Understanding what is required for employers to meet their superannuation obligations can be a challenge for many small business operators. The aim of this article is to provide the basics.
You must make super contributions for an employee if you’re considered an employer for super guarantee purposes and your employee is entitled to the super guarantee. You’re an employer for super guarantee purposes if you employ a person under a verbal or written employment contract on a full-time, part-time or casual basis.
Generally, you have to pay super for an employee if they’re 18 years or over and you pay them $450 or more (before tax) in salary or wages in a month. It doesn’t matter whether the employee is full time, part time or casual. Employees who are under 18 years old must meet the above conditions and work at least 30 hours per week to be entitled to super guarantee. The superannuation guarantee eligibility decision tool can be a great way to test whether you are meeting your obligations
(Superannuation guarantee eligibility decision tool).
You also have to pay super for contractors if the contract is wholly or principally for their labour, and for employees who are temporary residents of Australia. If you’re a sole trader or partner in a partnership you don’t have to pay super for yourself, but you can make super contributions as a way of saving for your retirement. Note that if you employee yourself through your company or trust you must pay yourself super in line with the superannuation rules.
Currently, you must pay a minimum of 9.25% of each eligible employee’s ordinary time earnings each quarter in super. From 1 July 2014, the rate will increase to 9.50%. Ordinary time earnings (OTE) is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift-loadings and allowances, but doesn’t include overtime payments.
Super is calculated quarterly – that is, every three months. For each of your employees:
– multiply their ordinary time earnings for the quarter by 9.25%
– pay this amount to a complying super fund or retirement savings account by the quarterly cut-off date.
If you back-pay salary or wages to a former employee you have to pay super contributions on that back pay.
You have to pay super guarantee contributions for each eligible employee at least four times a year. Payments must be made by the quarterly cut-off dates:
If you require any further information on keeping up with your superannuation obligations please contact the team at CNS Partners.