How to Pay Employees’ Super and Meet Your Obligations

Understanding Your Superannuation Obligations

Employers in Australia must contribute to their employees’ retirement savings through superannuation. The minimum amount employers must contribute is the Super Guarantee (SG).

The Super Guarantee applies broadly to most employees, including full-time, part-time, or casual workers. Employees under 18 are eligible if they work over 30 hours per week and earn above a specific monthly threshold. Certain contractors, if primarily engaged for their labor, may also be considered employees for superannuation purposes.

The current Super Guarantee rate is 11% of an employee’s ordinary time earnings. This rate is set by legislation and can change, with scheduled increases typically occurring on July 1st each year. Employers must apply the correct rate for the specific payment period.

Superannuation contributions are typically due quarterly. Payments must be received by the employee’s super fund by specific dates: October 28 for July-September, January 28 for October-December, April 28 for January-March, and July 28 for April-June. These are the latest dates funds must arrive at the superannuation fund.

Preparing for Superannuation Payments

Before making superannuation contributions, employers must undertake several preparatory steps. Employers must offer employees a choice of superannuation fund. They provide new employees with a “Superannuation Standard Choice Form” within 28 days of their start date to nominate their preferred fund.

If an employee does not choose a fund, the employer must contribute to a “default” fund. This default fund must meet regulatory requirements, including being a MySuper product. MySuper products are simple, low-cost superannuation options.

Employers must collect specific details from employees or their chosen fund. This includes the super fund’s name, Australian Business Number (ABN), Unique Superannuation Identifier (USI), and the employee’s member account number. Employers also collect the employee’s Tax File Number (TFN) and provide it to the super fund.

Calculating the correct Super Guarantee amount involves determining an employee’s Ordinary Time Earnings (OTE). OTE generally includes regular salary, wages, commissions, shift loadings, and certain allowances. It typically excludes overtime payments, reimbursements, and lump sum payments for unused leave.

Employers are required to use SuperStream, a mandatory electronic standard for sending superannuation contributions and associated data. Employers can use integrated payroll software, a commercial superannuation clearing house, or a super fund’s online portal. Setup involves configuring employer and employee details.

Making Superannuation Contributions

After preparatory steps, employers submit superannuation contributions. The process involves transmitting payment and associated employee data electronically, adhering to the SuperStream standard. Employers use their chosen SuperStream method, such as payroll software, the ATO’s Small Business Superannuation Clearing House (SBSCH), a commercial clearing house, or a direct super fund portal.

When using these platforms, employers upload a data file or manually enter required information for each employee. This includes the employee’s super fund details, member account number, total contribution amount, and the specific pay period. The system processes this data alongside the corresponding payment. The SBSCH allows employers to make one bulk payment for all employees, which it then distributes to various super funds.

After entering data and confirming amounts, the employer authorizes payment through the system. This often involves a secure authentication process. The system processes the transaction, sending payment to relevant superannuation funds and associated data for allocation to individual employee accounts.

Upon successful submission, employers generally receive a confirmation receipt or notification. While payment is initiated immediately, processing time for funds to reach the employee’s super fund can vary, typically taking a few business days. Employers should monitor confirmations to ensure payments are successfully sent and received by due dates.

Meeting Ongoing Superannuation Compliance

Beyond regular contributions, employers have ongoing responsibilities for superannuation compliance. Maintaining accurate records is fundamental. Employers must retain documentation related to superannuation contributions, including payment receipts, employee fund choices, and Ordinary Time Earnings calculations.

Employers must keep superannuation records for a minimum of five years from the date the contribution was due or paid, whichever is later. This retention period ensures a verifiable audit trail for all superannuation activities. Proper record-keeping helps in responding to inquiries from regulatory bodies or employees.

Reporting superannuation information to the Australian Taxation Office (ATO) is primarily done through Single Touch Payroll (STP). Under STP, employers report payroll information, including superannuation guarantee amounts, to the ATO each time they pay employees. This real-time reporting ensures the ATO has up-to-date information on employer contributions.

Accurate reporting of superannuation guarantee amounts via STP allows the ATO to monitor employer contributions. It also ensures employees can view their superannuation information through their online services.

Failure to meet superannuation obligations, such as underpaying or making late contributions, can result in the Superannuation Guarantee Charge (SGC). The SGC is a penalty that includes the unpaid superannuation guarantee amount, interest calculated from the start of the relevant quarter, and an administrative fee. This charge is not tax-deductible and serves as a financial consequence for non-compliance.