obligations therefore, you are required to:

  • keep records detailing whether employees have or have not been offered a choice of funds
  • keep records confirming that your company’s default fund is a complying fund and meets the minimum life insurance requirements
  • keep records for five years to show that all financial obligations have been met
  • keep copies of written information provided to employees
  • keep records that superannuation contributions have been paid to an employee’s super fund

Penalties may apply if records are not kept.

Rule 7 – Keep Employees Informed

Whilst you are not obliged to include super contribution amounts on an employee’s payslip, it helps your employees if you do. It also shows at a glance that regular contributions are being made on their behalf.

Rule 8 – Salary Sacrifice Assistance

You can assist an employee to boost their super through salary sacrificing if they wish to do so. However, unless you are a financial adviser, you are not allowed to give financial advice.

Salary sacrificing arrangements must be agreed upon by both the employer and the employee. You must also keep written records of any agreements made.

Salary sacrifice contributions are made out of an employee’s wage into their super fund. As they are before-tax payments, there are some good tax advantages to salary sacrificing.

Rule 9 – Submit Tax File Numbers

The law states that an employer must pass on an employee’s tax file number (TFN) to their super fund. If a TFN is not provided then the funds contributed can be taxed at a much higher rate and voluntary contributions are not able to be accepted by, or on behalf, of the individual.

Key Dates

You can of course elect to make super contributions when you pay your employee’s wages. However, if you pay quarterly then payments must be made by the following key dates:

Quarter Due Date for Payment
1 – July to September 28 October
2 – October to December 28 January
3 – January to March 28 April
4 – April to June 28 July

So, whatever you do, don’t forget to maintain your super guarantee obligations. Should you not meet your super obligations then you are required to lodge a Superannuation Guarantee Charge Statement – Quarterly form along with any financial penalties as determined by the ATO.

If you would like further information regarding salary sacrificing, using a superannuation clearing house or confirmation that you are calculating your super guarantee contributions correctly, then please contact us.