So what’s so super about superannuation?

Increasingly superannuation is becoming more important, as we inevitably edge closer to retirement superannuation increases in relevance.

As of August 2013, Australians had over $1.6 trillion in superannuation assets. Australians now have more money invested in managed funds per capita than any other economy in the world.

Importantly our government and the Australian Taxation Office in particular are well aware of the value of our superannuation in retirement and continue to tinker with the rules to protect us from ourselves. As such it has never been more important to understand the rules and ensure we are compliant with the ever evolving legislation.

You must make super contributions for an employee if you’re considered an employer for super guarantee purposes and your employee is entitled to the super guarantee. You’re an employer for super guarantee purposes if you employ a person under a verbal or written employment contract on a full-time, part-time or casual basis. Generally, you have to pay super for an employee if they’re 18 years or over and you pay them $450 or more (before tax) in salary or wages in a month. It doesn’t matter whether the employee is full time, part time or casual.

Employees who are under 18 years old must meet the above conditions and work at least 30 hours per week to be entitled to super guarantee.

To help us determine if we are required to contribute superannuation the ATO has a superannuation guarantee eligibility decision tool to work out if you must make super contributions for our workers. If you’re a sole trader or a partner in a partnership you don’t have to make super contributions to a super fund for yourself but you might want to make super contributions anyway to save for your retirement. You may be able to claim a full deduction for your super contributions and may be eligible for matching co-contributions from the government.

If you pay an individual under a contract that is wholly or principally for their labour and you pay them for hours worked rather than to achieve a result, you have to pay super contributions for them. This is particularly important when engaging contracted cleaning staff.

Again the Australian Taxation Office has a handy employee/contractor decision tool to help you to work out whether your new or existing workers are employees for tax and super purposes.

Setting up super for a worker

Many employees are entitled to choose the super fund their employer super contributions are paid into. You need to:

• identify your eligible employees

• provide a standard choice form to employees who are eligible to choose a super fund

• nominate a default fund

• act on your employee’s choice.

To meet your super obligations, you must pay your contributions to a complying super fund or retirement savings account (RSA). You can check that a super fund is complying by using the online Super Funds Lookup, or by getting confirmation from the fund’s trustee.

If you have award obligations to make super contributions into a specified fund or RSA, these contributions will usually count towards meeting your super guarantee obligations.
If you have fewer than 20 employees, you may also be eligible to use the free Small Business Superannuation Clearing House service administered by the Department of Human Services.

How much to pay and when to pay?

From 1 July 2013, you must pay a minimum of 9.25% of each eligible employee’s ordinary time earning each quarter in super. From 1 July 2014, the rate will increase to 9.50% and will continue to increase until it reaches 12% on 1 July 2019.

The table below shows the super guarantee rate increases.

Ordinary time earnings is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift-loadings and allowances but doesn’t include overtime payments.

Super is calculated quarterly – that is, every three months. For each of your employees:

• multiply their ordinary time earnings for the quarter by 9.25%

• pay this amount to a complying super fund or retirement savings account by the quarterly cut-off date.

You have to pay super guarantee contributions for each eligible employee at least four times a year. Payments must be made by the quarterly cut-off dates:

If you haven’t paid the minimum amount to the correct fund on time, you have to lodge a superannuation guarantee charge statement and pay the superannuation guarantee charge. The SGC is not tax deductible and neither are some late superannuation payments.

If you pay a super contribution to a super fund after the cut-off date, you may be able to use this late payment as an offset to reduce the amount of super guarantee charge you pay. You must still lodge a SGC statement and pay the balance of the super guarantee charge.

Company directors have a legal responsibility to ensure that their company meets its superannuation guarantee charge obligations. The director of a company that fails to meet a SGC liability in full by the due date automatically becomes personally liable for a penalty equal to the unpaid amount.

As well as the super guarantee charge, there are several other penalties and charges that might apply, depending on your circumstances. For example, penalties apply if you:

• don’t keep proper records

• make false or misleading statements, or enter into arrangements designed to avoid your super obligations.

Ensuring you meet your obligations under the superannuation provisions is critical. If you are new to business or are employing a new staff member it is critical that you ensure you satisfy the requirements and avoid potentially harsh penalties for non-compliance.

AccomNews

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