Be a super employer: paying superannuation guarantee

As an employer, paying superannuation guarantee (SG) may seem like just another expense you have to worry about in the course of running your business.

However, by paying SG an employer is playing a vital role in providing for their employees’ retirement. So let’s delve into the basics so that you can be sure you’re meeting your employer obligations.

The who, what, when, where and how…?

First consider who is eligible for super. Generally, this is any employee you pay $450 or more (before tax) in a calendar month, regardless of whether they are full-time, part-time or casual. Employees under the age of 18 or working in a domestic or private nature (e.g. a nanny) also need to work for more than 30 hours per week to qualify for super.

Importantly you also need to consider whether your contractors, company directors and temporary residents are eligible. Generally, they are if they are engaged by you principally or wholly for their labour.

So, what is the right amount you have to pay? The amount of SG you must pay is currently calculated at 9.5% of what you pay your employees for their ordinary hours of work – which we refer to as ordinary time earnings (OTE). OTE includes payments such as commissions, shift loadings and allowances, but not overtime payments. This SG amount is in addition to salary and wages you pay your employees, not included.

Remembering when and where you have to pay super is just as important as paying the right amount. At a minimum, you must pay SG on a quarterly basis by 28 October, 28 January, 28 April and 28 July. Contributions are considered paid when the superauunuation fund receives them, so you need to take into account processing time to ensure you meet quarterly due dates. In most cases, your employee can choose the fund to which you make contributions unless you’re obliged to pay into a fund specified under an industrial award.

All businesses must pay SG using SuperStream, so this is how you’ll pay super contributions. SuperStream allows you to pay by electronic funds transfer or BPAY® to super funds, meaning you can make all your contributions in a single transaction, even if they are going to multiple funds. There are some exemptions to using SuperStream and you may be eligible to use the free Small Business Superannuation Clearing House which you can access via the Business Portal or through ATO online services.

What if things don’t go to plan?

We understand that from time to time things don’t always go 100 per cent to plan. If you find yourself in a situation where you have underpaid super, made a contribution late, or not paid at all, we encourage you to contact the ATO early so they can work with you to get back on track.

If you have underpaid, not paid or paid your super obligations late, you must lodge a Super guarantee charge statement and pay the superannuation guarantee charge (SGC) to the ATO by the quarterly due date – one month after the SG due date. Unfortunately, when you have not met your full obligations on time you have to pay extra interest (currently calculated at 10 per cent per annum) which is then paid by us into to your employee’s chosen fund. You also have to pay an administration fee per employee of $20, per quarter, and you need to calculate and pay the SGC based on your employee’s total salary and wages instead of their ordinary time earnings. Generally, this is a higher amount. For example, it might include any overtime you paid your employees.

However, if the issue is that you made late payments to your employee’s fund, you may be able to benefit from some relief. When completing your SGC statement, you can either:

  • claim a late payment offset which reduces the SGC you would otherwise have to pay
  • carry forward the late payment as an on-time contribution for a future quarter for the same employee.

You can find further information on how to lodge the SGC statement and pay on the ATO website or work with your tax agent.

If you are experiencing difficulty in paying on time, the ATO can help you. You may be able to set up a payment plan to pay the SGC in instalments. You’ll need to consider what you can pay to ensure you can meet each ongoing payment amount.

Where the ATO finds that employers consistently fail to pay amounts owing or don’t make any attempt to engage with us, we take firmer action. This prevents these businesses from gaining an unfair advantage over those doing the right thing. Plus, we need to protect employee entitlements.

For example, when taking firmer actions against a company that is not meeting obligations, the ATO can recover these amounts from the company director personally, with a penalty equal to the unpaid amount. There are a number of other ways we collect penalties including withholding a tax refund or even issuing a director penalty notice to start legal proceedings.

Claiming a deduction for super

You can only claim a deduction for on-time SG payments you make for employees, including additional contributions you have paid on behalf of your employee under a salary sacrifice arrangement. These deductions can only be claimed for payments the superannuation fund received during the relevant financial year.

In other words, you cannot claim a deduction for SGC payments you make to the ATO because you have underpaid, not paid or paid your super obligations late.

Where to go for further help

We’re continuously working to ensure our super system makes it easy for businesses to meet their obligations, and makes it difficult for them to get it wrong. For example, we now have real-time reporting with Single Touch Payroll and have launched the Super Guarantee Employer Obligations online course. We also acknowledge our role in safeguarding employees’ super entitlements and we’re working to improve visibility of the super system.

For further help or if you need a refresher on how to meet your super obligations for employees:

  • visit ato.gov.au/Superforemployers
  • visit ato.gov.au/SuperQuickCheck
  • listen to our Talking Super for Employers podcast
  • complete the free Super Guarantee Employer Obligations online course at ato.gov.au/educationcourse

John Ford

Risk and strategy lead | Australian Taxation Office

John Ford is the Program Lead for the ATO’s Risk and Strategy – Employer Obligations portfolio. He is responsible for leading the ATO’s approach to supporting employers to meet their Superannuation Guarantee, Fringe Benefits Tax and Pay as You Go Withholding obligations. John has been with the ATO for 21 years and has held Assistant Commissioner roles in Integrated Compliance and Superannuation & Employer Obligations.