Walker Hill Group

Superannuation rules for employers

There are plenty of contributions employers need to consider when it comes to employee payments, and superannuation is no different. Superannuation is a vital percentage of your employee’s retirement savings, and employers must pay super contributions to avoid penalties and extra charges for your business.

Today we’re looking into the superannuation rules for Australian employers, so you can rest assured you’re up to date with your current obligations.

When are superannuation contributions required by an employer?

Generally, employers must pay super contributions to employees who are over 18 years old and working full-time, part-time, or under casual contracts. Employees who are under 18 years old will still be entitled to superannuation guarantee contributions if they work more than 30 hours a week.

The amount your employees earn does not matter when it comes to the superannuation guarantee, so there is no minimum threshold requirement to earn this payment.

Contractors who are paid for their labour will also need to be paid super contributions, so this is worth considering if you work with mainly contractors. Even if they quote an Australian Business Number, you’ll be required to pay the superannuation guarantee.

Are all employees eligible to receive superannuation contributions?

Under the superannuation guarantee scheme, almost all employees are entitled to super contributions as a part of their employment contracts. Generally speaking, all employees are eligible for the super guarantee, no matter whether they’re:

  • Full-time, part-time, or casual
  • A temporary resident
  • A company director
  • Earning a super pension while working
  • Related to you

However, there are some exceptions as we’ve mentioned above, including age and working hours:

  • Employees under 18 need to be working 30+ hours a week to get super guarantee contributions
  • Domestic or private workers earn super contributions if they work more than 30 hours a week
  • Contractors should be paid superannuation if you pay them mainly for laborious tasks
  • Self-employed workers or sole traders do not need to be paid super contributions
  • Armed forces reservists do not need to be paid superannuation guarantee contributions

What to do with high income earners who “opt out” of super

Employers do not need to pay super contributions for high income earners who work for multiple employers, as long as they don’t ask you to pay it to them. However, you must obtain a Superannuation guarantee employer shortfall exemption certificate for the employee. It is your employee’s responsibility to apply for this to opt out of the SG, and the Australian Taxation Office reserves the right to decline applications.

How to set your business up to make super contributions

There’s a five-step process that you, as an employer, must take to set up your business so you can make superannuation payments to employees.

1. Choosing your default super fund

As an employer, the first thing you need to do is choose a default super fund to pay into in case your employees don’t already have a specific fund chosen. It is illegal for super funds to offer incentives for employers to use them, so bear in mind that most of your options will be very similar.

2. Offering employees their choice of super fund

Now you’ll give your employees a standard choice form so they have the ability to choose their super fund. This will need to be issued within 28 days of their start date at the business. Once your employee makes a choice, you have two months to start paying super contributions into the said fund.

3. Get the details of your employees’ stapled super fund

Alternatively, you will need to get the details of employees’ stapled super funds if they’re eligible for the payment but didn’t choose a super fund. This often happens with contractors who work for multiple employers and therefore don’t need multiple super funds. Stapled super funds are also common among temporary residents.

4. Give employees’ TFNs to their chosen funds

Your employee will need to give you their Tax File Number (TFN) so you can provide this to the super fund they’ve chosen. You need to relay this information to the super fund within 14 days to prevent being fined.

5. Set up a system to pay super contributions electronically

Now you’re ready to start making superannuation payments to your employee’s funds! You can do this electronically, paying all contributions by the quarterly due date (which is 28 days after the end of each quarter).

You can learn more about setting up super for your business here.

How to calculate the amount of super to pay employees?

Employers must pay superannuation guarantee contributions to employees at least four times a year. The minimum rate is 11% of the employee’s ordinary time earnings (OTE) for the 2024 financial year, although this is scheduled to increase to 11.5% on 1 July 2024 and again to 12% on 1 July 2025.

There is an online calculator for you to use to make sure you’re paying the correct amount of super for your employees, which you can find here.

You do not need to pay super guarantee contributions to your employees if they’re earning above a certain limit, otherwise known as the maximum contribution base. This amount changes every financial year, and the income limit for 2023 – 24 is $62,270 per quarter.

There are specific rules for the super guarantee on overtime hours and back payments, which you can learn more about here.

How do you make superannuation contributions?

Once you have your employees’ super fund and how much you need to pay them, you must set up payments electronically through SuperStream and also report via Single Touch Payroll.

Where do you make super contributions?

Super contributions need to be paid into either a complying super fund, which meets the specific requirements under super law.

You can use Super Fund Lookup to make sure your employee’s chosen fund is compliant with the super guarantee’s obligations.

When to make super contributions?

Super contributions need to be paid quarterly, so there will be a minimum of four payments made to your employee’s super fund per year. You need to pay into the fund within 28 days of the quarter ending to avoid an SG charge. It is possible to pay more frequently into your employee’s fund, as long as the overall amount remains the same.

Additional employee contributions

Employees are welcome to boost their retirement funds by making voluntary contributions to their super funds. There are a number of ways you can work with your employee to do this, including:

  • Salary sacrifice arrangements: Sacrificing a portion of your employee’s salary enables you to pay the sacrificed amount into their fund rather than including it in their taxable wages
  • Personal super contributions: Employees can make personal contributions from post tax wages, which might make them eligible for tax deductions
  • Splitting contributions with a spouse: Employees might choose to create an arrangement with their spouse to contribute or split contributions across their personal funds
  • Downsizer contributions: Employees over 55 years old may be able to make a downsizer contribution to their super if they’re selling their home

Record keeping and reporting requirements

It is essential that you keep good records for your employees and their super funds, as it’s a legal requirement to do so. Under super law, you need to be able to show the following:

  • How much SG you pay for each employee, and how you calculate the total
  • That you have offered each employee the choice of super fund, unless they’ve opted for a stapled super fund
  • Your request to a stapled super fund to the ATO or new employees
  • Details regarding any reportable employer super contributions that aren’t shown in your employee’s accessible income

When paying super for any employee, you’ll need to keep a record of how much you paid for them, factors affecting the amount you paid, how you calculated this, and more. Salary sacrificing arrangements will also need to be kept record of, should you be asked to disclose them.

Employers who fail to meet the super obligations are liable for a Super Guarantee charge, so it’s in your best interest to keep clear and thorough records for all of your employees.

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