How super works for employers

The Superannuation Guarantee (SG) legislation requires employers to pay a minimum of 9% of the employees' ordinary time earnings as super.

If paid on time, these payments can be claimed as a tax deduction.

What employers need to do?

1.   Make SG payments for eligible staff

You need to pay SG contributions for employees who are at work or on leave, such as:

• paid sick leave
• other paid leave (for example, jury service or compassionate leave)
• long service leave
• annual leave, and
• workers’ compensation (in some circumstances).

Under the legislation, you don’t have to pay SG contributions for employees who are:

• earning less than $450 in a calendar month
• aged 70 or over, or
• under 18 years of age and working less than 30 hours a week.

Employer contributions are also generally not required when an employee is away from work and not receiving pay, such as on parental leave or approved leave without pay.

2.   Calculate Superannuation Guarantee

Use ordinary time earnings to calculate SG
For employees with straightforward terms and conditions of employment, working out ordinary time earnings (link) should be simple. But working out ordinary time earnings is more difficult for complex salary packages – with loadings, allowances or commissions for example.

Our factsheet provides details of the payments that count as salary or wages and ordinary time earnings.

Use the maximum contributions base to calculate SG
There’s a limit to the amount of SG that you have to pay for an individual employee. This is known as the maximum contributions base and for the 2011/12 financial year, the maximum contributions base payable is $175,280 a year (or $43,820 a quarter).

For employees whose ordinary time earnings are higher than the maximum contributions base, you can calculate SG contributions using 9% of:

• ordinary time earnings, or
• the maximum contributions base.

3.   Providing Tax File Numbers (TFNs)

When an employee starts work with your company, they should complete an ATO form that contains their TFN. Once they’ve given you this form, you must pass on their TFN to us:

• within 14 days of the employee giving you this form, or
• when you make the first SG contribution on their behalf.

The ATO may fine you $1,000 if you’re late providing an employee’s TFN. Privacy laws don’t allow you to give us a copy of the ATO’s form, but they allow you to pass the TFN on to your employee’s super fund.

4.   Pay on time

Payments made on time (before the Australian Taxation Office (ATO) SG contributions’ deadlines) can be claimed as a tax deduction:

If you don’t meet the quarterly deadline you’ll have to provide an SG statement the following month to the ATO. You will also have to pay the SG charge levied by the ATO.

If a member is making contributions as a payroll deduction from their after-tax salary, then these must be paid to their super fund within 28 days of the end of the month.

5.   Reporting super contributions

The Government requires you to report on certain super payments you make on behalf of your employees.

For example:

• Salary sacrifice contributions your employee has asked you to make from their before-tax pay.
• Additional amounts paid to an employee's super fund (for example, an annual bonus paid to super).
• An employee negotiating for increased super contributions as a part of their salary package (for example, under individual employment contracts).

Generally, you need to report those contributions on your employee's payment summary.

Reportable employer super contributions can affect a range of government entitlements and obligations for your staff.

6.   Allow your staff to choose their own super fund and select a default fund

Generally, your staff can choose their super fund. If they don’t make a choice, you need to choose a fund that you can pay super into on their behalf. This is called your default fund. Read more information about Choice of Fund, including a list of those kinds of employees who can’t choose a fund.