Superannuation Obligations of an Employer

As financial services professionals we often get asked about an employer's obligations when it comes to superannuation payments. In short, superannuation is payable for certain individuals and penalties apply for late or non-payment.

 

Are you required to pay super?  If so, how much and when?

If you are an employer with employees between the ages of 18 and 69, who currently earn $450 or more (before tax) in a month, then you are legally required to contribute 9% of each eligible employee's "ordinary time earnings" to superannuation.  Where an employee is under the age of eighteen, they are also required to have worked a minimum of thirty (30) hours per week. 

These payments must be made at least four (4) times a year, within twenty-eight (28) days after the end of each quarter.  Provided these superannuation contributions are paid on time, you can generally obtain a tax deduction for the amount paid, however if paid late the tax deduction availability is withdrawn.

You have until 28 July following the end of the relevant financial year to provide the minimum amount of superannuation support. 

 

What must you do if you haven't met your obligations

If you don't pay the minimum amount for each eligible employee into the correct fund by the due date, you are required to lodge a Superannuation Guarantee Statement and pay the Australian Taxation Office (ATO) the superannuation guarantee charge. This charge is the amount of shortfall super that needs to be paid for the employee, plus interest, plus an administration fee.  The ATO will then forward this charge to the employee's nominated superannuation fund.

 

What is superannuation guarantee?

The Superannuation Guarantee (Administration) Act 1992 (the Act) requires you either to provide a minimum level of superannuation support for each of your employees or to pay the Superannuation Guarantee Charge, which IS NOT TAX DEDUCTIBLE. 

If you have not provided your employees with the minimum level of superannuation support you must lodge a Superannuation Guarantee Statement and pay the charge to the ATO.  The superannuation guarantee applies to all employers.

 

How is the charge made up?

The Superannuation Guarantee Charge is made up of three components:

 

Shortfall of contributions

For each employee, the shortfall component is calculated by multiplying the employee's salary or wages paid in the relevant contribution period by the employee's individual shortfall percentage (9%).

 

Interest

The interest component is calculated on the total amount of these shortfalls.  It is designed to substitute for the superannuation fund earnings an employee would have received if you had provided the minimum amount of superannuation.  The current rate is 10% per annum.

 

Administration

The administration component is $50 plus $30 for each employee included in the statement.  This component is intended to cover part of the costs of administering the Act.

 

Superannuation Guarantee Charge

The Superannuation Guarantee Charge is the total of the above three components.  Further penalties will be imposed if you:

• fail to lodge a statement or information by the due date;
• give false or misleading information;
• fail to keep records of your calculations; or
• make an arrangement for the purpose of avoiding the Superannuation Guarantee Charge.

Did you know as an employer, Superannuation is also required to be paid on any Directors' Bonus that has been declared during the previous financial year.  Therefore if a Directors' Bonus has been declared, superannuation at the compulsory rate of 9% must be paid to the Directors' superannuation fund.

The above information is of a general nature only and may not represent your specific employment scenario, therefore is it recommended that you consult with your accountant or financial planner to ensure that your obligations have been or are being met. Should you require any further advice, our experts can be reached on 1300 TAX 000 or at enquiries@tagwealth.com.au.

General Advice Warning: Liability limited by a scheme approved under Professional Standards Legislation. This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal taxation and financial advice prior to acting on this information. Opinions constitute our judgments at the time of issue and are subject to change. Neither, the Company or any of employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.