Superannuation is one of the most important employment obligations of small business. Not only is it law to pay super contributions for eligible employees, but it is a key incentive area for workers. Reporting as part of the regular pay cycle and bulk payments quarterly should be engrained into business practice. As should the processing and maintenance of employee records regarding superannuation. But, according to the ATO, we are still getting it wrong! Recently the ATO published a list of common mistakes small businesses make in complying with superannuation laws.
Common superannuation mistakes:
According to the ATO small business commonly makes the following mistakes with respect to its super guarantee obligations: •paying insufficient super contributions for eligible employees;
•missing the quarterly cut-off dates;
•not understanding that, in some circumstances, super should be paid for contractors even if the contractor quotes an ABN;
•not keeping accurate records;
•not passing on an employee’s tax file number to their super fund;
•not lodging a Superannuation Guarantee Charge Statement – Quarterly if they have not paid their employees super to the fund by the due date, or don’t pay the correct amount.
As an employer, you must pay a minimum of 9% in superannuation to your eligible employees based on their ‘ordinary time earnings’. Eligible employees are those workers aged 18 to 69 years who earn $450 or more (before tax) in salary and wages in a month. These workers can be full-time, part-time or casual.
If you are not sure whether an employee is eligible, then the ATO has a decision tool to assist you at their website http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=SGEligibility.xr4&go=ok Similarly, if an employee is classed as ‘eligible’, you may want to check the superannuation calculation via the ATO’s calculator at http://calculators.ato.gov.au/SGCalculatorWeb/GetSGContribution.aspx?ms=Businesses
Quarterly Cut-off Dates
As an employer, you must pay superannuation contributions to eligible employees at least four times a year. The following is a list of the quarterly periods and the payment cut-off dates.
|Quarter||Period||Payment cut-off date|
|1||1 July – 30 September||28 October|
|2||1 October – 31 December||28 January|
|3||1 January – 31 March||28 April|
|4||1 April – 30 June||28 July|
For businesses with less than 20 employees, a quick and easy way to manage quarterly superannuation payments is via the ATO’s Clearing House. By way of this process, you pay the full amount of super to the ATO and the ATO will disburse the funds to the individual employee’s chosen super fund. For more information, see our Article on Australian Clearing House for Superannuation’ article.
If a contract for work is wholly or principally for labour, then you may have to pay superannuation to a contractor even if they quote an ABN. Sometimes the decision between an independent contractor and an employee is a difficult one. For further information, see our article on Employee Vs Contractor: A basic guide to help you decide.
As an employer, you must keep accurate and up-to-date records on superannuation paid to employees including: •the amount paid for each employee and how it was calculated;
•that an offer was made to eligible employees on a choice of super fund;
•how any reportable employer super contributions were calculated.
Passing on an employee’s Tax File Number
As an employer, you are required to provide an employee’s tax file number to their superannuation fund within 14 days of receiving it. The consequences of not passing on the Tax File Number is that the employee’s superannuation contributions will be subject to extra tax and may not be accepted by the super fund. Further, you may be penalised as the employer.
Superannuation Guarantee Charge Statement – Quarterly
Lodgement of the Superannuation Guarantee Charge Statement is necessary in the following circumstances; •if there is a ‘super guarantee shortfall’, ie. you have not paid enough super contributions of an eligible employee;
•if you have missed paying super contributions for an eligible employee(s) by the quarterly cut-off date
•if you have not paid super to the eligible employee’s chosen super fund.
The penalties attached to the statement can be costly. The ‘super guarantee charge’ is calculated by adding the super guarantee shortfall amount(s), interest at 10% per annum and an administration fee of $20 per employee per quarter.