Superannuation Guarantee (SG)
The Superannuation Guarantee (SG) legislation requires most employers to pay a minimum of 9.5% 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
- Long service leave
- Annual leave
- 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
- 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 should be simple. But working out ordinary time earnings is more difficult for complex salary packages – with loadings, allowances or commissions for example.
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 2014/15 the maximum contributions base $197,720 (or $49,430 a quarter).
For employees whose ordinary time earnings are higher than the maximum contributions base, you may still contribute based on 9.5% of ordinary time earnings. However, unless they are required under an award or agreement, the extra contributions are not compulsory.
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 $1,100 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:
||SG tax deductibility deadline
||SG statement lodgement and SG charge payment deadline
|1 Jul-30 Sep
|1 Oct-31 Dec
|1 Jan-31 Mar
|1 April-30 Jun
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.
# From 1 January 2014, this fund must have a MySuper Authorised product.