Businesses in Australia who have employees are generally required to make superannuation (or ‘super’) contributions on their behalf. This is a compulsory system enforced by law by the Australian government.
What is superannuation?
Superannuation is a contribution made by the employer on behalf of the employee to be paid into a super fund nominated by the employee. This is often referred to as the Superannuation Guarantee.
How much superannuation do I need to contribute?
By law, as an employer you must pay a minimum of 9.5% of the employee salary into the super fund. The government has announced this will remain at the same rate until 1 July 2021, when it will increase to 10% and then in 0.5% increments annually until 1 July 2025 where it will finally reach 12%.
If your employee is over 18 and paid more than $450 (before tax) in a calendar month or they are under 18 and are paid a more than $450 (before tax) in a calendar month and work 30 or more hours in a week, you must pay super.
When do I need to pay superannuation?
All super paid for eligible employees are calculated from the date that they have commenced employment with you. Super payments are subsequently paid (at a minimum) quarterly by the below due dates:
|Quarter||Period||Payment Due Date|
|1||1 July – 30 September||28 October|
|2||1 October – 31 December||28 January|
|3||1 January – 31 March||28 April|
|4||1 April – 30 June||28 July|
How do I pay superannuation?
All employers are expected to pay via SuperStream – a standardised electronic solution that is designed to streamline super payments. Given that different employees may have different super funds, SuperStream allows employers to use a single platform to pay to multiple funds, improves speed of transactions and reduces any potential manual data entry errors. All businesses are expected to be compliant with SuperStream. For more information on SuperStream, click here.
If you are utilising a payroll system, check to ensure that the system provider is SuperStream ready. You can check if your payroll software is SuperStream ready by visiting the SuperStream Product Register.
If you do not have a payroll software, you may use Small Business Superannuation Clearing House (SBSCH). This is usually for businesses that have an annual turnover of less than $10 million and fewer than 10 employees. Your business may make super contributions as a single electronic payment to SBSCH accompanied with the contribution data for all your employees. SBSCH will then assist in distributing the funds to each super fund. To figure out if you should be using SBSCH, click here to visit the Australian Taxation Office (ATO) website to access the SBSCH decision tool to begin the process. Your accountant will be able to assist you with this or instead, may be able to manage your super guarantee obligations on your behalf through their agent portal.
Where do I begin?
Firstly, you will need to assess whether your current payment method of meeting your super guarantee contributions are SuperStream compliant. Subsequently, the ATO provides a comprehensive step by step checklist to assist you in figuring out what your next best steps are. Alternatively, you can seek the advice of your accountant who can assist you in figuring out your recommended course of action.
What happens if I have missed or am late for a payment?
Missed or late payments of Super may result in an employer needing to pay the Super guarantee charge (SGC). The charge is made up for:
- Super guarantee shortfall amounts
- 10% interest on this amount (as of 2018)
- Administration fee of $20 per employee, per quarter missed
This is reported and addressed by lodging an SGC statement by the due date. The SGC is paid to the ATO. It’s important to note that for late payments you must still lodge an SGC statement and pay the balance of the SGC to the ATO. For more information on calculating how much you need to pay, visit the ATO website.
Single Touch Payroll
Single Touch Payroll (STP) is a new initiative by the ATO that allows employers to send their employees’ tax and super information each time payroll is run from a payroll or accounting software that offers STP reporting. Currently as of 1 July 2018, employers with 20 or more employees must report via STP. For more information on getting started, visit the ATO website.
Employers with 19 employees or less currently are not required to report through STP. However, legislation is currently being proposed through parliament.
The ATO has made efforts to simplify the process of superannuation guarantee contributions. However, there are still several ways to ensure that as an employer, you are making the correct and required contributions. It’s important to note that irrespective of which payment method you use, even if part of this process is outsourced, you are still responsible for ensuring your employees’ super is paid correctly. Additionally, ensure that your method is SuperStream compliant as this is the only recognised method to meet your super guarantee obligations by the due dates.
If there is any doubt about your process of payment or you wish to have it reviewed by a qualified accountant, Box Advisory Services can assist you in ensuring you are fully compliant. Book an appointment now!
Please note that every effort has been made to ensure that information provided in this guide is accurate. You should note however, that the information is intended as a guide only, providing an overview of general information available to contractors and small businesses. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek your own advice for any legal or tax issues raised in your business affairs.