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Superannuation Guarantee Explained for Employers

As an Australian business owner, you’re likely familiar with your obligations to employees, including payment of wages, entitlements, and ensuring health and safety. Another obligation to be aware of is providing superannuation to your employees.

Superannuation requires businesses to contribute to their employee’s retirement fund every quarter. Failure to pay could result in fines and even legal action. 

Here is a guide to paying superannuation for Australian business owners, including: 

What is superannuation?

Superannuation (Super) is a legal requirement set by the Australian government that requires employers to contribute to their employee's retirement fund.

If you’re a small business owner with employees, you must know your staff's salaries to contribute the required amount to their superannuation fund. You can even choose to offer additional contributions to your employee's superannuation as part of a benefits package to encourage the best talent to work for you. 

Since superannuation is a legal requirement, it’s important to be diligent about contributing the correct amount. Failure to do so could lead to penalisation from the Australian government. 

How much superannuation do you need to pay to employees?

As a small business owner, you must contribute 11% of your employee's ordinary time earnings (OTE) towards their superannuation fund, known as the super guarantee charge. This is the super guarantee rate set until 30 June 2024. However, from 1 July 2024 to 30 June 2025 the amount you must contribute will increase to 11.5%. It must be paid at least quarterly, and contributions are tax-deductible for the employer.

For instance, for the financial year 2023-2024, if your employee earns $1,000 weekly in OTE, you must contribute at least $110 to their superannuation fund each week. For the 2024-2025 financial year, this number would be $115.

There are contribution caps based on employee salary and a maximum contribution base. If your employee makes over $250,000 annually (From 1 July 2017 the Division 293 threshold is $250,000), they must pay an additional 15% tax on their superannuation contributions. Seek advice from a tax accountant or financial advisor to ensure compliance with all laws and regulations.

When calculating your required superannuation requirements, include commissions, and bonuses in your employee’s OTE. TUse the Australian Taxation Office’s (ATOs) Super guarantee contributions calculator to find out how much to pay your employee. 

By 2025, superannuation fund requirements will steadily increase to 12%. Ensure you stay updated with the laws and requirements set by the Australian government.

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What superannuation choices can you give your employees? 

As an employer, there are several superannuation choices that you can offer to your employees. These include:

  1. Default Fund: This is the fund your employees will be automatically enrolled in if they don't choose their own super fund.
  2. Choice of Fund: Allow your employees to choose their own super fund. This gives them the ability to select a fund that suits their specific needs and preferences. 
  3. Self-Managed Super Fund: Your employees can set up their own self-managed super fund (SMSF). This option requires the employee to have significant time and expertise, so it's not recommended for everyone.
  4. Employer-Sponsored Fund: Choose to set up an employer-sponsored fund for your employees. This is specifically designed for your employees, offering a range of benefits and features that other funds may not provide.

When choosing superannuation options for your employees, it's important to consider factors such as cost, investment options, insurance coverage, and other features that may be important to them. 

Choosing a fund is not compulsory for an employee. If they don’t choose a fund, you must pay their contributions to their existing ‘stapled’ fund, which is advised by the ATO.

If the employee doesn’t have an existing ’stapled’ fund, you should contribute to the ‘default fund’ listed on the choice form.

What happens if you don’t meet your superannuation obligations?

As a business owner, not meeting your superannuation obligations could result in penalties and, in extreme cases, legal action. Here are some potential outcomes:

  1. Super Guarantee Charge (SGC): The ATO may issue an SGC assessment if you can’t meet your superannuation obligations. The SGC is a penalty equal to the amount of unpaid superannuation plus interest and an administration fee. The penalty is not tax-deductible.
  2. Director Penalty Notice (DPN): If your business is a company, and you fail to pay your employees' superannuation, as an owner, you may be personally liable for the unpaid amounts. The ATO can issue a DPN, making you personally liable for the unpaid superannuation. If you receive a DPN, you have just 21 days to either pay the outstanding amount or put your company into voluntary liquidation.
  3. Legal Action: If you fail to pay your employees' superannuation, they may take legal action against you to recover their unpaid amounts. This can result in costly legal fees and damage to your business reputation.

How QuickBooks can help

Paying your employees’ superannuation is an important part of running a business. If you fail to pay your obligations on time, you could face fines and even legal action.

QuickBooks has innovative features designed to aid businesses, including automated tracking of superannuation payments with Beam, reminders and alerts, and record-keeping features so that you can meet your obligations accurately and on time. 

Streamline your reports and filings with powerful accounting software. Sign up for QuickBooks today and receive a 30-day free trial

While every care has been taken to ensure the accuracy of the information presented as at 12 April 2024, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.


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