Superannuation contribution has been compulsory in Australia since it was introduced in 1992 and is an integral part of the Australian “three-pillar” retirement income system:
- Personal savings
- Superannuation earnings
As an employer, it is vital that you are aware of the current super laws when preparing to pay your employees, and also know what upcoming changes are expected so you can stay prepared.
Most importantly, it’s incredibly important to know the common practices of paying super and know of the most common pitfalls business owners face when starting their own business so you can be as prepared and protected.
Do I really have to pay super for my employees?
If you are paying any employee over $450 a month, then yes. You do have to pay them superannuation, on top of their pay.
You must also:
- Pay a minimum of 9.5% of the wage into their super – the superannuation guarantee (and this rate is expected to rise steadily to a peak of 12% by 2021)
- Pay the superannuation guarantee quarterly, by the due dates imposed by the ATO:
– 28th October
– 28th January
– 28th April
– 28th July
- Your payments must be paid and reported on electronically
- Payments must be made to a complying super fund provider
Employees can choose their own superannuation fund to receive their payments, but you can also set up a default fund or employer-nominated provider to suggest to your employees. Setting this up is simple and makes things much easier on your end.
Once you have chosen an employer-nominated fund, you must still offer your employees an option to choose their own fund, and provide their tax file number (TFN) to the appropriate fund. Also, you must keep records of all your superannuation payments for your business’ financial report.
What not to do when it comes to superannuation
Miss quarterly deadlines
If you miss paying super to your workers by the deadlines imposed by the ATO, your company will be hit with the expensive super guarantee charge.
Neglect to track your superannuation payments
Having a clear, extensive account of all your business’ superannuation is critical come end of financial year.
Fail to provide employees with super fund choices
If you dictate to your employees what super fund they must use, you are not only being unprofessional but could face serious legal consequences. The ATO explains how most employees are entitled to choose their own fund. Find out more here.
What all businesses should do
It doesn’t matter how big or small your company is, or how new it is: all employees need to be paid the right superannuation for their work.
Business owners should not be trying to do the bare minimum, but stepping up and taking every initiate they can.
You should be educating your employees about superannuation by giving them factual information about your obligations and the process they can go through to nominate their own chosen super fund.
Need the support of a bookkeeper in Melbourne?
Business finance can be tricky, which is why it’s always a smart move to engage the talent and skills of a professional bookkeeping team to help you keep on top of your financial obligations, including superannuation.