As a small business owner with employees, it’s important that you understand the rules associated with superannuation payments. Let’s take a look at the what-why-when-where-how of superannuation payments for small business owners.
What is superannuation?
The superannuation (super) guarantee is mandated by the Australian Government and requires employers to provide sufficient super support for their employees. Employers are obliged to contribute a minimum percentage of each eligible employee’s earnings to a complying super fund or retirement savings account.
Why is super paid?
Super is paid to your employees to provide for their retirement.
Under what circumstances is super payable?
Super is payable to every employee aged 18 and over who earns more than $450 before tax in a calendar month. Employees who are under the age of 18, or those undertaking domestic work, such as nannying, are also owed super if they work more than 30 hours per week. Some contractors are also owed superannuation. Ask your accountant or visit the Australian Taxation Office (ATO) super for employers page to confirm.
How much super should be paid?
In 2019, the superannuation guarantee was 9.5% of an employee’s ordinary time earnings (OTE). OTE includes commission, shift loading and allowances, but does not include overtime payments. You can use the ATO’s super contributions calculator to determine the amount to pay your employee’s super fund.
When are super payments due?
You must pay super at least four times a year, by the quarterly due dates, which fall on the 28th of October, January, April and July. If you prefer, you can pay more regularly. In fact, there are some super funds require employers to make monthly contributions.
Where are super payments made to?
Your employees are entitled to nominate a preferred fund. If they do, you must make payments to their chosen option, provided it is a complying super fund or retirement savings account. You can check whether a fund or account is complying at superfundlookup.gov.au.
If your employee has not nominated a preferred fund, you are required to select one of MySuper’s default funds. You can explore options and choose a MySuper fund via a ratings website such as SuperRatings.com.au.
How are super payments made?
From 1 July 2016, the ATO mandated that all employers must use its SuperStream system to make super payments. SuperStream is an ATO initiative designed to make super reporting and paying simpler for employers. The system manages the money and data associated and sends electronic information in a standard format to employers, funds, service providers and the ATO.
If you’re already using payroll software such as MYOB or Xero, there are integration solutions that exist to accommodate SuperStream. To learn more, visit the ATO’s FAQ SuperStream page.
What happens if I have previously missed super payments?
If you don’t pay super on time, you may have to pay the ATO’s super guarantee charge. You must also pay super on back pay (of salary or wages), even if the employee no longer works for you. It’s best to get back on track as quickly as possible, working proactively with your accountant and the ATO to resolve the situation.
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Source & for more info: www.ato.gov.au