How to Pay Superannuation to Employees

Superannuation in Australia is a system designed to help employees save for retirement. Employers have a legal obligation to contribute a percentage of their employees’ earnings into a superannuation fund. This system supports Australia’s retirement income policy, aiming to reduce reliance on the Age Pension and provide individuals with financial independence. Employers must ensure timely and accurate contributions are made to compliant superannuation funds for their eligible workforce, which requires understanding specific rules and utilizing electronic payment methods.

Determining Superannuation Eligibility and Contributions

Employers must accurately determine which employees are eligible for superannuation guarantee (SG) contributions and how much to pay. Most employees, whether full-time, part-time, or casual, are eligible for SG contributions. An employee becomes eligible if they are 18 years or older, regardless of how much they earn. For employees under 18, they must work more than 30 hours per week to be eligible. Temporary residents working in Australia are also entitled to receive superannuation contributions.

The superannuation contribution amount is calculated based on an employee’s Ordinary Time Earnings (OTE). OTE includes regular payments for ordinary hours worked, such as salary, wages, commissions, shift loadings, and most allowances. Payments for paid leave, including annual leave and public holidays, are also part of OTE. Certain payments like overtime (unless regular), expense reimbursements, and specific lump sum termination payments are excluded from OTE.

The Superannuation Guarantee (SG) rate, the minimum percentage of OTE an employer must contribute, is subject to change. From 1 July 2025, the SG rate is 12% of an employee’s OTE. Employers should verify the current rate with the Australian Taxation Office (ATO) as it can increase. There is also a maximum contribution base, which limits the earnings amount on which super is calculated each quarter; for the 2025-26 financial year, this is $62,500 per quarter.

Superannuation contributions are due quarterly. The due dates are the 28th day of the month following the end of each quarter: 28 October, 28 January, 28 April, and 28 July. If a due date falls on a weekend or public holiday, the payment is due on the next business day. Failure to pay by the due date can result in a Superannuation Guarantee Charge (SGC), which includes interest and an administration fee, and the missed payment is not tax deductible.

Preparing for Superannuation Payments

Before making superannuation payments, employers must take preparatory steps to ensure compliance. A primary consideration is the employee’s choice of super fund. Employers are required to offer eligible employees a Superannuation Standard Choice Form within 28 days of hiring, allowing them to choose their preferred superannuation fund.

For new employees who do not choose a super fund, employers must identify if they have a ‘stapled super fund’. A stapled super fund is an existing superannuation account linked to an individual, following them across different jobs. To find an employee’s stapled fund, employers can request this through ATO online services, provided they have lodged a Single Touch Payroll event or a tax file number declaration for the employee. The ATO applies ‘tiebreaker’ rules to select the stapled fund if an employee has multiple eligible accounts.

If an employee does not choose a fund and does not have a stapled fund, employers must pay contributions into a compliant default super fund. This default fund must meet regulatory requirements to be suitable for employee contributions. Employers need to gather essential details for each employee’s super fund, including the fund’s name, Australian Business Number (ABN), Unique Superannuation Identifier (USI), and the employee’s member account number. Accurate collection of this information is important for successful payment processing.

Employers are mandated to use SuperStream, an electronic system for making superannuation contributions and sending associated data. To become SuperStream compliant, employers have several options. They can use SuperStream compliant payroll software, which integrates payment and data submission. Alternatively, employers can utilize a superannuation clearing house, such as the ATO’s free Small Business Superannuation Clearing House (for businesses with 19 or fewer employees or an aggregated turnover under $10 million), or a commercial clearing house. Engaging a registered tax agent or bookkeeper is another option, as these professionals can handle SuperStream obligations.

Making Superannuation Payments through SuperStream

The SuperStream system standardizes the process of transmitting superannuation payments and their associated data electronically. This streamlines transactions, reduces errors, and improves efficiency. When using a SuperStream compliant solution, employers must ensure the payment and data are sent together in the required electronic format. This linking of payment and data by a unique payment reference number (PRN) allows super funds to accurately match contributions to individual employee accounts.

If an employer uses payroll software, the workflow involves generating a superannuation file within the software. This file contains all employee details, contribution amounts, and fund information. The employer reviews this file for accuracy before submitting it. Depending on the software’s capabilities, submission might be directly to super funds or via an integrated clearing house. Ensure the payroll system is up-to-date and certified as SuperStream compliant.

For employers using a clearing house, such as the ATO’s Small Business Superannuation Clearing House (SBSCH) or a commercial alternative, the process involves a few steps. The employer enters employee and contribution data into the clearing house’s online portal. After entering the data, the employer makes a single electronic payment to the clearing house, covering all employee contributions. The clearing house then distributes these payments to the respective individual super funds. For commercial clearing houses, the super contribution is considered ‘paid’ when received by the super fund, not the clearing house, so allow adequate processing time. For the ATO’s SBSCH, payments are considered ‘paid’ once the clearing house accepts them, which helps small businesses meet obligations.

After a SuperStream submission, employers should receive confirmation of both payment and data transmission. This confirmation provides evidence that superannuation obligations have been met. Issues like incorrect employee details or payment rejections may occur. If a payment is rejected or an error is identified, employers must promptly rectify the issue to avoid penalties. For instance, the SBSCH requires exact matching of SMSF bank account details; any mismatch will prevent payment processing.

Ongoing Compliance and Record Keeping

Employer obligations extend beyond making superannuation payments, encompassing ongoing compliance and diligent record keeping. Employers are required to report superannuation contributions to their employees. This is done through payslips, which should clearly show the superannuation amounts contributed. Single Touch Payroll (STP) reporting ensures superannuation information is sent directly to the ATO with each pay run. This real-time reporting makes employees’ superannuation information available via their myGov accounts, replacing traditional payment summaries.

Maintaining comprehensive records is a compliance requirement for employers. These records demonstrate adherence to superannuation laws and facilitate audits or inquiries. Employers must keep proof of all superannuation payments, such as receipts, statements from clearing houses, and bank statements. Detailed records of superannuation calculations, including Ordinary Time Earnings (OTE) calculations and the Superannuation Guarantee (SG) rate applied, should also be retained.

Records of employee super fund choices, including Superannuation Standard Choice Forms, are also necessary. For new employees, documentation related to stapled super fund notifications and any requests made to the ATO for stapled fund details must be kept. Employers should retain records of all communications with employees regarding their superannuation entitlements and contributions. Superannuation records should be kept for at least five years. Regular internal checks of superannuation processes and records help ensure ongoing compliance and identify any potential discrepancies before they become issues.