What are the Superannuation Guarantee obligations for employers?
- June 30, 2023
- 6 min read
As an employer, you want to attract and retain top talent, but what can you do to ensure that your employees are financially secure and ready for retirement?
That’s where superannuation guarantee obligations come in.
Superannuation is a form of retirement savings in Australia, and as an employer, you have a legal obligation to contribute a percentage of your employees’ earnings to their super fund.
While it may seem like just another administrative task, meeting your superannuation guarantee obligations can have a significant impact on your employees’ financial well-being and help you build a loyal and motivated workforce.
So, let’s dive deeper into what superannuation guarantee obligations are, why they matter, and how you can fulfil them most effectively.
What is the superannuation guarantee obligation?
In Australia, the Superannuation Guarantee (SG) obligations are a compulsory contribution that employers must make to their employees’ superannuation funds, and the amount is calculated as a percentage of each employee’s ordinary time earnings.
This ensures their employees receive adequate retirement savings.
How much is the superannuation guarantee?
As of 1 July 2022, the SG is 10.5% of an employee’s ordinary time earnings.
However, this rate is set to gradually increase over time until it reaches 12% by July 2025.
How is SGC calculated?
It’s now time to calculate SGC!
The SG contribution rate is calculated based on a percentage of an employee’s Ordinary Time Earnings (OTE).
What is OTE? OTE includes an employee’s ordinary hours of work and any regular shift allowances but does not include overtime payments, bonuses, or other irregular payments.
As of 1 July 2022, the SGC rate is 10.5% of an employee’s OTE.
This means that if an employee earns $50,000 per year in OTE, their employer must make super contributions of $5,250 per financial year ($50,000 x 10.5%) to their correct super fund.
If you are using accounting software for your payroll, the system will calculate the amount of SGC for each employee, for each payroll period.
Employers must pay superannuation contributions at least quarterly, and the payment must be made to the employee’s super fund.
Employers must also provide employees with a Superannuation Guarantee Charge statement that outlines the number of super contributions made and the super fund they were made to.
How do employers meet their super obligations?
Employers need to meet their super obligations as failure to do so can result in penalties and legal issues.
Employers may also face additional obligations, such as providing employees with a choice of super fund and offering eligible employees the opportunity to salary sacrifice super contributions.
- Making regular superannuation contributions on behalf of eligible employees
- Calculating the correct amount of superannuation contributions based on each employee’s ordinary time earnings
- Making superannuation contributions at least quarterly and by the due date
- Keeping accurate records of contributions made to each employee’s super fund
Employers may also face additional obligations, such as providing employees with a choice of super fund and offering eligible employees the opportunity to salary sacrifice superannuation contributions.
Employers should seek professional advice from a qualified accountant or tax specialist to ensure compliance with all SG obligations and to manage their superannuation contributions effectively.
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What is the $450 threshold for SGC?
Before 30 June 2022, the $450 threshold for Superannuation Guarantee Contributions (SGC) referred to the minimum amount of earnings an employee must receive in a calendar month before their employer is required to make superannuation contributions on their behalf.
In other words, if an employee earns less than $450 in a calendar month, as an employer you are not required to make superannuation contributions for that month.
In the new financial year from 1 July 2022, the threshold for the Superannuation Guarantee Contributions (SGC) has been removed. This means that regardless of how much an employee earns, their employer will be required to make superannuation contributions to their super fund on their behalf.
What do the ATO’s new super guarantee rules mean?
Did you know the Australian Taxation Office (ATO) introduced new super guarantee rules that came into effect on 1 July 2021?
The Australian Government is getting tougher on employers with the aim of the new rules ensuring employees receive the correct amount of superannuation guarantee (SG) contributions from their employers and improve compliance with SG obligations.
Let’s check out the key changes under the new rules –
Removal of the $450 monthly earnings threshold
Previously, employers were not required to make SG contributions for employees who earned less than $450 in a calendar month. This threshold has been removed, meaning that employers must make SG contributions for all eligible employees regardless of how much they earn.
Expansion of the definition of Ordinary Time Earnings (OTE)
The definition of OTE has been expanded to include a broader range of payments such as bonuses, allowances, and commissions. This means that employers must now calculate super payments based on a wider range of payments made to their employee’s choice of fund.
Annualisation of salary arrangements
Employers who use annual salary arrangements must ensure that the annual salary paid to employees covers all of their entitlements, including SG contributions. If the annual salary falls short of the employee’s entitlements, the employer must make additional payments to ensure compliance.
Increased powers for the ATO
The ATO has been given increased powers to enforce compliance with SG obligations, including the ability to issue directions to employers and make estimates of unpaid SG contributions.
Overall, the new SG rules aim to improve compliance with SG obligations and ensure that employees receive their correct SG contribution.
Employers should review their SG processes and seek professional advice to ensure they are meeting their obligations under the new rules.
Do all employers have to pay superannuation?
In general, all employers in Australia are required to pay Superannuation Guarantee Contributions (SGC) for their eligible employees.
Employers are required to pay SG contributions to their employees’ super fund at least quarterly, based on a percentage of their OTE.
Who is exempt from the superannuation guarantee?
Do you have any employees who are exempt from the super guarantee?
There are some types of workers who are exempt from receiving a SG contribution from their employer.
These include:
Non-resident employees
If an employee is a non-resident of Australia and is performing work outside of Australia, their employer is not required to make super payments for them.
Certain employees covered by industrial agreements
Some employees may be covered by industrial agreements that exempt them from employer SG contributions.
High-income employees who opt out of SG
A high-income employee works for several employers and they choose not to be paid the SG. They must complete an SG employer shortfall exemption certificate covering the period of work.
It’s important to note that even if an employee is exempt from SG contributions, they may still be eligible to receive contributions from their employer under other schemes such as the Superannuation Co-contribution or Salary Sacrifice arrangement.
What happens if superannuation is paid late?
If an employer fails to pay Super Guarantee Contributions on time, they may be liable for penalties and interest charges, and the employee’s retirement savings may be negatively impacted.
The penalties and interest charges are calculated based on the amount of unpaid employer super contributions and the length of the delay.
If an employer is late in making SG payments, they may be required to lodge an SGC statement with the ATO. The SGC statement includes details of the unpaid super contributions, the interest charges, and the administration fee.
The employer will then need to pay the SGC to the ATO, who will distribute the super contribution to the employee’s super fund. The ATO will also calculate the interest and penalty charges and notify the employer of the amount owed.
In addition to financial penalties, late payment of SGC can damage an employer’s reputation and impact employee morale. Employers should ensure that they meet their SGC obligations on time and seek professional advice if they are unsure about their obligations.
As an employer, it’s vital to understand your obligations under the relevant legislation and agreements and seek professional advice to ensure that you are meeting your obligations. With the Australian Tax Office’s recent changes to Super Guarantee Charge rules, it’s more important than ever to stay up to date with the latest regulations and make timely super payments to your employee’s choice of fund.
Stay on top of your SGC obligations with Sleek. Call us now on +61 4 9100 0480 to get started or make an appointment with a Sleek accountant!
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