Employer Information

Employer Superannuation Obligations

For most people, retirement savings will be built through super contributions made by their employers over their working life. Employers are obligated by law to make those contributions in an accurate and timely manner.

Who is an employer?

An employer is typically a person, company or partnership that employs one or more workers for their services or labour.

Generally, employers are obliged to make superannuation guarantee contributions when the employee:

  • Earns more than $450 per month before tax from their work for you
  • Is aged between 18 and 70

In some circumstances, persons who are not usually considered to be employers will be treated as such for the purposes of superannuation law. If you have any doubt about your obligations you should obtain specific advice.

Who is an employee?

Employees are those workers whom you employ in your business. This contrasts with contractors who are self-employed and provide you with services.

Typically, contractors will bill you for those services by providing you with an invoice, a tax file number (TFN) and Australian Business Number (ABN).

Employees may work for you under an award, a workplace agreement, including an individual or collective agreement, or an individual employment contract. They may be paid an agreed rate of pay for their work, receive other payments for their time at work and/or may also be paid bonuses for meeting or exceeding performance targets.

Each employee will usually have a TFN, and may be employed on a full-time, part-time or casual basis.

In some circumstances, persons who are not usually considered to be employees will be treated as employees for the purposes of superannuation law. If you have any doubt about your obligations you should obtain specific advice.

What is the superannuation guarantee contribution?

The superannuation guarantee (SG) levy requires employers to provide most Australian workers with superannuation contributions. The aim is to ensure that as many Australians as possible enjoy the benefits of a superannuation income in their retirement.

The SG is an employer obligation. The contributions are a minimum set down by the Federal Government and must be paid into a complying fund, which is one that meets government standards.

If an employee’s ordinary time earnings are $1000 a month, your contribution to their super fund each month would be $90.

Ideally, this amount should be paid into your employee’s super fund of choice at the same time they receive their pay.

Who is eligible for SG contributions?

Generally, employees aged between 18 and 70 years of age earning $450 or more per month are entitled to have 9 per cent of their ordinary time earnings paid into the super fund of their choice or, if no choice is made, the employer-nominated default fund.

If your employees are under 18 you may be required to still pay the levy if they work more than 30 hours per week and earn $450 per month or more.

The minimum SG contribution an employer must make is calculated on an employee’s Ordinary Time Earnings, which means what you pay them for their ordinary hours of work. This amount will usually include any shift or casual loadings or commissions, some allowances and paid leave, but will exclude any annual leave loading payments and non-performance bonuses. It does not usually include payments made for irregular work in excess of ordinary hours where separate overtime amounts are payable.

The SG contribution must be paid at least quarterly, but ideally for employees should be paid into the super fund to coincide with the payment of wages and salaries.

Who else is covered?

The SG includes contractors engaged under a contract that is wholly or principally for labour. Even if the person quotes an ABN, the person may be an employee for SG purposes. The other party to the contract is considered to be the employer.

Fund Choice for Employees

Many workers are entitled to choose the super fund they want to join. Sometimes, your employees don’t make an active choice. In most cases, you are then obliged to put their super contributions into a “default” fund, which is the fund you have identified as your employer-nominated fund.

What does Choice of Fund mean?

Many employees are able to choose their own super fund into which SG contributions are paid, unless:

  • You pay superannuation for your employee under a state award or industrial agreement or under certain workplace agreements, including an Australian Workplace Agreement (AWA) and collective agreements (although choice can also be provided under these awards or agreements).
  • Your employee is a federal or state public sector employee excluded from choice by law or regulations.
  • Your employee is in a particular type of defined benefit fund or the employee has already reached a maximum benefit in that defined benefit scheme.

If you are not sure what award or industrial agreement, if any, your employees are covered by, simply contact the workplace relations department in your state or territory.

Source – Industry Super Network