Superannuation obligations for employers
Businesses need to be aware of their superannuation guarantee responsibilities when they start employing staff. Once an employee earns over $450 in a calendar month the employer is required to contribute to the employee’s chosen superannuation fund.
When and how much??
The two most obvious questions when clients establish that they are required to pay superannuation for their employee(s).
The minimum amount of superannuation required is calculated at 9.5%1 (relevant for financial year ending 2016) of the employees ‘Ordinary Times Earnings’. This would most likely be their total salary before tax, however there are carve outs such as overtime hours which are not included.
Superannuation is required to be paid within 28 days of the end of each quarter the salary is paid as outlined in the table below.
|Quarter salary paid||Super contribution payment due|
July – September
|October – December||
|January – March||
|April – June||
For a business to be eligible for tax deduction for superannuation contributions, the contribution must be physically paid (and the relevant superannuation fund receive the funds) before the end of the financial year. If you want to make certain that the contribution will be a tax deduction in the current financial year, we recommend making sure the payments are made at least a week before the end of financial year
What if I don’t pay?
If a business fails to meet their obligations they expose themselves to the Super Guarantee Charge which is made up of: the shortfall amount not paid, interest on those amounts and an administration fee calculated on a per employee/per quarter/not paid basis. Unlike other obligations, directors of a company would become personally liable for these amounts where a company cannot make payment.
If you are having any issues determining your superannuation responsibilities, we’d be more than happy to assist.
1 It is proposed that the superannuation rate be periodically raised to reach 12% by 2026, however the next increase isn’t due until 1st July 2021.
Contributed by Adam Burgess