Employer superannuation contributions -Everything you need to know.

As an employer, it’s vital you know the requirements for paying super, as late or missing payments can result in penalty charges.

In this guide, you’ll discover:

• what superannuation is

• who is eligible for superannuation

• how often employers have to pay superannuation contributions

• what information employers can and cannot provide on superannuation funds

• employer superannuation best practices

• how to streamline super calculations and contributions.

• What is superannuation?

  Superannuation, or “super”, is the money put aside by employers for their employees' retirement funds. As a mandatory requirement, super contributions are not voluntary and so should be understood by all employers.

  For most people, super contributions begin when you start work and continue for the remainder of your working life. Your employer automatically pays a percentage of your salary or wages into your chosen super fund, and with each different job, you hold the employer contributes a minimum set percentage into your fund.

  Your super fund invests and manages this money for you until you retire. It’s a long-term investment that grows over time. So, the more you save, the more money you’ll have for your retirement.

  Do employers have to pay employee superannuation?

  All employers must pay their employees’ super as stipulated by the Superannuation Guarantee.

  The Super Guarantee (SG) is the compulsory contribution made by all employers to their eligible employees. It’s paid directly to each employee’s nominated super fund or a default fund on their behalf.

  SG is a percentage of each eligible employee’s Ordinary Time Earnings (OTE), including their regular wage plus any shift loadings, commissions, paid leave, and some allowances. The Australian Government determines the SG rate, which is 10.5% of OTE in 2022/23.

  Prior to 1 July 2022, if an employee was over 18 and earned $450 or more (before tax) in salary or wages in a calendar month, the employer must pay super for them. Note: salary or wages includes any overtime.

  After 1 July 2022, the $450 threshold is removed and all workers over the age of 18 are entitled to super contributions.

  Who is eligible for superannuation?

  In general, all employees are eligible for super. It doesn't matter whether the employee is:

  • full-time, part-time or casual

  • receiving a super pension or annuity while working

  • a temporary resident, such as a backpacker

  • a company director

  • a family member working in your business.

  Here are some additional eligibility rules that employers must follow:

  Employees under the age of 18

  You must pay super for employees under the age of 18 if they work over 30 hours in a given week.

  Private and domestic care employees

  You must pay super for private and domestic employees if they carry out work that:

  • affects you personally (not your business, like an at-home personal carer).

  • affects your home, household affairs or family (such as a housekeeper, nanny or carer).

  • You must pay super for work of a private or domestic nature if they worker over 30 hours per week they work over 30 hours per week.

  You may also have to pay super for domestic employees or carers if both the following apply:

  • you have a National Disability Insurance Scheme (NDIS) plan that you manage yourself

  • you use your funds to hire a carer or other domestic worker.

  International employees

  You must pay super for international employees, including temporary residents, such as backpackers or working holidaymakers.

  If you send an Australian employee to work temporarily in another country, you must continue to pay their super contributions in Australia.

  But, you do not have to pay super for:

  • non-resident employees who work outside Australia

  • some foreign executives who hold certain visas or entry permits

  • employees temporarily working in Australia who are covered by a bilateral super agreement.

  If you’re a non-resident employer, you do not have to pay super for resident employees for work they do outside Australia.

  Find out more about your super contribution responsibilities to international employees on the ATO website.

  Contractors

  You must pay super for contractors, even if they quote an Australian business number (ABN), if you pay them primarily for their labour.

  Self-employed

  If you're self-employed as a sole trader or in a partnership, you do not have to pay a super guarantee for yourself, but that doesn’t mean you shouldn’t consider doing so regardless.

  Find out more about your super contribution responsibilities for self-employed business operators on the ATO website.

  How often do employers have to pay employee super contributions?

  Employers must pay employee super contributions at least once a quarter by the relevant due dates. You can choose whether this is one or multiple payments across the quarter, such as fortnightly or monthly.

  Payment frequency may depend on whether employees are covered by an award or employment agreement that specifies payment frequency. In this case, you must meet the agreed payment criteria.

  What is the role of employers when it comes to superannuation funds?

  Employers must ensure they pay superannuation guarantee contributions on time to the super fund chosen by the employee.

  If no fund is chosen, then they must use the “stapled super fund” notified by the ATO for the employee.

  If there is no “stapled super fund”, then they must pay the default superannuation fund or another fund that meets the choice of fund obligations.

  There are certain things that employers can and cannot provide, as detailed below.

  What employers can provide:

  Factual information

  You can give factual information to employees, including documents relating to superannuation, such as:

  • employees' rights and employers' obligations under SuperChoice

  • how employees can tell their employer what fund they want the superannuation guarantee contributions paid into

  • what will happen if the employee does not choose a superannuation fund.

  Referrals to government websites

  You can refer employees to information on government websites, such as the YourSuper comparison tool and Moneysmart resources. These tools let your employees compare MySuper products and help them choose a fund that meets their requirements.

  Referrals to licensed financial advisors

  You can refer employees to a licensed financial advisor. But you must disclose any benefits that you or your associates may receive from the referral. You must make this disclosure at the same time, and in the same form, as the referral.

  What employers cannot provide:

  Financial advice

  You should not give financial product advice or mislead employees about superannuation products.

  People who regularly give financial product advice about superannuation need to hold an Australian financial services (AFS) licence or act as the representative of an AFS licensee.

  Financial product advice is a recommendation or statement of opinion (or a report of either) that:

  • is intended to influence a person (or persons) deciding on a financial product or class of products

  • could reasonably be regarded as being intended to have such an influence.

  If you give financial product advice without being licensed or authorised to do so, you may be breaking the law. Also, uninformed advice could be misleading or inappropriate to your employees’ circumstances, costing them money if they act on the recommendation.

  Fund recommendations

  You should not mandate, recommend or influence your employees to choose a particular superannuation fund. If you do, you may be breaking the law.

  Employers have to select a default superannuation fund for employees who have not chosen a fund. The fund is recorded as the 'nominated superannuation fund' on the ATO's standard choice form.

  Superannuation products

  You should not make an unsolicited offer to employees, or ask them to apply for a superannuation product during real-time contact, such as a meeting or a telephone conversation – that is, you should not hawk products.

  Employer superannuation best practices

  Paying super contributions on time is mandatory, but there are other best practices and behaviours you should consider to make the entire process easier for you and your staff.

  Provide superannuation fund choices

  Employers must allow their employees to choose their super fund. There are 3 exceptions to this rule:

  1. employment is governed by a workplace agreement that specifies the fund or funds into which payments must be made

  2. the employee is a member of a defined benefit fund that meets specific criteria

  3. some state and Federal Government employees.

  If an employee doesn’t specify a preferred super fund, you must pay their super into a default fund with a MySuper option for contributions.

  Pay super contributions by the deadline

  Employers must pay super contributions by the quarterly deadline, as specified by the ATO.

  If you fail to pay on time, you’ll have to pay the (non-tax deductible) Super Guarantee Charge. But if you pay before the deadline, you can claim a tax deduction against your business income.

  Super contributions are considered paid when received by the super fund, not when you pay them. So, allow plenty of time for bank clearing. To mitigate this, most employers pay their employee super contributions at the time the employee’s wage is paid, such as weekly or monthly.

  Check for a stapled fund

  As of 1 November 2021, if new employees do not supply details of a nominated superannuation fund, employers must use the ATO database to check for a stapled fund.

  As long as the stapled fund complies with superannuation law, you must pay the necessary super contributions into that fund.

  If an employee doesn’t have an existing super fund and doesn’t nominate one, you must pay their super into a default fund with a MySuper option for contributions.

  Keep accurate records

  Employers must keep accurate records that:

  • detail whether you have or have not offered employees a choice of funds

  • confirm your company’s default fund is compliant and meets minimum life insurance requirements

  • show that you have met all financial obligations over the past 5 years

  • prove that you have paid superannuation contributions to an employee’s chosen funds or the default fund.

  Penalties may apply if employers do not keep accurate records.

  Calculate income properly

  It’s vital that employers calculate employees’ income correctly as Super Guarantee (SG) contributions use that figure.

  Contributions are a percentage of regular Ordinary Time Earnings OTE), which includes regular wages plus any shift loadings, commissions, paid leave, and some allowances.

  However, some items are generally excluded from OTE, including:

  • overtime (other than regularly rostered overtime)

  • fully expended expense allowances, such as car allowances

  • reimbursed expenses

  • benefits subject to fringe benefits tax

  • jury top-up payments

  • parental leave payments

  • annual leave loading

  • accrued annual leave, long service leave, and sick leave paid as a termination lump sum

  • redundancy payments

  • gratuities and tips

  • dividends

  • partnership and trust distributions

  • restraint of trade agreement payments

  • payments for private and domestic work under 30 hours a week.

  Assist with salary sacrificing

  Employers are not allowed to give financial advice to employees unless they hold a Financial Services Licence, but they can assist with salary sacrificing.

  Any salary sacrificing arrangements must have both the employer and employee’s written agreement. Employers must report these amounts on the individual’s payment summary – reportable employer super contributions.

  Salary sacrifice contributions are pre-tax payments from an employee’s income into their super fund. And they may offer the employee some good tax advantages.

  Salary sacrifice arrangements can only apply to future payments, not past earnings. There are limits to how much a person can voluntarily contribute before losing tax concessions.

  There’s no difference between employer super contributions and salary sacrifice amounts, so both are assessed against an individual’s concessional contributions cap.

  Report extra super contributions to the ATO

  In most cases, an employer doesn’t need to report on the basic superannuation contributions. But if you pay an employee extra super contributions, such as through a bonus or salary sacrifice, you may need to report the payments to the ATO.

  These extra super contributions could influence any government payments your employees may receive, such as child support payments, family tax benefits, and government co-contributions.

  You can report any extra super payments through Single Touch Payroll or as an item on an employee’s PAYG Payment Summary and Payment Summary annual report to the ATO.

  Provide employee tax file numbers to the super fund

  Employers must provide employee tax file numbers (TFN) to their super fund no later than:

  • the day on which you make the first super contribution for an employee

  • within 14 days of receiving their TFN, if not available at the first contribution.

  • Without a TFN, the employee might be taxed at a much higher rate, and the super fund won’t accept any voluntary contributions.

  Employers who fail to provide a TFN will face a financial penalty from the ATO.

  Use technology to streamline super calculations

  Single Touch Payroll (STP) technology helps employers automate and streamline payroll variables like superannuation, tax, and annual leave. If anything looks amiss, the software flags the problem with a helpful error message.

  Once everything is entered correctly, STP software automatically sends your employees’ tax and superannuation information to the ATO.

• FAQs

  What do employers do if they miss a super payment?

  If an employer misses a super payment deadline, they must submit a Super Guarantee Charge (SGC) statement by the end of the following month. They also have to pay the SGC (which is not tax-deductible) to the ATO, which consists of:

  • unpaid SG payments

  • interest on the outstanding amount

  • an administration fee.

  What are employers required to do in terms of superannuation?

  Employers must make superannuation contributions to their eligible employees’ super accounts at an ATO-prescribed minimum percentage rate of the employee’s ordinary time earnings.

  At what age do employers stop paying super?

  In general, an employer must pay SG contributions for employees aged 18 to 69 years. Once an employee reaches the age of 70, an employer is no longer required to pay the superannuation guarantee.

  What is the superannuation guarantee?

  The superannuation guarantee (SG) is a percentage rate set by the Australian government. It’s called a “guarantee” because it refers to the minimum regular payment employers must pay.

  As of July 2022, the minimum SG rate for eligible employees is 10.5% of ordinary time earnings (OTE). It is slated to increase annually by 0.5% until it reaches 12 percent in 2025.

  Streamline super calculations and contributions with MYOB

  Superannuation is a mandatory scheme where employers pay a fixed rate of employees OTE into a retirement fund. Missing payments or late payments are subject to penalty charges.

  As an employer, you can remove the hassle of super calculations and contributions with cloud-based payroll from MYOB. You can stay in the ATO’s good books by sending compliant Single Touch Payroll (STP) reports on time.