Superannuation Guide For Employers

Superannuation is the 10% that you – the employer, has to pay on top of wages of your employees. This goes to to a superannuation fund which grows the money so that your employees have something to live on in their retirement. (This will rise to 12% by 2025).

That is the theory but it gets tinkered with every now and again because, in practice, it does have problems.

One change that is coming up on the 1st of November 2021 is “stapled super fund”. Basically you will have to get your employee to nominate a super fund (or get the Australian Tax Office to tell you the super fund they are using).

This is actually a long overdue idea. Employees who didn’t nominate a fund used to just get their super money paid into the employers own super fund. Over time they might end up with a lot of different super funds from every new employer. Each one charging fees until the tiny amounts in each account were eaten up.

Super works with money + time = cash to retire on. Even just a hundred bucks can become a significant amount of cash if you invest it over 30 years.

You can check out what the Australian Taxation Office has to say about it HERE

So who is eligible?

Employees who earn more than $450 a month. Contractors, under some circumstances, as well. You can read about the guidelines from the ATO HERE

That is the only criteria. It doesn’t matter if they are full time, part time or whatever. It doesn’t matter if they are already getting a super pension, are a temporary resident or your mum helping out part time. If they earn $450 in ordinary time earnings – then you have to pay a superannuation guarantee contribution.

Employees under 18 get it if they work more than 30 hours a week or you pay them more that $450 before tax. It’s the same if it’s someone employed by you personally (not as part of your business). So, for example, nannies, housekeepers, etc.

Contractors get super if you are paying them mostly for labour and you pay them more than $450 per month.

Overseas workers get it (but not if they are actually employed by you overseas). Some kinds of visas or entry permits held by some foreign executives employed in Australia are covered by an agreement that means you don’t have to pay them super. Ring the ATO on 13 10 20 to check on this one.

Australian workers you send overseas get it but that might mean you are paying super in Australia but also in the country they are working in. To get an exemption in this case, you can get a “certificate of coverage“ which you can read about HERE

Who Doesn’t Get Super contributions?

If you are a sole trader or in a partnership then you do not have to pay yourself super.

People on a high income that work for multiple employers can ask not to have super paid on their behalf. You can read more about this on the ATO website HERE

So what does the employer need to do?

Set up a default super fund. Ideally, the employee should already have one. But there are circumstances when you will need an ’employer-nominated fund.’ You can read more about this HERE

Offer your employee their choice of super fund (it’s important that you keep records about this). Make sure the super funds get your employees TFN (Tax File Number).

As mentioned, as of 1st of November 2021 all new employees should tell you of their existing super fund. This fund is “stapled” to the employee and they keep using it for every new job they start. You (or your tax agent) can request the details of the “stapled” super fund from the ATO if the employee doesn’t supply it. You can read more about this HERE

You might also need to set up a salary sacrifice agreement. This is where you pay extra super for your employee (an incredibly wise idea!) You can read more about this HERE

How Does the Employer Report and Pay?

In a word – electronically.

The money goes to a super fund or a retirement savings account (RSA).

It’s a requirement, to all intents and purposes, that you have STP (Single Touch Payroll). XERO, MYOB, Quickbooks or all the other computerised accounting/payroll providers can be used for STP. As can third party payroll providers.

Basically, the software bundles the super and payroll together and does most of the work for you. It’s important that your software (and how you use it) are set up correctly and you should consult your tax agent to help you with that (or just get them to do it all for you).

The super component of reporting actually uses SuperStream. Make sure that whatever payroll software you use is SuperStream-compliant.

You can read more about the reporting requirements HERE

You pay the money to a “Super clearing house” who then pay the super fund concerned. You just make a payment (including all your employees’ super contribution information) to the clearing house and they do all the rest.

If you have 19 or less, employees then you probably should use the SBSCH (Small Business Superannuation Clearing House). It’s a free government run effort. You can read about it HERE

Otherwise you will have to find a commercial clearing house (but some super funds run their own super clearing houses).

Anything Else I Should Know?

Super guarantee contributions are tax deductible. The timing of super payments affects tax deductions you can claim. Consult with your tax agent on how this works in practice.

If you are late paying super you can be subject to the Super Guarantee Charge. If you are already late or going to be late – get onto your tax agent straight away. The ATO have a range of other “measures” to enforce compliance. These can be pretty dire if you don’t engage with them.

Being registered for Pay As You Go Withholding (PAYGW) is a requirement if you have to withhold tax from your employees. If you are paying super then you are paying wages – so this is also something to talk to your tax agent about. Besides – you have to be enrolled for PAYGW to be able to register STP software with the ATO.

If you would like some advice on all of this, please call us on 1300 268 800.