One of Australia’s economic strong points is that the working class receives mandatory superannuation – which in basic terms – is money put away for their retirement. The employer is responsible for making the core contributions towards superannuation when certain work criteria, such as permanent employment status and a minimum wage amount, have been met. What’s more, employees themselves can add to the amount, and sometimes even the government adds a few coins into the mix if the person is eligible. Go Australian retirement!
So, although very beneficial for the country’s welfare overall, superannuation is another liability a business owner has to take on. If you don’t do it, or fail to get your employees’ contributions right, you can face some serious penalties from the government.
How much do you have to pay?
The current rate, as of February 2015, is a minimum 9.5%. That amount is multiplied by your eligible staff’s ordinary time earnings (OTE). OTE is the ordinary hours worked by your employee and includes shift loading/allowances and commissions; however, excludes overtime.
When do you pay?
Every three months, you must work out the superannuation owing for each eligible employee. Each of your staff are allowed to nominate their preferred superannuation fund, and you must then submit the figures and payment to that organisation by their due date.
There’s no avoiding superannuation! So don’t ignore it, try and delay it, or put it off to the next quarter. If you miss payments, you will need to back-pay the amount – so calculate, prepare and pay each quarter.
First Quarter: 1 July – 30 September (payment must be made by 28 October)
Second Quarter: 1 October – 31 December (payment must be made by 28 January)
Third Quarter: 1 January – 31 March (payment must be made by 28 April)
Fourth Quarter: 1 April – 30 June (payment must be made by 28 July)
Do you get tax breaks from super?
Surely the Australian government aren’t going to arm-wrestle businesses into contributing to their employees’ retirement without some sort of trade off, right?! Correct!
You can – and should – claim a tax deduction for all superannuation payments within the financial year you make then. It’s vital your accountant is experienced in business and knows how to submit this information for you.
Why is that so important?
Because if you fail to pay the correct amount on time, even though you are allowed to lodge a Superannuation Guarantee Charge (SGC) statement – that statement is not tax deductible. And late payments for superannuation aren’t tax deductible either – so make your payments on time to get the most from the tax benefit from them.
You may well cry when you send off large sums of money into your employees’ superannuation accounts if you don’t budget for them in advance. Here are some quick tips on how to plan ahead for your employer obligations:
1. Each time you pay wages, work out the superannuation amount for each eligible employee (minimum is 9.5% of their OTE).
2. Move that money aside (ideally into an interest bearing account) and don’t touch it.
3. When the quarter ends, each staff member’s superannuation fund will be expecting you to report the amount and make payment by the due date.
4. Because you’ve already calculated and put the money aside, you’ll be able easily make the payments on time each quarter.
5. Claim the superannuation payments to minimise your tax liability.
Need a hand?
Although superannuation is relatively simple to work out, it’s a responsibility which must be taken seriously by any employer. Because of the rigid payment due dates, I’ve seen a lot of businesses fail to meet them and lose their ability to claim their tax deductions. Don’t get caught in that trap!
We understand you’re a busy business owner – you don’t have time to manage, track, calculate and report every aspect of your bookwork. Leave that to me and my team, give us a call so we can free up your time and ease your mind: 1300 135 918.