Superannuation (super) is a crucial aspect of financial security for employees in Australia. It ensures that workers have a safety net for their retirement, helping them maintain a comfortable lifestyle when they stop working. As an employer, it is your responsibility to contribute to your employees’ superannuation, following specific guidelines set by the Australian Taxation Office (ATO).
What is Superannuation?
Superannuation is a long-term savings plan designed to provide financial support to employees when they retire. Employers contribute a portion of their employees’ earnings into a super fund, which then invests these contributions to grow over time. The Superannuation Guarantee (SG) is the minimum contribution that employers must pay. This mandatory contribution helps employees build their retirement savings, making superannuation an essential element of Australia’s retirement system. To know more about the recent changes in superannuation caps, read more our here.
When Do Employers Need to Pay Super Guarantee
Super Guarantee (SG) contributions are an essential part of employee benefits, and it’s important for employers like you to know when and how to make these payments. Currently, employers are required to pay SG contributions regardless of an employee’s earnings. In the past, there was a $450 monthly wage threshold where employees earning less than $450 is not eligible for SG contributions, but with recent changes, you now need to make SG contributions for all eligible employees, no matter what their monthly pay is. This shift highlights the importance of keeping accurate payroll records to ensure that every employee gets the superannuation benefits they’re entitled to.
Eligibility
Employee age and hours worked play a significant role in determining SG contributions. If you have employees who are 18 or older, you must make SG contributions for them, regardless of how many hours they work each week. This ensures that all adult employees are covered under the superannuation scheme.
How You Calculate Super Guarantee
The current SG rate is set at 11.5%, which is the percentage of an employee’s earnings you need to contribute to their superannuation fund. When you make on-time payments, calculate these contributions based on the employee’s Ordinary Time Earnings (OTE), which includes regular hours worked but excludes overtime and extra payments.
If a payment is late or missed, you’ll need to calculate the SG based on the employee’s total salary and wages. This could mean covering any shortfall and possibly facing additional charges.
Full-Time, Part-Time, and Casual Employees
You need to make SG contributions for all employees, regardless of whether they work full-time, part-time, or casually. The type of employment doesn’t matter—every eligible employee must receive superannuation contributions. This requirement also extends to employees who are already receiving a superannuation pension or annuity while still working for you. By ensuring that contributions are made for these employees, you provide consistent superannuation coverage across all employment types.
Temporary Residents and Backpackers
Your obligation to pay SG contributions includes temporary residents and backpackers working for you. Just like your local employees, these workers are entitled to superannuation benefits while they are in Australia. The same rules apply regardless of their visa status, ensuring that temporary residents receive the same level of superannuation support during their employment.
Company Directors and Family Members
Even if you employ company directors or family members within your business, you are required to make SG contributions for them. Their roles in the company do not exempt them from receiving superannuation. This requirement ensures that everyone, regardless of their relationship to the business or their position, is fairly included in the superannuation scheme.
Employees Under 18
For employees under 18, you need to pay SG contributions if they work more than 30 hours in a week. The focus here is on the hours worked rather than the amount they earn. This rule ensures that younger employees who are putting in significant working hours receive the superannuation benefits they deserve, promoting fair treatment and support for young workers.
Domestic or Private Workers
If you employ domestic or private workers, such as nannies, housekeepers, or carers, you are required to make SG contributions if they work more than 30 hours a week. The hours worked are the key factor in determining their eligibility for superannuation, ensuring that individuals in these roles are also provided for, regardless of the nature of their work setting.
NDIS Plan Participants
When you use funds from a National Disability Insurance Scheme (NDIS) plan to hire a carer or other domestic worker, you may need to make SG contributions for them. This requirement helps ensure that workers hired through NDIS plans receive proper superannuation support, acknowledging the value of their contributions while providing care services.
Independent Contractors
Independent contractors aren’t automatically exempt from SG contributions. If you primarily pay a contractor for their labor, even if they provide an Australian Business Number (ABN), you are responsible for making superannuation contributions. This rule ensures that workers who are essentially part of your workforce receive the same superannuation benefits as other employees, promoting fair and consistent treatment.
International Workers and Exemptions
For international workers, SG obligations still apply to temporary residents, including backpackers and working holidaymakers. If you have Australian employees working temporarily overseas, you need to continue making SG contributions in Australia. You can apply for a certificate of coverage to avoid paying super in the foreign country. However, there are exemptions for non-resident employees working outside Australia, certain foreign executives, and employees temporarily working in Australia covered by a bilateral super agreement. Keeping a certificate of coverage helps you prove these exemptions.
Understanding the Exceptions
There are certain situations where you’re not required to pay SG. If you’re self-employed, such as a sole trader or partner, you don’t need to pay SG for yourself. Members of the army, navy, or air force reserves are also exempt from SG contributions for their reserve roles. Additionally, high-income earners working for multiple employers who opt out of SG need an SG employer shortfall exemption certificate, which they receive after applying to opt out.
Conclusion
Staying on top of Super Guarantee requirements is vital for compliance and avoiding penalties. With the recent changes and the various categories of employees you need to consider, it’s important to regularly review your SG obligations to ensure your contributions are accurate and up to date. By understanding these rules and applying them correctly, you can ensure all employees receive the superannuation benefits they are entitled to.
We’re Here to Help
Superannuation obligations can seem intricate, but you don’t have to handle them alone. At Chan & Naylor, we offer expert guidance to ensure you’re meeting all your Super Guarantee responsibilities correctly and efficiently. Whether you have questions about eligibility, calculations, or specific situations involving your employees, our team is here to provide tailored advice. Reach out to us for a consultation and let us help you stay compliant and support your employees’ financial futures.
About Chan & Naylor
Established in 1990, Chan & Naylor has been a trusted partner for thousands of businesses and investors across Australia. Choosing Chan & Naylor Pymble means you’re not just selecting a service provider; you’re gaining a partner aligned with your business goals. You’ll have access to a dedicated client manager supported by a team of accountants that specialises in business tax and investments. Contact us today so we can discuss how we can help you.
Disclaimer
This article serves as general information only and may not account for the unique circumstances of individual readers. For personalised and strategic solutions tailored to your specific situation, we invite you to seek professional advice from Chan & Naylor. Our highly experienced team is dedicated to helping you navigate the complexities of Australian taxation, ensuring that your financial strategies align with the latest regulations. Contact us today to embark on a path of informed and customised tax planning for your property investments.
