Superannuation is a mandatory expense that a business needs to pay for eligible employees to provide for their retirement.
The Super Guarantee (SG) is the minimum amount you must pay to avoid the super guarantee charge. Super guarantee is currently 10.5% of an employee’s ordinary time earnings.
If you pay an employee wages, you are also required to pay them the Super Guarantee.
1. Overview Of Superannuation in Australia
Superannuation is a mandatory expense that a business needs to pay for eligible employees to provide for their retirement.
The Super Guarantee (SG) is the minimum amount you must pay to avoid the super guarantee charge. Super guarantee is currently 10.5% of an employee’s ordinary time earnings.
If you pay an employee wages, you are also required to pay them the Super Guarantee.
2. How Much Superannuation To Pay
- A business needs to pay superannuation for each worker regardless of how much they are paid. Before 1 July 2022, a business did not have to pay super guarantee for a worker earning less than $450 a month.
- Superannuation is calculated on an employee’s Ordinary Time Earnings (OTE) which is the gross amount your employees earn for their ordinary hours of work (before tax). OTE includes:
- Ordinary hours of work
- Commissions
- Shift loading
- Annual leave loading
- Allowances
- Bonuses
3. Employee Eligibility
Generally, all employees aged 18 years or older are eligible for super guarantee regardless of how many hours they work. If they are under 18 years old, you need to pay superannuation if they work more than 30 hours in a week.
It doesn’t matter if the employee is:
- Full time, part time or casual
- Receiving a super pension or annuity while working (this includes employees on transition to retirement)
- A temporary resident, such as a backpacker
- A company director
- A family member working in your business.
4. What You Need To Set Up
As an employer, you need to set up your business to pay super into your eligible employees’ chosen super funds or their stapled super fund where no choice has been made.
If your employee hasn’t made a choice and doesn’t have a stapled super fund, you can contribute their super to your default super fund.
What you need to do:
- Select your default super fund (each employer needs to have a Default Super Fund in place should employees choose to use a default fund)
- Ensure that the default fund is an an eligible superannuation fund as listed in the relevant award (all awards have several funds to choose from)
- Offer employees a choice of super fund and keep records that show you’ve done this
- Request your employee’s stapled super fund details if they do not make a choice
- Provide employees’ TFNs to their funds
- Set up your bookkeeping or payroll systems to track and pay super contributions electronically to the right fund
5. When To Pay Superannuation
Superannuation is due to be paid by the 28th of each quarter, for the previous quarter. Superannuation due dates for 2023 are as follows:
- 28 January (for October-December 2022 quarter)
- 28 April (for January-March 2023 quarter)
- 28 July 2023 (for April-June 2023 quarter)
- 28 October 2023 (for July-September 2023 quarter)
Superannuation must be lodged and received by the super fund by the 28th of each quarter as above.
6. How To Pay Superannuation
You need to pay employee super contributions electronically to either a:
- Complying super fund: a fund that meets specific requirements and obligations under super law
- Retirement savings account (RSA): an account that provides a low cost and low risk savings strategy for retirement.
You can make payments through:
- Small Business Superannuation Clearing House (free service via the Tax Office Online services for business) for small business with 19 or less employees
- Other commercial clearing house options
- Your super fund’s clearing house
- Direct to the fund via payroll software (such as Xero)
7. If You Cannot Pay Superannuation On Time
If you do not pay an employee’s Super Guarantee (SG) to the right fund on or before the due date, you must:
- Lodge a Superannuation Guarantee Charge (SGC) Statement
- Pay the Super Guarantee Charge.
Your employee’s super contribution is only considered ‘paid’ on the date it’s received by the super fund.
8. The Impact Of Not Lodging Or Paying Employee Super On Time
There are many possible negative consequences if you don’t pay your employee superannuation on time.
Some of these include:
- You won’t be able to claim late super payments as a tax deduction (i.e. you will end up paying more tax than you would have)
- You will need to complete and lodge a SGC Charge Statement to the Tax Office (this can be difficult for the average business owner to do themselves)
- You will be charged an administration fee (by the Tax Office) for each employee for each overdue quarter
- You will be paying interest (by the Tax Office) on overdue super
- You may be subject SGC audit or review
- You may receive a Garnishee Notice, Director’s Penalty Notice or a Direction to Pay
- Your employee’s morale may be affected if their super is late and this may impact their trust in you as their employer
If you’re in a situation where you’re unable to pay your employee super on time, the worst thing you can do is try to avoid it. You’ll need to discuss your options with the Tax Office and get it sorted.
9. More Information
For more information about Superannuation, visit the Australian Tax Office or Fairwork Australia:
https://www.ato.gov.au/Business/Super-for-employers/
https://www.fairwork.gov.au/pay-and-wages/tax-and-superannuation#super-guarantee
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