Your super obligations as an employer

Whilst there has been little official change to employer requirements over the last 12 months when it comes to paying super for employees, this doesn’t mean employers can afford to relax and take their eyes off the ball. 

Superannuation remains a critical component of the Australian economy and the retirement plans of many Australians, so ensuring it is paid correctly and on time can make a significant difference to your employees.

Here is a reminder of some of the key requirements for employers when it comes to paying super for employees, as well as some proposed changes being mooted through Parliament.

What’s the rate of super guarantee in 2019/20?

The rate of super guarantee (SG) remains at 9.5% for 2019/20 – the same rate it has been since 1 July 20141. It is legislated to gradually increase by 0.5%pa from 1 July 2021 until it reaches 12.0% on 1 July 2025, though debate continues over timing of increases2,3

An employer’s maximum SG obligation in respect of an employee is capped each quarter and is based on the maximum contribution base4. For 2019/20 the maximum contribution base is $55,270 per quarter (up from $54,030 in 2018/19)5. This means the maximum SG an employer will need to pay per employee is capped at $5,250.65 per quarter. 

Whilst this equates to an annual salary of $221,080 (and annual SG of $21,002.60), it’s important to remember that an employer’s actual obligation is based on quarterly calculations and an employee’s salary and wages for the quarter may be impacted by seasonal payments such as bonuses. 

Choice of super fund 

In most cases, new employees must be offered a choice of super fund. Employers should be careful not to be seen to recommend any particular super fund to an employee as this would likely constitute the provision of personal financial advice – which can only be provided by a financial adviser. Employers can however recommend to employees that they seek financial advice to help decide which super fund they want their SG paid into. 

If an employee doesn’t exercise choice, then employers will need to make SG payments to a default super fund. Employers need to determine whether a relevant award, agreement or determination (or similar) applies that specifies the default fund to be used. 

Employers who need to nominate a default super fund should ensure that it meets all relevant requirements, such as offering an interest in a MySuper product. It is important to note that as a result of legislative changes, from 1 July 2019 default insurance typically provided to MySuper members does not need to be provided in certain circumstances.6 Employers should consider seeking advice to ensure their default super fund complies. 

How, and how often, to pay super 

SuperStream is the way employers must pay employee SG contributions to super funds. With SuperStream, money and data are sent electronically in a standard format. 

It allows employers to make all their contributions for each period in a single transaction, even if those payments are going to multiple super funds. 

Legally, SG payments must be made to complying super funds by the quarterly due dates, which are 28 days after the end of each quarter. 

If you don't pay the minimum amount of SG for your employee into the correct super fund by the due date you may have to pay the super guarantee charge (SGC). 

Whilst SG is only due to be paid quarterly, you also need to consider any additional super payments made on behalf of an employee, such as via a salary sacrifice arrangement. The employment arrangements may determine the frequency of these payments, although it may be easier to pay SG contributions at the same time. 

Whilst it may not sound much, the frequency at which super is paid (both salary sacrifice and SG amounts) can make one employer more attractive than another, which may be important if an employer was looking to attract and/or retain key employees. 

Finally, it is important to note there is a proposal before Government at the moment to make additional changes to the way SG is calculated and paid into the future. If passed, from 1 July 2020, SG will need to be calculated on salary and wages before discounting for any amount an employee sacrifices into super. Additionally, any amount paid to super that is from a salary sacrifice arrangement will not be able to count towards reducing an employer’s SG obligations7. Some employers already operate on this basis, so the legislative change may have no impact. Others however may need to review their arrangements.

1. https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?anchor=Superguaranteepercentage

2. https://www.legislation.gov.au/Details/C2017C00230/Controls/

3. https://www.canstar.com.au/superannuation/super-guarantee-increase/.

4. https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=2#Contributions_caps

5. https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=25

6. https://treasury.gov.au/sites/default/files/2019-03/c2019-t370846-consultation-paper.pdf

7. https://www.ato.gov.au/General/New-legislation/In-detail/Super/Superannuation-Guarantee---Salary-sacrifice-integrity/

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This information is current as at 17 September 2019. This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714 (Westpac). This article provides an overview or summary only of factual information and it should not be considered a comprehensive statement on any matter or relied upon as such.  It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, the Westpac Group accepts no responsibility for the accuracy or completeness of, nor does it endorse, any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material. Commonwealth material in this publication is subject to copyright and reproduced by permission, but does not claim to be the official or authorised version. The Westpac Group cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of contributing to, or investing in, superannuation can impact individual situations differently and you should seek specific advice from a registered tax agent or registered tax (financial adviser).