Knowing who to pay
If you employ one or more members of staff – either full-time, part-time or casually – it’s likely you’re required to make super contributions under the Superannuation Guarantee (SG). That said, contributions only need to be made for employees aged 18 years or over who earn $450 or more (before tax) each calendar month. Younger staff may be eligible for SG contributions if they earn at least this amount and work 30 hours or more each week.
You could also be liable for SG contributions for contractors. As a guide, if you pay contractors for hours worked (for instance, someone conducting market research on behalf of your business) to achieve a specific result (like a web designer paid a lump sum to revamp your website), the contractor could be an ‘employee’ for SG purposes, which makes you liable for super contributions.
The Tax Office website has an online calculator that can help you resolve the issue – head to the ATO's website, click on ‘Business’ and follow the links to ‘Is your worker an employee or contractor?’, or speak with your tax adviser.
How much to pay
SG payments are set at 9.5 per cent of each worker’s ordinary time earnings. This includes basic wage payments plus commissions and shift loadings, but excludes overtime, reimbursed expenses and annual leave loading.
Setting up to pay
Most workers are free to choose the fund they’d like SG contributions paid into – the key exceptions are employees whose superannuation contributions are made under a state award or industrial agreement. If an employee doesn’t nominate a fund of their own, you’ll need to pay SG contributions into the fund you nominate – known as your ‘default fund’.
Some employers use an industry fund as their default, however, whichever fund you choose, it must offer MySuper – a low cost, basic style of fund. Be sure to read the fine print of any fund you’re considering. Some super funds will ask you to become a ‘participating employer’, which may mean having to pay super contributions monthly rather than quarterly – the minimum timeframe set by the ATO.
You’ll need to provide each employee with details of your default fund. But don’t attempt to influence a staff member’s choice of fund. This can be seen as offering financial advice – something that’s a big no-no unless you hold a Financial Services Licence.
How to pay
When it comes to paying super contributions, put the cheque book away: SG payments have gone hi-tech. The Government’s new Super-Stream initiative calls for SG contributions to be paid electronically and in a standardised format. If you have 20 or more employees, you need to comply with SuperStream by 30 June 2015. Small businesses (with 19 or fewer employees) can hold off until 30 June 2016.
Businesses can comply with SuperStream by upgrading their payroll software or outsourcing wage and SG payments to an outside payroll service. Small Businesses can register to use the ATO’s free Superannuation Clearing House. You pay all your SG super contributions in one transaction and the clearing house distributes the money across each employee’s fund.
What if you can't afford it?
Staying on top of your SG obligations isn’t just a legal obligation, it also makes good business sense. SG contributions are a tax-deductible business expense, but if you skip contributions, you’re likely to cop the dreaded (and non-tax-deductible) Super Guarantee Charge. This is made up of the outstanding contributions plus interest charge plus an administration fee. It’s a cost that can add thousands of dollars onto your annual operating expenses and it can apply if you are late by just one day. Make allowances for SG payments in your cash flow and pay the contributions on time.
For information, visit the Tax Office website here.
Super tip: Different ways to pay
Quarterly payment dates for SG contributions are 28 January, 28 April, 28 July and 28 October. Or pay by the 28th of each month, if paying monthly.