Superannuation, also commonly referred to as super, is a way in which employers fund their employees’ retirement income. It’s as simple as that. Employers pay a certain amount of money to their employees and that fund goes to provide for their respective retirements.
If you’re thinking of starting a small business or are already running one, then you’ve come to the right place. There is a lot to think about and it’s your responsibility to make sure that you know the requirements for paying super. This post is designed to help small and medium business owners find out everything they need to do when paying super for employees . From fund choices to making super contributions, we have the answers.
But What Exactly Is Superannuation?
Superannuation is a system created by the Australian government to decrease its citizen’s reliance on the Age Pension. It is compulsory and requires that employees’ retirement savings are built up over their working life. Every contribution will be invested, meaning that that fund will grow while you are working. It’s a good way to guarantee that the majority of people live comfortably when the time comes for them to retire.
Considering that the super is mostly made up of contribution that employer pays, you will have to plan for these if you’re looking at starting a small business, or if you are already running one. The same can be said if you’re self-employed and employ no staff – the super will make up a considerable chunk of your retirement savings.
You will have to be even more diligent and careful about it if you have people working for you. You will not only have to know exactly how much your employees make but you will also have to set a percentage of their salary that you will put towards the super and determine if there is any personal contribution you will have to make. In some cases, the government will also contribute. Either way, you need to make sure that you can contribute the right amount to their superannuation fund if you don’t want to be penalized.
How Do I Know How Much Super I need to Pay?
You must ensure you calculate well if you don’t want to be subjected to fines. So here’s what you have to do: Start by calculating your employees’ OTE, short for ordinary time earnings. This will include any over-award payments, commissions, shift loadings, bonuses, allowances but not overtime pay. A minimum of 9.5% of that total will have to go for contribution to the super. There are contribution caps and maximum contribution base as well. Depending on what your employee makes, you may not have to pay the super on all of it.
As you can tell by now, as a business owner, you will have to be on top of several things. If you need help sorting this out, consider hiring a bookkeeping company to ensure that you are the appropriate amount of super for each of your eligible employees.
How Do I Choose a Super Fund?
Some employees may not want to choose a super fund for themselves or may not even be able to. It is your job as the employer to find a default fund for them. And you can’t choose any fund. Selecting the first fund you come across may not pan out well for your employees. If necessary, find a company that can help you meet your superannuation obligations. They will also help you find the perfect default fund for your employees.
How Often Must I Pay the Super?
While it’s true that the superannuation is supposed to be paid at least four times a year, some super funds ask employers to make their contributions more frequently and may even require that you make monthly payments.
If you choose the super funds that ask for quarterly payments, you will have to make sure that you get all the payments in by the deadlines. Deadlines are as follows: October 28, January 28, April 28 and July 28. It’s fine to pay more regularly, but you will just have to make sure that everything is done before the due dates. Registering with a super fund that requires monthly contributions, on the other hand, means that you have no choice but the respect the requirements of that super fund.
Bear in mind that you must always pay your employees’ super on time. The law in Australia is very strict, and if you are late by even a day you could be hit with a super guarantee and have to charge a super guarantee charge statement. These will include interest and an admin fee. So, if you don’t want to be penalized, ensure that you don’t skip any payment. Also, consider getting a superannuation check from time to time, to ensure that you are respecting all the guidelines and are in the clear.