Paying your employees super – what you need to know

20 June 2023

If you own or manage a business and employ people, you may need to pay your employees super. It’s a legal requirement. The rules are set out under the superannuation guarantee (SG) legislation, a law that tells you the minimum amount you need to pay, to which workers, and how often.

The Australian super system helps people to save money during their working lives, so they can help support themselves financially in retirement. Employer super contributions are a crucial part of the system, and as an employer, it’s your responsibility to keep on top of payments.

Find out the basics below and see how AustralianSuper can help you manage your employee super payments.

 

How the superannuation guarantee works

The SG is set by the Australian government that determines the minimum percentage of an employee’s earnings that you, the employer, are legally required to pay them. 

Workers eligible for super payments 

Regardless of whether your employees work on a full-time, part-time or casual basis (including those on temporary visas), if they’re aged 18 or over, they’re generally eligible to receive SG super contributions.

If your employees are aged under 18, they must also work more than 30 hours per week to be entitled to SG contributions. You may also need to pay SG for some contractors. More information on super and contractors is available at ato.gov.au.

Calculating your employees super 

From 1 July 2023, the minimum SG rate for eligible employees is 11% of ordinary time earnings (OTE)1. Some employees may have a higher percentage of super agreed by an award rate or employment agreement. If this is the case, you’ll need to pay the higher amount. (For more information about award rates visit Fair Work Commission).

Ordinary time earnings (OTE)

OTE is the amount your employee earns for their ordinary hours of work. This generally includes annual leave, sick leave and long service leave. If loading, allowances, overtime and commissions are part of an employee's pay, calculating the ordinary time earnings can be more complex.

For more info on OTE, see the ATO’s OTE checklist. This identifies payments which could form part of salary or wages, and highlights if they're part of OTE.

Using OTE to calculate employee superannuation payments

You can use an employee’s OTE to calculate how much SG to pay them. Simply multiply the employee’s OTE for the business quarter by their SG rate (either the standard 11% or the higher percentage if they’re on an award or employment agreement rate).

How often to pay your employees super

You must pay your employees the super they’re owed at least once a quarter by due dates (shown below). You can choose whether this is one payment, or multiple payments across the quarter. The frequency may depend on whether any employees are under an award or employment agreement that sets out a specific payment frequency. If this is in place, you’ll need to meet the payment criteria outlined.

Employee super contribution due dates

Quarter Period Payment due 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

Source: ato.gov.au

What to do if you miss a payment 

If you miss a super guarantee payment deadline, you’ll have to lodge a super guarantee charge (SGC) statement within one month after the SG due date. You’ll also have to pay the SGC to the ATO, which is not tax-deductible, and is made up of:

  • The unpaid SG payments (those made after the payments deadline may reduce the SG charge you need to pay)
  • Interest on the outstanding amount, and
  • An administration fee.

To avoid the SGC, payments must be received by the employee's fund on or before the quarterly super due dates. 

You can download the SGC statement and work out how much you need to pay for each employee using the ATO SGC statement and calculator tool. It’s important to note, further penalties will also apply if you don’t lodge the SGC statement and pay the SGC by the due date.

From 1 July 2023, the superannuation guarantee increases to 11%

From 1 July 2023, the superannuation guarantee increases to 11%. It will continue to increase incrementally, at a rate of 0.5% each financial year, until it reaches 12% in 2025. AustralianSuper will keep members up to date with these changes. For more information on the rise to 12% visit ato.gov.au.

 

Tax deductions and due dates for super payments 

Making super payments on time isn’t just important for your employees, it’s important for your business. Employers who make SG contributions in line with the ATO’s deadlines can claim the payments as a tax deduction and will avoid paying a SGC to the ATO.

 

Providing Tax File Numbers (TFNs) 

Tax file numbers are an important part of the super payments process. When a new employee starts work with your business, they normally fill out an ATO Tax File Number Declaration form providing their TFN. As the employer, it’s your responsibility to pass the employee’s TFN to their super fund. For new employees, you must provide their TFN to their super fund more than 14 days before you make their first contribution. For existing employees, you have 14 days when you receive it to give their TFN to their super fund.

There is no need for you to provide AustralianSuper the employee's completed Tax File Number Declaration form. Simply providing the employee Tax File Number will be sufficient. 

 

Reporting extra SG payments to the ATO

If you pay your employee extra super contributions, for example from a bonus or via salary sacrificing, you may need to report the payments to the ATO. These extra contributions could influence any government payments your employees may receive. For example, family tax benefits, child support payments and government co-contributions. You can do this by reporting any extra super paid through Single Touch Payroll or as an item on your employee’s PAYG Payment Summary and Payment Summary annual report to the ATO.

In most cases, a business doesn’t need to report on the basic levels of SG. 

 

Paying contractors super 

Many people in Australia work as contractors, so it’s important to know the relevant super rules. In most cases, if your business pays a contractor for their labour, the government will consider them to be an employee for super purposes. That means you’ll need to pay the 11% SG, even if they have their own Australian Business Number (ABN).

If your contract is with someone who doesn’t provide the labour (such as a company, trust or partnership), you don’t need to pay super to that person.

The ATO has more information on paying contractors super.

 

Maximum SG payment caps

A rule called the Maximum Contribution Base puts a limit on the amount of SG an employer must pay an individual employee in a single quarter or financial year. For the 2023/2024 financial year, this limit is $62,270 a quarter or $249,080 a year2. Anything earned above that limit doesn’t have to have super paid.

For employees whose OTE is higher than the maximum contribution base, you may still pay super based on 11% of OTE, if they're required to under an award or agreement.

However, the extra contributions aren't compulsory, and you should keep in mind the concessional contribution limits.

 

Choosing a default super fund 

Employers must allow their eligible employees to nominate their own super fund, by giving them a Standard choice form (PDF) when they start work. However, not all of your employees will choose a preferred fund. Therefore, your business should also nominate what’s called a ‘default fund’ to make sure you can pay super.

Choosing a default fund is an important decision. It helps to look for a fund that works for both you and your employees.

 

DISCOVER SUPER FOR YOUR BUSINESS

 

Get help to make your electronic super payments

QuickSuper clearing house, from AustralianSuper 

One way to meet your SuperStream requirements is to pay super through a compliant ‘clearing house’, such as QuickSuper3.

QuickSuper is free for businesses if they have an employee with AustralianSuper. A clearing house also makes it easy to pay employees across multiple funds. Rather than making separate payments to each employee's super fund, you can just make one payment. The clearing house divides the money accurately and pays it into the correct funds and accounts.

References

  1. AustralianSuper Your super obligations
  2. ATO - Maximum super contribution base
  3. QuickSuper is a financial service provided by Westpac. AustralianSuper doesn’t accept liability for any loss or damage caused by use of the QuickSuper service and doesn’t receive any commissions from Westpac if employers use this service. Terms and conditions apply. Visit https://quicksuper.westpac.com.au to learn more.

*Source: The 2022 AustralianSuper Monash University Retirement Confidence Index. Based on answers from approximately 3,000 people aged 50 and over. Retirement scores are compared to the Australian average, estimated from the key socio-demographic variables captured in the study

This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/PDS or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

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