As a business owner, you must ensure you are managing employer superannuation requirements for your team. This means ensuring that superannuation is paid to the relevant employees, that the right amount of superannuation is paid to them and that it is paid on time.
We’ve put together a little guide which will help you out in answering these questions.
1. Relevant employees
(a) Full-time, part-time and casual employees
When it comes to superannuation contributions, it does not matter if an employee is full-time, part time or casual. You are required to pay superannuation guarantee contributions for employees if they are aged 18 years + and if they earn at least $450 or more in gross wages in a month. If an employee is under 18, they are entitled to superannuation if they work at least 30 hours a week and earn at least $450 or more in gross wages in a month.
A common mistake we see startups make is that they assume that they are not required to make superannuation guarantee contribution payments for contractors. This is not always the case. If an individual is paid mainly for their labour for hours worked under a contract, then you will have to pay superannuation contributions for them. More information is available here.
2. How much superannuation do you need to pay?
The current rate of superannuation is 9.25%. This is scheduled to change to 9.5% from 1 July 2014 with a proposed increase to 12% in the coming years, however this will be confirmed in the upcoming budget announcement. .
This rate of superannuation must be applied to the Ordinary Time earnings of your employees. This includes payment for your employees’ ordinary hours and whilst it includes commissions and performance based bonuses, allowances and shift-loadings; it does not include overtime payments. The ATO has prepared a table which breaks down the components of what forms Ordinary Time Earnings. This can be accessed here.
3. When is superannuation due?
Superannuation guarantee contribution payments for your team need to be paid by the 28th day of the month following end-of-quarter. i.e. for the June quarter, payment of superannuation payments is due 28th July.
If payments are made after this date, you are required to lodge an ATO Superannuation guarantee charge statement and pay a penalty (the penalty amount is huge – equivalent to the amount of superannuation which was paid late) and an administration charge. In some instances (depending on how late payment was made), you may be able to offset the penalty by the late payment amount, but you will not be able to receive a tax deduction for the superannuation contribution. So make sure you pay on time!
4. So, I’m liable to pay superannuation for my employees – what forms do I need to fill out?
If you’ve determined you’re liable to pay superannuation guarantee for your employees, then you need to check whether they’re eligible to choose a superannuation fund. This is generally the case for most startup employees, however there are a few exceptions listed here.
If your employee is eligible, you must provide them with a Superannuation Standard Choice Form within 28 days from the date they started working for you. This form can be downloaded via the ATO website using this link. Your employee can use the form to select their own fund, or accept the superannuation fund you have nominated for your staff.
Once the form is completed, you must then arrange for their superannuation to be paid into the selected fund. You are not required to send the form to the ATO, however you must retain it for your records.
5. What else is changing?
Apart from the proposed change in superannuation rates, the Government has confirmed a new data and e-commerce ruling on how superannuation contributions must be paid by employers. The new system will be compulsory from 1 July 2015 for businesses with less than 20 employees (for businesses with 20 or more employees it is compulsory from 1 July 2014).
Under the new ruling, superannuation payments must be made using a single Electronic Funds Transfer (EFT) to a registered superannuation clearing house. Many accounting software providers offer this function (such as Xero and QuickBooks Online). Alternatively, if you have less than 20 employees you can register to use the ATO’s Superannuation Clearing House.
Remember, as a startup founder and business owner it is your responsibility to ensure you are on top of your superannuation obligations.
This article is general in nature and is not intended to replace in any way professional accounting and legal advice.
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