💡 Key insights
- The superannuation guarantee requires employers in Australia to pay a minimum percentage of an eligible employee’s ordinary earnings into a complying super fund on their behalf.
- Employers must make super guarantee payments at least quarterly to avoid penalties, and the rate is set by law and may change over time.
- Super guarantee applies to most employees including full-time, part-time and casual workers once they earn above a minimum threshold.
- Failure to pay the correct superannuation guarantee can lead to ATO enforcement, interest charges and penalties for the employer.
Super is an important part of your financial compensation to your employees. The Superannuation Guarantee will affect you and your business’s finances. Therefore it is crucial that you know all about them to ensure your business performs effectively and efficiently.
What is the Superannuation Guarantee?
The Superannuation Guarantee is the money you contribute to your employee’s retirement, commonly known as Super. If an employee earns pre-tax $450 or more in a month, then you have to pay super in addition to their wages. The current minimum rate of super is 9.5%, but you can always elect to pay more if you want.
When and to whom do I have to pay Super?
You must pay super into your employee’s super fund at least four times a year. You can choose to pay it more often. It is important to note, that full-time, part-time and casual employees are all eligible for super. You do not have to pay super to workers who are not considered permanent residents for tax residents i.e. overseas contractors. For further information click here.
Who chooses where the Super goes to?
For most employees, they are allowed to choose to which fund their super is paid for. However, you must also have a default fund that they can choose or which you must pay their super contributions to if they do not choose a fund. If you do not do this you will be liable for significant tax and legal penalties.
Is there any tax deduction for paying Super?
You can claim a tax deduction on the money that you pay in Super contributions. This deduction has to be in the financial year that you pay them. For further help on claiming a tax deduction for your employee super contributions, connect with a super lawyer here.
Do I need to pay myself Super?
If you are running a small business, and are unincorporated, a sole trader or partnership, generally you do not need to pay super contributions to yourself. However it is recommended to do so, in order for you to have funds for your retirement. You will also be able to have a tax deductions for voluntary contributions that you make prior to being 75.
Conclusion
Thus, it is important that you make sure you are meet the Superannuation Guarantee, and therefore pay the required Super contributions to your employees. If you need any further help regarding your obligations to your employees for Super or other employee compensation issues, get in touch with a lawyer today.
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