How to manage and pay superannuation to your employees
It's no secret that the ingredients for running a successful small business is plenty of careful planning and consideration. You shouldn't take preparing for superannuation out of this recipe. From mitigating the risk of penalties to claiming deductions, here's our guide for efficiently managing your superannuation obligations.
What do I have to contribute?
As an employer, if you pay more than AU $450 to an employee before tax per month you legally must contribute to their superannuation fund, as well as paying their wages. This is known as the super guarantee, and is necessary regardless of whether the employee is working full-time, part-time or casually. Currently, the minimum amount an employer must contribute to an employee's superannuation fund is 9.5% of their ordinary time earnings, according to the Australian Taxation Office.
Superannuation contributions must be made at a minimum of four times per year. It's vital to make these payments before the due dates at the end of each quarter, or you may have to pay the super guarantee charge. This is a fee that consists of any missed super guarantees you haven't paid, plus an additional 10% interest on the amount. Furthermore, there's a $20 administration fee per employee, which you'll need to pay. If this charge isn't paid, you can be subject to further action, such as garnishee notices where businesses or people that hold money for you are subject to fees to reduce the accruing debt.
There are some instances where you don't need to pay superannuation, including:
- Employees under the age of 18 who work less than 30 hours per week.
- Those paid under a Community Development Employment Program.
- Employees who are non-residents, carrying out work outside of Australia.
- Workers in the army, navy or air force reserve.
Your employee may choose to make voluntary salary sacrifices to boost their superannuation. You'll need to discuss with your employee how much they're wanting to contribute. The threshold for superannuation contributions is AU $25,000 per year, which includes employer payments. It's important to make sure any salary sacrifices won't exceed this limit – consulting with an expert accountant or financial planner takes the headache out of running these numbers.
Why do I need to keep up with contributions?
Aside from operating in line with legal obligations, there are plenty of benefits to keep up with regular superannuation contributions. In fact, making regular payments to your employees' respective funds means you'll be able to claim deductions for these payments at tax time. In order to claim these deductions, contributions need to be made by June 30 each year.
SuperStream – the way employers must pay superannuation contributions – has it's own benefits. For starters, all payments are recorded and sent with a clear paper trail behind you. It sends data straight to the Australian Taxation Office, so there's little risk of errors or slow processing of payments. Additionally, if your employees file complaints against you, there's direct evidence of all payments and corresponding dates, so conflicts can be solved both effectively and efficiently.
At Wilson Porter, we're dedicated to helping our small business clients from start up to expansion. With a wealth of experience behind us, we're confident in our ability to give professional and expert advice to help you succeed in your financial ambitions. For more information, get in touch with our team.