The superannuation guarantee is the minimum percentage of earnings that you need to pay for your employees in superannuation. The Australian Government controls and legislates the super guarantee, so it’s important that you know your obligations as a business. Of course, the amount of super you should be paying your employees isn’t the only thing you need to be mindful of. You also need to make contributions by certain dates, and you have reporting responsibilities.
In July 2021, Australia will see its first superannuation guarantee increase since 2014. So, while most payroll and accounting programs should automatically update and make this easy for you, you should still know what you need to pay. Certainly, from a budgeting point of view, the increase in super guarantee rate will have an impact on your financials.
Let’s take a look at what’s changing with the super guarantee rate, as well as your other super obligations as an employer in Australia.
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What is the Superannuation guarantee rate?
As of June 2021, the superannuation guarantee rate was 9.5% of an employee’s Ordinary Time Earnings (OTE). OTE is essentially an employee’s base salary and wages, and does not include overtime payments. If an employee receives shift loadings, allowances or commissions, this forms part of their OTE. However, items such as overtime and reimbursements are not included in the calculations.
From 1 July 2021, the superannuation guarantee increased to 10%, and will continue to increase gradually until the rate reaches 12% in July 2025. The table below shows the staggered increase in super guarantee contributions for the coming years.
|Financial Year||Super Guarantee Rate|
|1 July 2002 – 30 June 2013||9%|
|1 July 2013 – 30 June 2014||9.25%|
|1 July 2014 – 30 June 2021||9.5%|
|1 July 2021 – 30 June 2022||10%|
|1 July 2022 – 30 June 2023||10.5%|
|1 July 2023 – 30 June 2024||11%|
|1 July 2024 – 30 June 2025||11.5%|
|1 July 2025 – onwards||12%|
As you can see, the superannuation guarantee rate has been frozen since 2014, so employers haven’t had to deal with much change. For the next 6 years, though, you’ll need to make sure you keep on top of an increase each year and budget accordingly.
Who do I need to pay super to?
You need to pay superannuation to all employees who earn at least $450 per month before tax, or work 30 hours per week. This applies to full-time, part-time and casual employees. Thanks to minimum wage laws in Australia, it’s unlikely you’ll have staff members working 30 hours per week and not earning $450 in a month.
It’s important to note that the $450 monthly earnings requirement will be scrapped before 1 July 2022, so even if your employees earn less than that, you’ll still need to make superannuation contributions for them.
If your employees are under 18, or working in a domestic capacity such as a nanny or a cleaner, they need to work 30 hours per week before being eligible for superannuation.
Do I pay super contributions for contractors?
If you employ contractors, the rules get a little murky. However, the general rule is that you should be paying superannuation contributions for contractors who are paid for their time rather than by a result. Even if they provide you with an ABN, they might be eligible for super. If you’re not sure about your requirements for contractors, check out our handy superannuation guide for employers.
When do I have to make superannuation guarantee payments?
We know, there’s a lot of dates to worry about as an employer. You’ve got GST payments, PAYG, payroll, annual tax returns. Well, superannuation is just another date to remember. You’re required to make superannuation guarantee contributions no less than quarterly. Of course, if you decide to do it more frequently, that’s totally up to you. The reality is, most employers hang on to the money and pay quarterly, because those dollars are better earning interest in your bank account rather than being paid to a super fund.
The due dates for quarterly superannuation payments are as follows:
- 28 January
- 28 April
- 28 July
- 28 October
Providing a choice of super fund
When you hire a new employee, you need to give them a choice of super fund. Also, you should have a nominated super fund, which is the fund you will make payments into if the employee either doesn’t have their own super fund, or fails to nominate their choice of super fund.
Provide your employees with a Standard Choice form, allowing them to nominate their super fund, or choose your own nominated fund. Once this is done, start making payments accordingly by the due dates listed above.
How do I make super payments for my employees?
If you have employees, there is now a standard way of making superannuation contributions. The system is called SuperStream, and it’s designed to streamline the process of paying super. Some employers will also be able to pay super to multiple funds for different employees, all in one single transaction.
With SuperStream, you’re required to send data electronically, including employee names, details and the amounts of super being paid. You also need to make the payments electronically. This is done using a unique reference number, but it’s important that your data and payment is sent on the same day.
The Superannuation Clearing House
If you’re a small business owner with 19 or fewer employees, or you have an annual turnover of less than $10 million, the Small Business Superannuation Clearing House (SBSCH) might be of interest to you. It’s a free service, and is compliant with SuperStream. The SBSCH takes the hassle out of super, by allowing you to make one simple payment that gets distributed across multiple super funds for your employees.
Claiming a tax deduction for super payments
Because superannuation contributions are a salary and wages expense, all businesses effectively receive a tax deduction for them. They’ll be included in your profit and loss as an expense, therefore offsetting the amount of income you earn. However, there are no special deductions to be claimed because paying super is a legal responsibility.
For employees, however, if you make personal superannuation contributions, you may be eligible for a tax deduction. One way to do this is by making pre-tax super contributions. This effectively lowers your taxable income. If you choose to make personal super contributions from your post-tax income, you may be eligible for a deduction, but you need to notify your super fund of your intent to claim a deduction.
Be aware though, there are caps on the amount of personal super contributions you can make each year, so ensure you take this into account when deciding if contributions are right for you.