Super is changing, get onboard!
If you’re a sole trader or a partner in a partnership, you don’t have to make superannuation contributions to a super fund for yourself. However, you may want to consider super as a way of saving for your retirement.
Most self-employed people can claim a full deduction for contributions they make to their super until age 75. Keep in mind that contributions you make may be subject to extra tax if they exceed the contributions limit for that year.
There are limits on how much you can contribute to super before incurring extra tax:
- The concessional (before tax) contributions cap for 2013-14 is $25,000. However, if you are 60 years old or over at any time during the 2013-14 financial year, you will be able to contribute more to your super from 1 July 2013, with the concessional cap increasing from $25,000 to $35,000.
- If you go over the cap from 1 July 2013, the excess contributions will be included in your assessable income and taxed at your marginal tax rate (plus an interest charge) rather than at the top marginal tax rate
- From 1 July 2014, this will also apply to people who are 50 years old or over at any time during the 2014-15 financial year.
Make sure your super fund has your Tax File Number (TFN), otherwise:
- Your super contributions will be taxed an additional 31.5 percent.
- Your fund won’t be able to accept personal contributions from you, which means you may miss out on any super co-contribution you’re eligible for it will be harder to keep track of your super.
Super for employers
You’re an employer for super guarantee purposes if you employ a person under a verbal or written employment contract on a full-time, part-time or casual basis. You may also be considered an employer if you:
- Make payments to a person for labour under a contract, even if the person quotes an ABN
- Are responsible for paying salary or wages
- Have legal control over the worker (such as the power to dismiss them
You’re also considered an employer and have to pay super for your eligible employees if you are:
- A non-resident employer who has employees working in Australia
- A government organisation, statutory authority or municipal body
- A tax-exempt organisation
- A family company or trust paying salary or wages to family members (including yourself) who work in the business
How much and when to pay?
From 1 July 2014, the rate will increase to 9.50 percent.
The Government has announced the rate will remain at 9.5 percent until 30 June 2018 and then increase by 0.5 percentage points each year until it reaches 12 percent.
Ordinary time earnings (OTE) is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift-loadings and allowances, but doesn’t include overtime payments.
Super is calculated quarterly – that is, every three months. For each of your employees:
- Multiply their ordinary time earnings for the quarter by 9.50 percent
- Pay this amount to a complying super fund or retirement savings account by the quarterly cut-off date
The quarterly cut-off dates to pay superannuation contributions to a complying superannuation fund are:
|Quarter||Cut off date for contributions|
|1 July – 30 September||28 October|
|1 October – 31 December||28 January|
|1 January – 31 March||28 April|
|1 April – 30 June||28 July|
If you back-pay salary to a former employee you have to pay super on that too.
The ATO has a tool which you can use the Superannuation guarantee (SG) contributions calculator to work out how much super you must contribute for your eligible workers.
What is the SuperStream standard?
SuperStream standard is a package of measures designed to improve the efficiency of the superannuation system.
The standard requires employers to:
- Send all data electronically in a standard message format. Your BAS Agent will be able to assist with this format.
- Make contribution payments electronically
- Link data and money with a unique payment reference number
- Ensure data and payments are sent on the same day
- Respond to fund requests for complete information within 10 business days
Employers with 20 or more employees will begin using the SuperStream standard from 1 July 2014. Employers with 19 or fewer employees will begin using SuperStream from 1 July 2015.
How do you get ready for SuperStream?
If you prefer to process your super contributions for staff yourself, you can work with your default super fund or payroll supplier to meet the SuperStream standard. Other partners, including accountants and clearing houses, will be able to help as well.
Your default fund may also have its own electronic channel that can be used during the transitional period up to 30 June 2016. This fund can provide you with details about how to comply with the SuperStream using their preferred facilities.
Do I need to collect additional information for SuperStream?
Yes. To support contributions being made using the SuperStream standard employers will need to collect the following information:
- Unique superannuation identifier (USI) for APRA-regulated funds
- ABN for SMSF funds
- Bank account details
- Electronic service address
For existing employees, simple processes will be implemented to enable employers to obtain this information. This may include receiving information:
- Direct from your default fund
- Via employees who have elected a choice fund (such as a self-managed super fund)
- Through a clearing house
- For new employees, the choice of super fund form will be updated to include this information
- Your HR or BAS Agent or Certified Consultant will provide you with options to support the capture of this information whether this is updating your existing payroll file or storing this information until an update is made available
- So contact your HR/payroll solution provider to understand assist with your plans. But remember, if you are a small business with 19 or fewer employees, the Small Business Superannuation Clearing House is available to help you meet your super guarantee obligations
What solutions are available?
There is ‘no one answer for all’, so employers can choose the solution that best fits their current business arrangements.
- Obtain accounting software like MYOB Essentials or upgrading your existing payroll software
- Engaging a service provider, such as a payroll bureau, BAS Agent or Certified Consultant
- Use a clearing house
- Working with their super fund who may have an online solution
What to do if you haven’t met your super obligations?
If you haven’t met your super obligations as an employer, you have to lodge a Superannuation guarantee charge statement – quarterly and pay a superannuation guarantee charge to the ATO.
Additionally, your business might lose the tax deduction you would normally get for super contributions, because the super guarantee charge is not tax deductible and neither are late super payments if the late payment offset has been elected.
You’ll have to pay the super guarantee charge if you:
- Don’t pay enough super contributions for your employee – this is called a super guarantee shortfall
- Don’t pay super contributions by the quarterly cut-off date for payment
- Don’t pay super to your employee’s chosen super fund – this is called a choice liability
The super guarantee charge is made up of the super guarantee shortfall amounts (including any choice liability), nominal interest at 10% per annum, and an administration fee of $20 per employee, per quarter.
The shortfall amount is calculated on your employee’s total salary or wages, not their ordinary time earnings (OTE). You’ll have to:
- Complete a Superannuation guarantee charge statement – quarterly
- Work out the amount of super guarantee charge to pay
- Pay the super guarantee charge to us by the due date for the relevant quarter
Employers should speak to their default fund or BAS Agent or Certified Consultant for help.
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’ circumstance will vary for end of financial year.