Superannuation obligations for businesses

Superannuation obligations for businesses

As a business owner, you’re not only responsible for the day-to-day operations and management side of your business, but it’s also your responsibility to support your workers—with everything from payroll and occupational health and safety, to making the correct contributions to your employee's superannuation fund.

Super is the money you pay to your employees to contribute to their retirement—regardless if your employees are full-time, part-time or casual, they’re all protected by a superannuation guarantee which outlines the minimum amount of super you must pay (more on this later).

It’s important to understand the laws around superannuation in Australia when running a business where you have staff working for you. This ensures that you’re not only meeting your employer obligations but that you’re paying the correct amount and won’t get penalised for any errors down the track.

So, what obligations do you need to stick to and what are the top mistakes as reported by the ATO that you need to avoid as a business owner? Read on to learn more and pay extra attention to key points 3 and 4—getting these right will save you many headaches and hassles in the future.

1. Allow your employees to choose their own super fund

When onboarding a new employee, an important box to tick is which superannuation fund you will be paying their contributions into. Employees are generally allowed to elect which super fund that is, however, there are a few instances where this is not possible.

• When employment is controlled by a workplace agreement that outlines the specific fund where payments should be made.
• Some state and federal government employees cannot choose.
• If the employee is part of a specialised benefit fund that must meet certain requirements.

When an individual commences with your business, you should provide them with the Standard Choice Form to fill out, where they can choose their preferred super fund. This form needs to be supplied to them within 28 days of their commencement of employment. Providing the fund meets the Australian superannuation law and all of the information has been filled out correctly, then your superannuation contributions should be paid into this chosen fund. Any existing employees within your business can also elect a new super fund at any time, in which case they will need to complete the same Standard Choice Form with all the necessary details.

2. Nominating a default fund when your employee doesn’t want to choose

As a business owner, it’s important to choose a default superannuation fund in the circumstance that any of your employees don’t want to select their own. When choosing a fund that’s suitable for you and your business, first check if your business is covered by a Modern Award—if you are, this can narrow down the list of potential super funds available to choose from as they will be listed under the Award.

Like with any decisions you make for your business, it’s important to do your research and make sure that the default fund you choose is going to benefit your employees, not just now, but in the long term. Consider the fees, investment options and insurance policies available when choosing a default super fund.

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3. Pay the required Superannuation Guarantee rate

As mentioned earlier, the Superannuation Guarantee is the minimum amount of super required to be paid by you as an employer to all of your employees. This contribution needs to be paid into the nominated super fund of each employee, or the default super fund if they didn’t select their own. The percentage paid is determined by The Australian Government and currently, in 2022/23, the rate is 10.50% of Ordinary Time Earnings or OTE. This rate has increased from 10% in the past financial year and is set to transition again over the coming years as outlined below.

Superannuation Guarantee Rate - 2022 and Beyond

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Ordinary Time Earnings can include the employee's regular hourly wage, loadings, any commissions earned, bonuses, paid leave and certain allowances. There are a number of things that are generally excluded from OTE—overtime doesn’t need to be included in the super contribution, however, if you’re back paying an employee, even someone who no longer works for you, this does count towards super. Some other items that you would not include are:-

• Parental leave payments
• Annual leave loading
• Redundancy payments
• Reimbursed expenses 
• Benefits associated with FBT (Fringe Benefits Tax)
• Expense allowances

Another thing to remember is that there are caps on contributions that outline the maximum contribution paid to an employee. What this means is that if your employee earns a certain amount of money, you may not be required to pay super on all of it.

For more assistance on the Superannuation Guarantee, including exclusions from OTE and determining the correct amounts to be paid to your employees, reach out to one of our Truesight Advisors for assistance. We’re always here to help and want to ensure you are set up right to avoid any future penalties.

4. Make sure you pay the required contribution on time

Super contributions are required to be paid by the employer every quarter at a minimum. There are set due dates which are the 28th of January, April, July and October, and if these dates fall on a weekend or public holiday then it will shift to the next business day. To keep on top of super payments, some businesses choose to pay their super contributions at the same time that they pay their employee's wages, whether that be weekly, fortnightly or monthly. 

Ensuring you pay the required super contribution on time is extremely important. Australian laws around superannuation are very tight and you can get a fine just by being a day or so late on your payments. For further info on missed or late super contribution payments, contact us for assistance or visit the ATO website.

If you’re a small business and have anywhere up to 19 employees, another option for ease and efficiency is to do a Superannuation Clearing House. This is a complimentary online service that you can use to make one easy payment to all of your staff, minimising paperwork and the time it takes to make regular payments into numerous super funds. This will also help to minimise any errors which could lead to costly fines. 

Make sure your superannuation contributions are paid into the correct fund also which will help you avoid any fines in the future.

5. Keep records of all superannuation payments and any related information

Part of your requirement as a business owner is to ensure you keep detailed records of all super-related information including contributions paid and when, plus how you arrived at that calculation. Other information that will need to be kept includes:- 

• Employee information including their tax file number (this needs to be provided to the elected super fund to ensure the employee pays the correct amount of tax, either on the day of your first contribution or within 14 days of receiving the TFN from your employee).
• Details of each employee's super fund and account.
• Evidence that all employees have been offered a choice of super fund.
• Confirmation that your business’s super fund is compliant with all requirements.
• Documentation provided to employees outlining that super contributions have been paid to the selected fund. Under the Fair Work Act, it is a requirement to include super contribution amounts on employees' payslips. 

To protect yourself and your business, you should keep a backup copy of all of these records. These will need to be kept for five years to show that all of your obligations have been met.

6. Support employees who wish to salary sacrifice

Some of your employees may wish to increase their super contributions by salary sacrificing. This is paid out of an employee’s wage, pre-tax, into their chosen super fund and can offer many benefits to the employee. As with all other records related to superannuation, it’s important to have a written agreement between you and your employee that details the terms and conditions of the arrangement. These amounts will also need to be reported on your employee’s pay slips.

At Truesight Advisors we understand how important it is to set up your business on the right foot from the get-go. Superannuation details and requirements can be a complicated process and we’re here to help plan and organise your contributions correctly so that you avoid any unnecessary fines or penalties. Connect with us today—our team of expert advisors are here to support you in any situation and guide you to make the best decisions for you, your employees and your business.