The Superannuation Guarantee (SG) is a Government initiative designed to provide most employees with a minimum level of super to help them save for their retirement
By law, as an employer, you’re required to make SG contributions (payments) on behalf of most employees if they:
Are between 18 and 69 years old (inclusive).
Earn $450 or more (before-tax) in a calendar month; or earn $350 or more in a calendar month if an employee is under the Hospitality Industry (General) Award (HIGA) or Restaurant Award.
Are under the age of 18 and work 30 hours or more a week and earn more $450 or more (before-tax) in a calendar month.
Are employed on a full-time basis, part-time or casual basis (including those who are working in Australia temporarily)
Using ordinary time earnings to calculate SG
For employees with straightforward terms and conditions of employment, working out ordinary time earnings should
be simple. But for more complex salary arrangements – with
loadings, allowances or commissions for example – working
out ordinary time earnings becomes a little more involved.
SG is calculated on ordinary time earnings, and SG charge
(see below) is calculated on salary and wages.
The following checklist shows the payments that count as
salary or wages and ordinary time earnings. It’s a summary
and provides general guidance only.
Using the maximum contribution base to calculate SG
There’s a limit to the amount of SG that you have to pay
for an individual employee. This is known as the maximum
contribution base and for the 2017/18 financial year,
the maximum contribution base is $52,760 a quarter
(or $211,040 a year).
For employees whose ordinary time earnings are higher
than the maximum contribution base, you may still
contribute based on 9.5% of ordinary time earnings.
However, unless they are required under an award or agreement, the extra contributions are not compulsory and you should keep in mind concessional contribution limits.
Stronger Super reforms
The Goverment's reforms will make our superannuation system stronger and more efficient, and will help maximise retirement income for members.
Stronger Super was announced by the Government on 16 December 2010 and is one of the most significant reforms to superannuation since the introduction of the compulsory super contributions in 1992. The reforms are designed to improve the super system and feature the following key elements:
The introduction of a simple cost-effective default superannuation product called ‘MySuper’;
Improving the interaction between employers and super funds, making it easier, cheaper and faster through the SuperStream package of measures;
Improving governance and integrity of the super system by clearly defining the duties of fund trustees and directors; and
Improving the integrity of the self managed superannuation fund sector.
How much do I have to pay?
SG Legislation requires employers to make contributions to a complying super fund on behalf of each eligible employee
The current minimum you must pay is 9.5% of the employee’s ordinary time earnings. If your employees are covered by an award or employment agreement which specifies a higher super contribution than 9.5%, you must pay the higher amount. Please note that recent Government announcements will require a gradual increase in the minimum Superannuation guarantee contribution levels.
Many employees can choose which super fund their employer superannuation contributions are paid into
If your employee does not choose a fund, you must pay their super contributions into your default fund. However, please note that your employee may not be eligible under SG to choose a super fund if you pay superannuation for them under a:
State industrial award;
Preserved state agreement;
Federal industrial agreement such as an Australian workplace agreement (AWA);
Pre-reform AWA, pre-reform certified agreement, collective agreement;
Old IR agreement, individual transitional employment agreement (ITEA); or
Workplace determination, or enterprise agreement (these are defined terms in Federal industrial relations law);
If your employees are eligible for Super Choice and you don’t meet your Choice Obligations, you may be penalised, so it is in your best interest to keep records showing:
You have offered a choice of superannuation fund to eligible employees and have provided them with a standard choice form within 28 days of the commencement of their employment;
You have acted on your employees’ choice of super fund;
The employer (default) fund meets the statutory death benefit insurance requirements.
When do I have to make SG payments to employees?
Under the Superannuation Guarantee Act you are required to make at least quarterly Superannuation Guarantee payments on behalf of your employees, with the option to contribute
as frequently as monthly
The frequency of how often you make payments may vary depending on whether any of your employees are covered by an award or employment agreement that requires a certain payment frequency.
For the majority of employees, SG contribution due dates are listed below:
If you do not pay the required SG contributions, you will have to pay the Superannuation Guarantee Charge. This can be expensive as it is not tax deductible. There is also an administration charge of $20 per employee and an interest charge of 10% per annum.
Super contributions to appear on payslips
Employers will disclose on payslips when contributions
This new measure is likely to apply from 1 July 2013 to ensure employee super entitlements are being met and provide an early warning if superannuation entitlements are not being paid.
As part of the stronger super reforms, there will be a requirement to report when the Superannuation Contributions are actually made on employee’s payslips.
Reportable employer superannuation contributions (RESC)
Reportable Employer Superannuation Contributions (RESC) what it means to you as an employer
For any employees taking advantage of government initiatives – such as co-contribution, family tax benefits and child support payments – you’ll need to report certain super payments you make on behalf of your employees.
Generally, you’ll need to list certain super contributions on employee’s PAYG Payment Summary if they have an ability to influence the amount of:
Once the contributions are reported, the ATO will use these amounts to work out the various Government benefits they are entitled to.
Providing employees Tax File Numbers (TFN)
When an employee starts working for you, they usually complete a TFN declaration form that contains the employee’s TFN. You have to pass on your employee’s TFN to their super fund within 14 days of receiving the Tax File Number declaration form from your employee, or when you make the first payment to the fund after receiving the TFN, whichever occurs last. This rule only applies if you have to make a super payment for that employee.
If your new employee gives you their TFN, it’s important you pass it on to their super fund.
Auto-consolidation of super accounts
Heads-up about auto-consolidation
From 1 January 2014 inactive superannuation accounts with less than $1,000 will automatically be rolled over into their owners’ active accounts using the member’s TFN as the unique identifier.
These measures are designed to enable individuals to be reunited with their super, whether it is sitting in a lost account or in multiple accounts across various funds, and potentially, to help them avoid paying multiple member fees.
If you would like to discuss further with a qualified adviser, feel free to book a consultation.