One day, you look forward to retiring and enjoying the Superannuation you have earned throughout your career. From 1 July 2022, you must pay Super to all employees. The only exception will be employees under 18 who work less than 30 hours. The Super payment is known as the Superannuation Guarantee (SG) contribution and is paid into a superannuation fund as part of their wages. In this guide, we will explain what you must do and how you go about paying Superannuation.
The superannuation guarantee scheme requires employers to provide sufficient superannuation support for their employees. Employers must contribute a minimum percentage of each eligible employee’s earnings (ordinary time earnings) to a superannuation fund or retirement savings account (RSA).
WHY do I have to pay Superannuation?
Superannuation is a government requirement to help workers provide for their retirement.
- The SG is currently calculated at 11% of an employee’s ordinary time earnings.
- The super guarantee rate increased from 10.5% to 11% on 1 July 2023.
- Businesses will be fined if they do not pay Superannuation or pay super at the correct rate.
WHAT else do I need to understand?
The employer must pay the SG at least four times yearly by the quarterly due dates.
- you must pay (via electronic funds transfer or Bpay) and report super electronically in a standard format, ensuring you meet SuperStream standards
- your superannuation payments must go to a complying superannuation fund – most employees can choose their own fund
- if you don’t pay the SG on time, you may have to pay the superannuation guarantee charge
- This does not apply if you are self-employed or a sole trader, and your super contributions are only for yourself
- Due dates for the contribution payment each quarter are 28 January, 28 April, 28 July, and 28 October
Whilst the SG is a cost to the business from a wages perspective, the good news is that the administrative part of the process has been made simple for small businesses. Instead of making individual payments to each employee’s super fund, you make a single payment totalling all employee contributions. You have these choices:
- If your Payroll software is SuperStream compliant, you can use it for the process. Ensure that the system covers both the SuperStream-compliant information and the payment.
- The Small Business Superannuation Clearing House (SBSCH) offered by the ATO is a free service you can use to make superannuation guarantee (SG) contributions. Eligible businesses have 19 or fewer employees or an annual aggregated turnover of less than $10 million. The big benefit here is they will split the payments across all the different super choices your employees may have made.
- Large Super funds have the facility to do it for you. Check with your fund to see if this is possible for your business.
- A messaging portal can take your information and make it SuperStream compliant, then send it to the relevant funds. You also provide them with a single payment to cover all employees.
HOW do I pay an employee Superannuation?
When a new employee starts who falls into the SG, you should:
- Offer your employees a choice of funds and provide them with the standard choice form.
- Provide them with information to help them understand Superannuation and investment options. Note: You cannot provide investment advice unless you are a licensed advisor.
- Provide the employee Tax File Number to their fund
- Keep records showing you have offered a choice and have paid. These records must be in English and kept for five years.
This process will be further simplified if you use an automated payroll tool (see our essential guide on payroll software).
Employees may also make additional salary sacrifice contributions that will be taxed at a concessional rate of 15% up to a limit at which point extra tax must be paid. (This might have the benefit of reducing the employee’s tax obligation). You are required to report this through the same mechanism above as an employer.
Your obligation to pay Superannuation to any one individual is capped. Current rates can be found here.
SUMMARY – Superannuation Guarantee
Superannuation is compulsory for all employees earning more than $450 a month. Employees can choose their fund, and you must report all payments to the ATO, which offer a special service if you have under 19 employees. Remember to budget for this cost in your business calculations.