In another blog post I mentioned Superannuation as one of the additional costs a small business owner needs to take into consideration when totaling up what it is going to cost to employ staff. The Superannuation Guarantee (SG) scheme means that you have no option but to pay the additional 9.5% into designated super funds of your employees on a regular basis. Read on to help make sure you are across your obligations and ensure you stay compliant for this important aspect of staff employment.
What is it and how does it work?
Needless to say, the superannuation industry is pretty heavily regulated and financial planners and advisors are the ones tasked with the investment of superannuation funds to try and maximise the returns (within given risk profiles requested by fund folders), so that upon retirement people have less of a reliance on the state pension in order to support the lifestyle they wish to follow.
From an employment perspective there are two aspects that need to be taken into consideration. The first is the above-mentioned Super Guarantee scheme which mandates that you must pay 9.5% of a person’s salary, as an additional payment, directly into their designated super fund. It is important to note that this isn’t a deduction that you take from their pay but is something you must pay in addition to their gross salary. The second relates to additional sums separate to the 9.5%. In the first instance it may be the case that the EA or Award provides for an additional sum to be paid in the super fund of employees that are under the relevant coverage. For example if superannuation is paid at 11%. This would mean that SG is still at 9.5% but that you are liable for an additional 1.5% to be paid over and above their gross salary.
The second relates to Salary Sacrifice although, other than the administration costs you might incur, there is no additional cost to you. Salary Sacrifice is a means for employees to pay extra amounts into their superannuation fund that is deducted from the gross salary (salary before PAYG is deducted) and then paid by you to their designated fund at the same time as you make the SG payment.
When do I make the payments?
In order to minimise the administrative burden on employers, superannuation funds can be paid on a quarterly basis by the 28th of the month following the quarter. So, for the quarter ending 30th June, the payment must be made by 28th July. However, there are funds which require payments to be made monthly and that will need to be taken into account. It is vitally important that, as a business owner, you make your payments on time. There are a number of reasons for this:
- You can’t claim superannuation payments that are paid late as deductions from income for tax purposes
- It is your employees money and should be paid on time to ensure that they are getting the maximum benefit from their super fund and investments
- You have to pay the Superannuation Guarantee Charge (SGC) on any sums you pay late and also complete the SGC statement
- There is a reputational risk to your organization if employees and the public find out you are not paying your employee’s funds over on time.
One final thing to note is that if you are currently, as of the date of this post, behind on superannuation, there is a short term amnesty scheme in place that will allow you to admit your arrears to the relevant authorities without fear of fines and penalties.