How to Pay Superannuation to Employees

Superannuation, often referred to as “super,” is a system designed to provide retirement savings for employees in Australia. Employers play a central role by contributing a portion of their employees’ earnings into superannuation funds. This contribution is a fundamental component of an employee’s compensation, accumulating over their working life to provide financial support in retirement. The Superannuation Guarantee (SG) scheme mandates these contributions.

Identifying Eligible Employees and Calculating Contributions

Employers must determine which individuals are eligible for superannuation contributions. Contributions are generally required for almost all employees, including full-time, part-time, or casual staff. This covers individuals over 18, and those under 18 who work more than 30 hours weekly. Certain contractors may also be considered employees for superannuation if paid primarily for their labor, even without an Australian Business Number (ABN).

The $450 per month income threshold for superannuation eligibility was removed. Previously, employees earning less than this amount were not required to receive contributions. Now, super must be paid on any payments made to eligible employees, regardless of their monthly earnings.

Once eligibility is established, calculate the correct superannuation amount. This calculation is based on an employee’s “Ordinary Time Earnings” (OTE). OTE includes pre-tax payments for ordinary hours, such as regular salary, wages, commissions, shift loadings, and most allowances that are not expense reimbursements.

Payments generally excluded from OTE include overtime, expense reimbursements, and certain termination payments. For the financial year commencing July 1, 2025, the Super Guarantee (SG) rate is 12% of an employee’s OTE. Employers must apply this percentage to the OTE to determine the minimum contribution.

There is also a maximum super contribution base. Employers are not required to pay SG for earnings above this quarterly limit. Understanding OTE components and applying the current SG rate helps avoid underpayments and potential penalties from the Australian Taxation Office (ATO).

Selecting a Superannuation Fund

Before making contributions, employers must ensure they pay into the correct superannuation fund for each employee. The “choice of fund” rule requires employers to offer eligible employees the opportunity to choose their own superannuation fund. Employers must provide a Standard Choice Form to new eligible employees within 28 days of their start date.

If an employee does not actively choose a superannuation fund, employers must follow rules regarding “stapled funds.” A stapled super fund is an existing super account linked to an individual employee, following them as they move between jobs. If a new employee does not make a fund choice, the employer must request their stapled fund details from the ATO using online services.

The ATO will provide the stapled fund details, or advise if no such fund exists. Contributions must then be paid into this identified stapled fund. If an employee has no stapled fund and does not make a choice, the employer can contribute to their own chosen default superannuation fund. This default fund must be a complying fund registered by the Australian Prudential Regulation Authority (APRA) and offer a MySuper product, which provides a basic, cost-effective investment option.

Processing Superannuation Payments

Superannuation contributions are standardized through SuperStream, a mandatory electronic system. This system requires both data and money to be sent electronically in a consistent format. SuperStream streamlines the process, reduces errors, and ensures faster processing of contributions.

Employers can meet SuperStream obligations through several methods. Many businesses use SuperStream compliant payroll software to generate and send data and payments. Alternatively, employers can use a commercial superannuation clearing house, which collects contributions for multiple employees and distributes them to various super funds.

The ATO also provides a free online service called the Small Business Superannuation Clearing House (SBSCH). This service is available to businesses with 19 or fewer employees and an annual aggregated turnover of less than $10 million. Employers pay their total contributions to the SBSCH, which then distributes the funds to each employee’s chosen super fund.

Superannuation contributions are typically due quarterly. The due dates are: October 28 for the July to September quarter, January 28 for the October to December quarter, April 28 for the January to March quarter, and July 28 for the April to June quarter. If a due date falls on a weekend or public holiday, payments are due on the next business day. Contributions are considered paid when the employee’s super fund receives them, unless using the ATO’s SBSCH where the payment date to the clearing house is considered the payment date.

Maintaining Records and Reporting

Accurate record-keeping is a compliance requirement for employers regarding superannuation. Employers must maintain detailed records demonstrating how contributions were calculated and paid for each employee. These records should include evidence of OTE calculations, Super Guarantee amounts paid, and confirmation of payment to the relevant superannuation funds.

Documentation related to an employee’s choice of superannuation fund, including the completed Standard Choice Form, must be retained. If a stapled fund request was made, records of this interaction with the ATO are necessary. These records must be kept for a minimum of five years from the contribution date, employee’s start date, or when choice was offered or changed.

Superannuation information is reported to the ATO primarily through Single Touch Payroll (STP). STP requires employers to report employee payroll information, including salaries, wages, Pay As You Go (PAYG) withholding, and superannuation contributions, directly to the ATO each time payroll is processed. This electronic reporting streamlines compliance and provides the ATO with real-time data.

Through STP, the ATO receives up-to-date information, reducing the need for separate annual payment summaries for employees. Employees can access their year-to-date superannuation information via their myGov account. Employers are also obligated to provide superannuation information on employee payslips, informing them of their accrued entitlements.