In many ways, Australia's retirement system is the envy of the world. Throughout the world in a variety of industrialised countries, enjoying one's golden years while being voluntarily unemployed is far from a sure thing for millions of people who are in or are approaching the typical age of retirement. But in Australia, approximately 55% of the people over the age of 55 have officially left the workforce, according to the most recent statistics available from the Australian Bureau of Statistics. This fact is largely attributable to Australia's robust pension and superannuation programs.
As an employer, you have a number of obligations to your employees as they pertain to super contributions. Do you know what yours are? If you've recently launched a small, mid-size or large business or plan on doing so shortly, it's important for you to know the facts now so you can be sure that you're fully compliant.
Here are a few things to be mindful of when paying into your workers' superannuation funds:
Certain percentage of pay must go to the fund
Whatever you're presently paying your staff in annual salary, 9.5% of their gross income is required to go into their super. Since Australia first introduced the superannuation program back in the early-1990s, this percentage has gradually increased, largely in accordance with the rising cost of living. For instance, back in 2000, the share was 8%, up from 4% in 1992.
That amount will steadily grow with each passing year to 2025, which at that point will be 12% of their annual gross salary.
You can choose how often you contribute
As far as when or how frequently you contribute to their superannuation funds, that's largely up to you. You can do so every pay period, monthly, or once per quarter. However, what is non-negotiable is the need to contribute no fewer than four times per year and within certain windows of time. They break down like this:
- 1 July – 30 September (1st quarter)
- 1 October – 32 December (2nd quarter)
- 1 January – 31 March (3rd quarter)
- 1 April – 30 June (4th quarter)
Again, when and how often you pay is up to you, but the gross amount should be 9.5% of their annual earnings. The next increase of 10% is scheduled to occur in the first quarter of 2022.
Be mindful of the deadlines
While you have flexibility in terms of how often and when you contribute to your workers' superannuation, that comes with a caveat, as there are deadlines for each quarter. For the 2021 fiscal year, those deadlines are as follows:
- 1st quarter – 28 October
- 2nd quarter – 28 January
- 3rd quarter – 28 April
- 4th quarter – 28 July
Do your best to pay before each of these due dates. Should you forget and miss a payment, you'll have to lodge a super guarantee charge (SGC) statement by the conclusion of the following month in which the payment is due. For example, if you're in the third quarter and don't pay by the 28th of April, the SGC deadline is 31 of May.
Payable to the Australian Taxation Office, the amount you owed may also include an administration fee as well as interest. What that interest is largely dependent on when you're paying relative to the missed due date.
Additionally, unlike what it is normally, the late payment is non-tax deductible, an incentive for paying before the due date. Note that your workers' superannuation must receive the payment by the due date. If you are using a clearing house, pay early to give them sufficient time to transfer funds to each employee's superannuation funds.
Include workers' Tax File Numbers
Each and every gainfully employed individual in Australia is assigned a Tax File Number, or TFN. It's incumbent upon you as their manager to pass along this information to the ATO. It's extremely important to keep this requirement in the back of your mind because it comes with a hefty charge should you forget, potentially as much as $2,220.
Payments may not be mandatory under certain conditions
Employers in Australia aren't required to contribute to their employees' supers in all scenarios. For example, the general rule is if their 18 years or older and are paid a gross income of $450 or more per month.
There may be exclusions to this necessity if:
- They're not an official resident of Australia and their day-to-day jobs are in another country.
- They arrived from overseas and are working on a temporary basis.
- Covered by the super provisions of a bilateral social security agreement.
Contractors may also be entitled to contributions
If you have employees working on a contractual basis, they may still be eligible for superannuation entitlements. Whether this applies is largely contingent on the nature of your contractors' work and your arrangement with them. Visit the ATO's website for further details on contractors.
If you're looking for assistance with superannuation or many other services, WMC Accounting has you covered. Contact us today to learn more about how we can help you do more.