How to Pay Employee Super: A Process for Employers

Superannuation, often called “super,” is a system in Australia designed to help employees save for their retirement. Employers play a significant role in this system by making regular contributions on behalf of their employees. These contributions are a mandatory part of employee remuneration and are governed by specific laws and regulations. Employers must understand their obligations to ensure compliance and avoid penalties. This article outlines the process employers follow to manage and pay employee superannuation contributions.

Understanding Employer Superannuation Obligations

Employers in Australia must make super contributions for eligible employees. Most employees over 18 are eligible, regardless of employment status. The minimum earnings threshold of $450 per month was removed from July 1, 2022, meaning super must be paid for all eligible employees. An exception applies to employees under 18, who must work more than 30 hours per week to be eligible.

Employers must pay super based on the Superannuation Guarantee (SG) rate, calculated on an employee’s “ordinary time earnings” (OTE). OTE encompasses regular earnings like salary, wages, commissions, most allowances, and paid leave. Overtime payments are excluded from OTE calculations. The SG rate increased to 11.5% from July 1, 2024, and is scheduled to rise to 12% from July 1, 2025.

A maximum super contribution base for OTE limits the earnings on which super must be paid each quarter. For the 2024-25 financial year, this base is $65,070 per quarter. Employers do not need to pay super on earnings above this amount.

Superannuation contributions must be paid at least quarterly. The due dates for these payments are October 28 (for the July 1 to September 30 quarter), January 28 (for October 1 to December 31), April 28 (for January 1 to March 31), and July 28 (for April 1 to June 30). If a due date falls on a weekend or public holiday, the payment is due on or before the next business day.

Employers must offer eligible employees a choice of super fund. This involves providing a “Superannuation Standard Choice Form” within 28 days of an employee starting work. Employees use this form to nominate their preferred super fund.

If a new employee does not choose a super fund, employers must check for a “stapled super fund.” A stapled super fund is an existing super account linked to an employee, which follows them as they change jobs, preventing the creation of multiple accounts. Employers can request stapled fund details from the Australian Taxation Office (ATO) via their online services. If no stapled fund exists and the employee does not choose a fund, employers can then contribute to their nominated default super fund, which must be a “MySuper” product.

Preparing Your Business for Super Payments

Before making super payments, employers need to gather specific information for each employee. This includes the employee’s Tax File Number (TFN), the super fund’s Australian Business Number (ABN), the Unique Superannuation Identifier (USI) for the super product, and the employee’s member number within that fund. Accurate details are important for successful payment processing.

All employers must comply with SuperStream, a standardized electronic system for making super contributions and sending associated data. SuperStream mandates that both the money and data are sent electronically in a consistent format. Each payment is linked to employee super information via a unique payment reference number (PRN).

Employers have several options to meet SuperStream requirements. These include using SuperStream-compliant payroll software, utilizing a superannuation clearing house, or, if available, using a super fund’s online portal. The choice depends on the business’s size and needs.

Many businesses use payroll software that integrates SuperStream functionality. Employers should verify with their software provider that their system is compliant, as updates may be necessary. Some payroll systems handle both data and payments, while others may require payments to be made separately via electronic funds transfer (EFT) or BPAY.

Superannuation clearing houses are another common solution, allowing employers to make a single bulk payment that is then distributed to multiple employee super funds. The ATO provides a free Small Business Superannuation Clearing House (SBSCH) for businesses with 19 or fewer employees or an aggregated annual turnover of less than $10 million. Larger businesses or those ineligible for the SBSCH can use commercial clearing houses, which charge a fee for their services. Setting up a chosen solution involves registering for the service, such as the SBSCH, or configuring existing payroll software to handle super contributions according to SuperStream standards.

Making Super Contributions via SuperStream

The process of making super contributions through SuperStream involves sending both the payment and the corresponding data electronically on the same day. This simultaneous transfer allows super funds to accurately match the contribution to the correct employee’s account. The unique payment reference number (PRN) generated by the SuperStream-compliant system helps in this matching process.

When using payroll software, employers generate a SuperStream file or data set that contains all employee details and their respective contribution amounts for the period. The software then facilitates the electronic transfer of funds, either directly to the super funds or through an integrated clearing house.

If an employer uses a superannuation clearing house, such as the ATO’s Small Business Superannuation Clearing House (SBSCH), the process involves submitting the employee super data and making a single bulk payment to the clearing house. The clearing house then takes on the responsibility of distributing the funds and data to each individual employee’s nominated super fund. For payments made through the ATO’s SBSCH, the employer’s super guarantee obligations are considered met once the payment and instructions are accepted by the clearing house.

For commercial clearing houses, it is important to allow sufficient processing time. The super contribution is deemed “paid” when the super fund receives the money, not when the clearing house receives it. This means employers should submit payments several business days before the official quarterly due date to ensure timely receipt by the super funds.

Regardless of the SuperStream solution used, employers must ensure all required information for each employee is accurate and complete. After a successful submission, employers receive a confirmation of receipt, allowing them to track the payment’s progress.

Ongoing Compliance and Record Keeping

Employers must maintain comprehensive records related to their superannuation contributions. These records must detail payment dates, the amounts contributed for each employee, and the specific super funds receiving the contributions. Proof of SuperStream compliance and evidence of offering employees a choice of super fund should also be kept.

Financial and accounting records that explain the fund’s transactions and financial position must be retained for five years. Other records, such as minutes of trustee meetings and records of changes to trustees, must be kept for a minimum of 10 years.

Failing to pay superannuation contributions on time or correctly can lead to the Superannuation Guarantee Charge (SGC). The SGC comprises three components: the superannuation shortfall (the unpaid amount), an interest component, and an administration fee. The interest is currently set at 10% per annum, calculated from the beginning of the quarter in which the super was due. An administration fee of $20 per employee, per quarter, is also applied.

If an employer misses a quarterly payment due date, they must lodge an SGC statement with the ATO and pay the charge. These late payments are not tax deductible. The ATO provides online tools and calculators to assist employers in determining their SGC liability and lodging the required statements.

Superannuation liability information is regularly reported to the ATO through Single Touch Payroll (STP). Employers should also be prepared for potential reviews or audits by the ATO, as diligent record-keeping is important to demonstrate adherence to superannuation obligations.