Superannuation for Employers

 

1. Determine who is an employee and if they
are eligible for the superannuation guarantee.

 

If you pay individuals under a contract that is wholly or principally for their labour, you have to make super contributions for them, even if they quote their ABN. These people are considered your employees for super guarantee purposes. However if you make a contract with a separate company, trust or a partnership this is not for the labour of the individuals and therefore not your employee for superannuation purposes. In general you must make super contributions for an individual if they:

 

 

If you operate your business as a sole trader or partnership, you are not an employee and the super guarantee rules don’t apply to you. Instead, like any self-employed person, you can claim a tax deduction for personal contributions you make to a super fund (limits apply).

 

2. work out who is eligible for choice of superannuation fund and which superannuation fund to use

 

Your employee is NOT entitled to choose their super fund if you are already paying super contributions for them under or in accordance with a state award / industrial agreement, federal industrial agreement or award or agreement that stipulates a super fund that contributions are to be paid to. In most other instances your employee would be entitled to a choice of superfund.

 

Should you have all your documentation on order our fees start from $350 for an audit. This will be agreed in an engagement letter which will outline the scope of our audit.

 

If you have a new employee who is eligible to choose a super fund or an existing eligible employee gives you a written request for a Standard Choice form, you must provide them with a Standard choice form within 28 days unless, the new employee provides you with details of their chosen super fund. You need to keep receipts or other documents issued by the fund showing you have made super contributions for that employee to their chosen fund and you must keep appropriate records to show you have offered your eligible employees a choice of super fund. An employee is not regarded as having chosen a super fund unless they have properly supplied the correct information required by the Standard choice form. Once an eligible employee chooses a super fund, you have two months to arrange to pay contributions into that fund.

 

When you offer your employee a choice of super fund you must tell them the name of the fund you will pay their

 

3. check whether the superannuation fund complies

 

The point of super is to create tax effective savings. In order to qualify for this the fund needs to be a Complying super funds that meet the SISA standards. Such funds qualify for a confessional tax rate of 15%. A complying super fund is a fund that has:

 

 

Non-complying super fund do not qualify for confessional tax rates. The rate of tax for a non-complying super fund is 45%. Non-complying funds are funds that:

 

 

To check wether a fund is in compliance visit the register of complying super funds

 

4. determine each employee’s earnings base

 

For most employees, their earnings base is their ordinary time earnings. This generally means the amount they earn for their ordinary hours of work including commissions, allowances and leave but does not include overtime that is paid for work performed outside of ordinary hours.

 

Refer to the ATO Checklist for salary or wages and ordinary time earnings for super purposes

 

5. pay contributions

 

Multiply the employees ordinary time earnings for the quarter by 9% and pay this amount to a complying super fund by the quarterly payment cut-off date which is always the 28th of the month after the respective calendar quarter or the next working day should this fall on a non working day. Your employee’s earnings start on the first day you employ them.

 

You must pay a minimum of 9% of your employee’s earnings base. If you make super contributions under an award, you must check that the contributions are enough to satisfy both the award and the super guarantee requirements of 9%Failure to pay 9% of your employees earnings, regardless of wether they are paid due to a funds trust deed, an industrial award or previous agreement between yourselves will result in you incurring the super guarantee charge.

 

There is a maximum limit on any employee’s earnings base for each quarter of any financial year and employers do not have to pay contributions for any earnings above this limit. This limit does not apply to other mandated contributions such as contributions you pay under an award. The limit is indexed each year and is currently $36,470 for each quarter in the 2007–08 financial year.

 

You can claim a full tax deduction for super payments you make for employees under the age of 75 or for those over 75 because the employee is under an industrial award, a determination, or a notional agreement preserving state awards. Super payments are tax deductible in the financial year you pay them.

 

6. understand the superannuation guarantee charge and how to calculate it

 

The super guarantee charge is a charge you have to pay to the ATO if you:

 

 

You will need to ensure the 9% is paid (including any choice liability) and pay any interest on that amount (10% per annum), and an administration fee ($20 per employee per quarter). This is what is referred to a the superannuation guarantee charge.

 

7. ensure you meet requirements to report superannuation contributions to your employees, and

 

Under tax law you do not have to report super contributions to your employees however, some employers who are covered under workplace legislation, awards or agreements have an obligation to report super contributions on payslips.

 

8. keep the necessary superannuation guarantee and superannuation choice records.

 

You must keep:

 

 

As with other business dealings, you must keep records that affect the amount you have to pay, such as advice from trustees about the funds you are contributing to. There are penalties for failing to keep accurate records.

 

If you ever incur a super guarantee charge, you must also keep records of how you worked out the amounts shown in your Superannuation guarantee charge statement – quarterly.

 

A penalty of up to $3,300 for an individual and $16,500 for a corporation applies for failing to keep records. Additionally, if you are audited and don’t provide a statement or information when asked by the ATO, you may incur a penalty. The maximum penalty is 200% of the amount of the charge payable.

 

If you pay super under an award, you may have additional record keeping obligations.

 

9. Tax file number obligations

 

You have to pass on your employee’s TFN to their super fund within 14 days of receiving the form or when you make the first payment to the fund after receiving the TFN, whichever occurs last. This rule only applies if you have to make super payments for that employee.

 

If you have an employee who wants to make personal super payments as a payroll deduction, make sure they also give you their TFN to pass on to their super fund. A super fund cannot accept your employee’s personal contributions if it doesn’t have their TFN.