FAQs

• Employers’ superannuation responsibilities

  For most people, retirement savings will be built through super contributions made by their employers over their working life. Employers are obligated by law to make those contributions in an accurate and timely manner.

  • Who is an employer?

    An employer is typically a person, company or partnership that employs one or more workers for their services or labour.

    Generally, employers are obliged to make superannuation guarantee contributions when the employee:

    • earns more than $450 per month before tax from their work for you
    • is aged between 18 and 70

    In some circumstances, persons who are not usually considered to be employers will be treated as such for the purposes of superannuation law. If you have any doubt about your obligations you should obtain specific advice.

  • Who is an employee?

    Employees are those workers whom you employ in your business. This contrasts with contractors who are self-employed and provide you with services.

    Typically, contractors will bill you for those services by providing you with an invoice, a tax file number (TFN) and Australian Business Number (ABN).

    Employees may work for you under an award, a workplace agreement, including an individual or collective agreement, or an individual employment contract. They may be paid an agreed rate of pay for their work, receive other payments for their time at work and/or may also be paid bonuses for meeting or exceeding performance targets.

    Each employee will usually have a TFN, and may be employed on a full-time, part-time or casual basis.

    In some circumstances, persons who are not usually considered to be employees will be treated as employees for the purposes of superannuation law. If you have any doubt about your obligations you should obtain specific advice.

    
    

  • What is the superannuation guarantee contribution?

    The superannuation guarantee (SG) levy requires employers to provide most Australian workers with superannuation contributions. The aim is to ensure that as many Australians as possible enjoy the benefits of a superannuation income in their retirement.

    The SG is an employer obligation. The contributions are a minimum set down by the Federal Government and must be paid into a complying fund, which is one that meets government standards.

    If an employee’s ordinary time earnings are $1000 a month, your contribution to their super fund each month would be $90.

    Ideally, this amount should be paid into your employee’s super fund of choice at the same time they receive their pay.

    
    

  • Who is eligible for SG contributions?

    Generally, employees aged between 18 and 70 years of age earning $450 or more per month are entitled to have 9 per cent of their ordinary time earnings paid into the super fund of their choice or, if no choice is made, the employer-nominated default fund.

    If your employees are under 18 you may be required to still pay the levy if they work more than 30 hours per week and earn $450 per month or more.

    The minimum SG contribution an employer must make is calculated on an employee’s Ordinary Time Earnings, which means what you pay them for their ordinary hours of work. This amount will usually include any shift or casual loadings or commissions, some allowances and paid leave, but will exclude any annual leave loading payments and non-performance bonuses. It does not usually include payments made for irregular work in excess of ordinary hours where separate overtime amounts are payable.

    The SG contribution must be paid at least quarterly, but ideally for employees should be paid into the super fund to coincide with the payment of wages and salaries.

    
    

  • Who else is covered?

    The SG includes contractors engaged under a contract that is wholly or principally for labour. Even if the person quotes an ABN, the person may be an employee for SG purposes. The other party to the contract is considered to be the employer.
    

• Fund choice for employees

  Many workers are entitled to choose the super fund they want to join. Sometimes, your employees don’t make an active choice. In most cases, you are then obliged to put their super contributions into a “default” fund, which is the fund you have identified as your employer-nominated fund.

  • What does 'choice of fund' mean?

    Many employees are able to choose their own super fund into which SG contributions are paid, unless:

    • You pay superannuation for your employee under a state award or industrial agreement or under certain workplace agreements, including an Australian Workplace Agreement (AWA) and collective agreements (although choice can also be provided under these awards or agreements).
    • Your employee is a federal or state public sector employee excluded from choice by law or regulations.
    • Your employee is in a particular type of defined benefit fund or the employee has already reached a maximum benefit in that defined benefit scheme.

    If you are not sure what award or industrial agreement, if any, your employees are covered by, simply contact the workplace relations department in your state or territory.

  • How does choice of fund work?

    Many Australian employees can choose the super fund their SG contributions are paid into.

    Choice of fund is different from investment choice. With investment choice the fund member chooses from a range of different investment portfolios and risk profiles within a fund.

    Choice of fund gives employees the opportunity to choose a fund that best suits their needs while accumulating benefits for their retirement, as well as life, and disability insurance options that fit with their needs.

    Under choice of fund rules, you are generally obliged to provide new employees with a standard choice form within 28 days of starting employment. Penalties may apply if you do not do this. Employers are not to interfere with that choice process.

    The standard choice form can be downloaded from the Australian Taxation Office website.

    Once an employee notifies you of his or her choice of fund, you may be required to treat that fund as his or her chosen fund within two months. If after 28 days the employee has not chosen a fund, you must generally make the SG contribution into the default fund.

    There is no limit on the number of times an employee can ask you to change the fund into which their contributions are paid. However, employers are generally only required to act on the employee’s request once every 12 months.

    You should keep records for at least five years of employees who do not have to be offered choice of super fund, as well as records showing the standard choice form has been given to all eligible employees. Records confirming the default fund chosen meets the minimum life insurance requirements set out in the legislation are also required to be kept.

    Penalties may apply if these records are not kept.

    
    

  • What is the standard choice form?

    This is a one-page form for you, the employer, and a second page for your employee/s to complete, if the employee is choosing a fund.

    The standard choice form requires from you, the employer:

    • The name of the fund that you will contribute to if your employee does not make a choice (i.e. the default fund)
    • The contact details for your employee to get the fund’s product disclosure statement
    • A statement about whether contributions at a higher level than 9% are being made and whether you would continue to make contributions at the higher level if your employee chooses another superannuation fund.

    Where required, the choice form must be provided within 28 days of the employee requesting to choose their own fund or within 28 days of a new employee’s commencement date. You must also provide a choice form to all employees within 28 days if you change the default fund.

    The form may be downloaded from the ATO website.

    A list of instructions to help you and your employee to complete the form correctly is attached to the form.

  • What happens if I fail to offer choice of fund to my employees?

    If you fail to offer your eligible employees a choice of fund within 28 days of their commencing work, you run the risk of incurring a choice liability.

    If this liability occurs, you must lodge a quarterly superannuation guarantee charge statement and pay the SG charge to the ATO. This charge will include 25 per cent of the difference between the amount that should have been paid into the fund the employee chose and any amount actually paid into that fund for the quarter.

    The maximum choice liability is limited to $500 per notice period per employee.

    In addition, you may be charged interest at the rate of 10 per cent per year on the shortfall, plus an administration fee of $20 per employee.

    You cannot claim tax deductions for the choice liability.

    
    

  • What if my employee is not a member of the fund that they nominate?

    It is up to the employee to find out how to join the fund that they nominate and to obtain product disclosure statements, information and application forms for that fund.

    The employee can be told that by the next date for the payment of super contributions, they need to have joined a fund of their choice otherwise their super contributions will be paid into the default fund chosen by you.

    As an employer you are not permitted to provide any research, comparisons or product disclosure statements for any fund other than your default fund and must not try to influence the employee in any way or provide them with financial advice when choosing a super fund.

    Warning

    If you pay super contributions into a super fund that your employee has nominated but not joined, those super contributions may be automatically rejected. The employee must be a member of the fund they wish to nominate.

    
    

• Which fund for employers

  • What is a default fund?

    An employer-nominated fund is the fund you select for employees who do not exercise their right to choose a super fund.

    Many employees are eligible to choose their super fund. However, more than 90 per cent of employees contribute to their employer-nominated fund rather than selecting another fund. This may be due to low levels of consumer engagement with super.

    Where possible, Industry SuperFunds recommend that employers select a fund that considers the retirement income of their employees.

    
    

  • How do I choose a default fund for my employees?

    Selecting a default superannuation fund for your employees requires careful thought and some basic considerations.
    You are obliged to make SG contributions to a default fund if the employee fails to choose their own fund to receive the 9 per cent super contribution.

    Your employer nominated fund (i.e. your default fund) must offer minimum life insurance cover to members. For details refer to the ATO website.

    When choosing a default super fund, consider whether:

    • commissions or ongoing advice fees are paid to intermediaries
    • entry, exit or on-going fees are applied
    • when contributions cease, the employee remains a member of the default fund until he/she consolidates into a new active fund or is rolled into a suitable eligible rollover fund
    • the fund meets prudential regulatory standards
    • the fund has effective procedures in place for following up arrears in payments
    • the fund has a representative trustee structure
    • the fund complies with relevant legislation.

    
    

  • What if my workplace is covered by an award?

    New industrial relations awards will come into effect on 1 January 2010. It is intended that these awards have application to every workplace. These awards may specify a superannuation fund or funds that the employer must make contributions to where an employee who is eligible to fails to exercise choice of fund. For further information on which Industry SuperFund applies to your industry go to www.fwa.gov.au
    

  • What are my award super obligations?

    If your funds work under awards. your obligations to pay the SG contribution may not be the same as the conditions applying to super set out in award provisions.

    The award may specify which super fund contributions should be paid into and there may not always be a choice of super fund.

    Some awards also include a qualifying period which employees are required to work (e.g. three months) before they are entitled to super, whereas there is no qualifying period under SG.

    The award may also exclude part-time and casual employees from receiving super contributions.

    If you are covered under Australian workplace legislation, awards or agreements that require you to report super contributions on pay slips, you are obligated to report the amount of contributions paid to your employees.

    The frequency varies, but monthly payments of SG contributions are common.

    Where award super obligations clash with SG Contribution Law (SGCL), the regulations relating to ordinary time earnings under SGCL will determine the amount of super to be paid.

    In other words, the SGCL requirements will override the award if the award provides for lower super payments than SGCL requires.

    Example

    Kylie is 18 and is employed on a casual basis for 12 hours a week while she completes her studies.

    As the award that she works under excludes casual employees, her employer does not have to make any super contribution for Kylie to satisfy award requirements.

    However, to satisfy the requirements of the SG, Kylie’s employer still has to make super contributions for any month that she is paid more than $450. If her employer fails to do this, the company may have to pay the SG charge.

    Warning

    SG contribution requirements will override award provisions if the award provides for lower super payments.

  • Do I include super in my Enterprise Bargaining Agreement?

    Superannuation is a key condition of employment and as such should be considered in preparing comprehensive Enterprise Bargaining Agreements (EBAs).

    A typical superannuation contribution clause allows for a minimum 9 per cent employer contribution into a nominated fund or a fund of the employees’ choice. These types of clauses can impose additional obligations upon you compared to those under the Superannuation Guarantee.

    Further information about your super responsibilities under EBAs and awards can be found at the ATO website under the tab for superannuation, or from your state-based Chamber of Commerce.

    
    

• Industry super funds

  When you consider which “default” fund is best for your employees, think about an Industry SuperFund. The industry super model of low fees and no commissions is only run to benefit members.

  • What is an Industry SuperFund?

    Industry SuperFunds are multi-employer superannuation funds that usually cover employees in a particular industry or a group of industries. Many are also open to the general public.

    Industry super funds generally started in the 1980s following the inclusion of superannuation entitlements into industrial awards. Today, many industry super funds have large memberships. They are recognised as being run only to benefit members and paying no sales commissions. They generally charge low administration and investment management fees and no entry or exit fees.

    These funds have trustee boards with equal representation for employers and employees and continue to provide employers and employees with a low cost and portable superannuation option. Industry super funds include those featured throughout this website.

    
    

  • Why should I choose an Industry SuperFund for my employees?

    Industry super funds now have 17.4 per cent of super assets, nearly 5 million members and approximately 485,000 employers

    According to SuperRatings, industry super funds dominated the published performance tables in the balanced option for all time periods of one, three, five and seven years to December 31, 2008.*

    All of the top-10 performing super funds in the balanced option, over five years to December 31, 2008, are run only to benefit members. Of the top 10 funds, 9 are industry super funds.*

    SuperRatings SR50 Balanced Index Option Survey as at December 31, 2008 Past performance is not a reliable indicator of future performance.

    
    

  • What can an Industry SuperFund do to help me make superannuation easier?

    Industry SuperFunds offer a range of services that help you to cope with continually changing superannuation responsibilities. They offer quick and easy online administration solutions, flexible payment and data transfer options, highly trained relationship managers, tailored corporate solutions and some offer a clearing house facility. Ask your Industry SuperFund about the options available to you.

    Control and flexibility

    Your Industry SuperFund may offer an online facility that provides the following features to make your job easier:

    • view your current contribution advice and correct or update details
    • access contribution transaction records and contribution reports on each of your employees
    • view status tracking of contributions
    • add, terminate and correct member details
    • take advantage of high-level encryption for a more secure method of submitting documentation when compared with emailing reports directly.

    Access more payment options

    Contribution returns can be submitted:

    • electronically via an online form pre-populated with your employees’ details
    • electronically via a payroll or Excel spreadsheet file
    • on paper
    • Electronic Funds Transfer (EFT), direct debit or via BPay.

    Easy and simple

    Industry SuperFunds may offer easy and simple online processes for:

    • uploading a payroll file or spreadsheet directly for processing. This method best suits employers with 30 or more employees
    • entering contribution details into a pre-populated form that contains all of your employees’ data from the previous month. All you need to do is update the information and then submit the form.

    Corporate services

    Many Industry SuperFunds offer a “corporate” facility, which includes the full range of standard industry super features and benefits, plus additional products and services. This is ideal for companies seeking tailored arrangements such as:

    • defined benefit administration capacity
    • tailored insurance arrangements
    • senior account management
    • tailored management reporting
    • consultative committee services
    • customised communication resources
    • a transition team to support you at every step
    • actuarial services.

    Clearing house

    Many ISFs offer a clearing house facility that allows you to make just one payment when paying contributions for your employees to multiple superannuation funds.

    The clearing house receives the electronic transfer of data and funds from you, and then distributes the various payments to the other funds chosen by your employees.

  • How do I become a participating employer in an Industry SuperFund?

    By becoming a participating Industry SuperFund employer, your employees will have access to high-quality, low-cost superannuation options and access to third parties which offer low-cost home loans, low-cost credit cards, financial planning and a range of other benefits.

    It’s easy to start up – and there are no joining fees or charges. Generally, all you have to do is follow these six steps:

    1. Complete the online application form with the Industry SuperFund of your choice.
    2. Provide your employees who will be joining the fund with the latest product disclosure statement (sometimes called Member Information Guide), which includes a Membership Application Form.
    3. Choose how you want to make the superannuation contributions for your employees. For example, you can write a cheque, transfer money directly from your bank account or transfer funds electronically. Do not send cash.
    4. Collect all Membership Application Forms and check that they are signed and filled out correctly. Then sign each of the forms yourself as the employer.
    5. Send all forms to your fund. The fund will then send you a certificate confirming your participation in their fund, and your first contribution advice.
    6. If you cannot supply your Industry SuperFund with completed membership forms for your employees, supply the following details for each employee – full name, address, date of birth, date joined the employer, date joined the fund and TFN.

    Service and support

    As a participating employer, you will be kept up-to-date on developments at your Industry SuperFund (ISF) and any issues relating to superannuation that may affect you. Most larger funds have relationship managers to help you with any matters arising on a day-to-day basis. The fund may also offer:

    • a national customer service centre
    • regular updates on their website
    • an employer newsletter
    • a member newsletter, which is also sent to employers
    • the Annual Report to Members, which is also sent to employers.

    Member education

    When joining an Industry SuperFund, you want to know that your employees will receive support to help ensure they make informed decisions about their superannuation. This is why your Industry SuperFund has designed a comprehensive member education program. Many funds offer free retirement and planning seminars.

    Important note

    Unless you hold an Australian Financial Services Licence (AFSL), or are an authorised representative of an organisation that holds an AFSL, you cannot recommend any financial products or give advice about any superannuation funds to your employees (or anyone else).

    Breaches of the relevant legislation could expose you to hefty fines and/or imprisonment.

    Any person wanting advice on your super should in the first instance seek advice from your super fund who may be able to answer your question or refer you to an appropriately qualified person.

  • What is a super fund relationship manager?

    Some Industry SuperFunds employ relationship managers or field staff to provide an additional level of service for employers who have a large number of employees who are members of the fund. In some instances employers with 50 or more employees, which are members of a particular fund, may be assigned a relationship manager to assist them.

    Typically, relationship managers:

    • are the primary point of contact for the employer with the fund
    • assist employer’s administration and payroll staff to meet their superannuation commitments in a timely manner
    • liaise between the employer and the various functions of the fund, i.e. administration or insurance, in order to manage specific questions or issues
    • answer questions from members and employers with accurate and timely general advice
    • provide information on where to obtain assistance for specific individual requests
    • develop a planned visitation program to meet with employers and their employees to answer questions
    • deliver member education programs about super at workplaces
    • provide customer relationship management, in relation to the funds’ products and services.

    There is no charge or additional cost to the employer or their employees (i.e. fees remain the same) for this service. Contact your super fund to find out if they offer you this service.

  • What is net benefit?

    A study by research and ratings agency SuperRatings (commissioned by Industry Fund Services) based on existing fee structures concluded that Industry SuperFunds would return on average $75,781 more (in today’s dollars) than retail super funds (retail master trusts) over a 40-year working life*.

    * The modelling shows the effect that fee differences alone have on the growth of superannuation. The figures shown as a result of the modelling are not predictions or estimates of actual outcomes. The effect of fee differences on super balance will vary between individual super funds and be affected by the fund’s performance. The comparison shows projected outcomes, applying today’s average fees of a sample of Industry SuperFunds and a sample of retail super funds (retail master trusts), over 40 years. Differences in fees may change in the future and this would alter the outcome. Current at 30 June 2009 and may be revised if further information becomes available.

    Assumptions - Based on a starting salary of $50,000 and a starting super balance of $20,000 - refer to the Assumptions page for details of further assumptions used in this comparison.

    The modelling compared a sample of Industry SuperFunds with a sample of retail super funds and shows how higher fees and sales commissions can eat away members’ super over their working life, leaving them with less to retire on; so it is important that people are aware of the fees, including sales commissions they might be paying.

    Industry SuperFunds are designed exclusively for the benefit of members and are run only to benefit members.

    Industry SuperFunds also provide services to members, including:

    • a range of superannuation investment strategy options
    • personal insurance options
    • access to low-cost banking with ME Bank
    • financial planning from Industry Fund Financial Planning
    • low-cost non-super investment products.

    
    

• Super rules

  It is not enough that you pay your employee super contributions; you have to follow the rules about how and when you pay those contributions. Failure to pay, or to pay in the allocated time, may bring you into conflict with the Australian Taxation Office. You need to understand your obligations.

  • How much do I pay for the SG Levy?

    As an employer you currently have a legal obligation to pay super contributions equivalent to at least 9 per cent of ordinary time earnings paid to your eligible employees.

    The 9 per cent is calculated on each eligible employee’s earnings base consisting of their ordinary hours of work.

    This usually includes the payments received for the hours ordinarily worked as well as allowances and shift loadings. Irregular overtime and performance-based bonuses are usually excluded.

    Generally, eligible employees are those:

    • aged between 18 and 70
    • are paid $450 (before tax) or more in a calendar month
    • work full-time, part-time or on a casual basis
    • are under 18 but work more than 30 hours a week.

    The ATO has tools to help you understand and meet your obligations, as well as a SG contributions calculator. For more information, visit the ATO website.

  • When do I have to pay it?

    You are required to pay SG contributions quarterly although you can pay more regularly to suit your needs. Employers who fail to make the required payment by the due date will be liable to pay the SG Charge to the ATO.

    Generally, you have four weeks from the end of each quarter to make your payments.

    The payments must be made by the following cut-off dates:

    • Quarter 1 (July 1 to September 30) by October 28
    • Quarter 2 (October 1 to December 31) by January 28
    • Quarter 3 (January 1 to March 31) by April 28
    • Quarter 4 (April 1 to June 30) by July 28.

    
    

  • What is the SG Charge and how do I calculate it?

    If you fail to pay the minimum 9 per cent of ordinary time earnings (OTE) into an eligible employee’s chosen super fund or, alternatively, into the default fund, or fail to make all your payments by the quarterly cut-off dates each year, you will incur a penalty.

    This penalty is called a SG Charge. It is calculated by adding the unpaid amount of super contributions (which are based on salary and wages, not ordinary time earnings) and a 10 per cent per year interest rate. On top of this you will usually be required to pay an administration fee of $20 per employee each year.

    It will cost you more to pay the SG Charge than to pay SG contributions to your eligible employees and you will not be able to claim this charge as a tax deduction.

    The Choice Liability Charge is payable if you have not offered an eligible employee a choice of super fund, or you have paid their super into an incorrect super fund. For more information visit the ATO website.

    
    

  • What is an employee’s earning base?

    The earnings base for most employees is their ordinary time earnings (OTE), which means what you pay them for their ordinary hours of work. This amount will usually include any shift or casual loadings or commissions, some allowances and paid leave. It does not usually include payments made for work in excess of ordinary hours where separate overtime amounts are payable. But it may include rostered or regular overtime.

    Also regularly excluded are:

    • fully expended expense allowances, such as car allowances
    • reimbursed expenses
    • benefits subject to fringe benefits tax
    • jury top-up payments
    • parental leave payments
    • annual leave loading
    • accrued annual leave, long service leave and sick leave paid as a termination lump sum
    • redundancy payments
    • gratuities
    • dividends
    • partnership and trust distributions
    • restraint of trade agreement payments
    • payments for domestic or private work under 30 hours a week.

    A detailed list of what is and is not included in OTE can be found on the ATO website.

    Warning

    You must comply with the terms of an award, agreement or contract if it requires you to make greater contributions than ordinary time earnings. Failure to do so may lead to penalties. If in doubt seek specific advice.

  • Do I have to tell my employees about their super contributions?

    You are not required to provide a statement to employees of how much super contributions you paid into their chosen super fund or default fund.

    However, you may be required to tell your employees the default fund into which their super contributions will be paid within 28 days of them starting work for you. You may also be required to add the name of the fund and the amount of the super contribution on the employee’s payslip depending on the workplace legislation that applies to your business.

    Further information on your obligations with regard to super reporting requirements under individual awards and workplace agreements can be obtained from the Department of Employment and Workplace Relations.

    
    

  • Do I have to provide an employee’s TFN to their super fund?

    When your employee fills out a TFN declaration form (NAT 3092), you must pass it on to the super fund.

    If you do not pass on your employee’s TFN:

    • you will be guilty of an offence and liable to pay a penalty
    • your employee may have to pay extra tax on the contributions
    • your employee may miss out on the Federal Government’s super co-contribution payments.

    If you make employer contributions for an employee, you need to give the fund the TFN within 14 days of receiving the employee’s TFN declaration form. But if you do not make a contribution for the employee in that period, you may pass the TFN on when you make a contribution.

  • Why does the fund need the TFN?

    Your employees face significant consequences if their super funds do not have their TFNs.

    For example, their super may be taxed an additional 31.5 per cent and their super fund will not be able to accept any personal contributions. This means eligible employees could miss out on receiving a government super co-contribution payment.

    
    

  • What happens if I don’t pass on the TFN?

    The ATO has been checking that employers pass on employee TFNs to the relevant super fund. It is an offence not to provide an employee’s TFN to their super fund within the required timeframe.

    For individuals, the maximum penalty that can be imposed is 10 penalty units (currently $1100). However, the maximum penalty payable by a body corporate is 50 penalty units (currently $5500).

    The maximum penalty may apply for each offence, so if you fail to report five TFNs to the relevant super fund, five penalty units can apply.

    
    

• Personal Super

  Don’t forget about you and your family. You can build your super by making your own contributions (or for your spouse) into a personal super plan of an Industry SuperFund.

  • I am self-employed, what benefits can I get for putting money into super?

    You will generally be able to claim a full tax deduction for contributions to superannuation, subject to certain restrictions (please refer to your tax adviser). These contributions are called concessional contributions.

    However, total concessional contributions over $25,000 in a year will result in excess contributions tax of 30%, plus Medicare levy, in addition to the standard contributions tax of 15%. If you are age 50 or more at the end of one or more of the financial years 2009/2010 to 2011/2012 inclusive, a transitional cap of $50,000 applies for the relevant year(s). The transitional cap will then revert back to $25,000 from 1 July 2012 (this figure will be indexed).

    You will be able to contribute until you reach 75 years of age and generally be entitled to a full tax deduction on those contributions, as above.

    In order to claim the tax deduction as a self-employed person, there is a requirement that less than 10% of your assessable income, reportable fringe benefits and income which is salary sacrificed into superannuation, is attributable to employment as an employee.

    You could also be entitled to the government co-contribution as a self-employed person making your own contributions from tax paid dollars, referred to as non-concessional contributions.

    Under this strategy, the Federal Government contributes $1 for each $1 you contribute to super, to a maximum amount of $1,000 per annum, if your assessable income plus reportable fringe benefits plus salary sacrificed to superannuation (income) is $31,920 * or less. The co-contribution tapers off as your income rises and cuts out at $61,920* a year. To be entitled to the co-contribution you must be less than 71 years old at the end of the income year in which you make the personal superannuation contribution.

    You should note that the Government’s co-contribution payment is expected to increase to $1.25 for each $1 you contribute to super in the 2012/2013 – 2013/2014 financial years to a maximum of $1,250 per annum. This will again increase to $1.50 for each $1 you contribute to super from 2014/2015 financial year onwards.

    Choosing an Industry SuperFund for your self-employed super will mean you benefit from low fees and no commissions. You can also take advantage of value-for-money life, disability and income replacement insurance using an Industry SuperFund.

    Based on the updated thresholds for 2009/2010 financial year.

    
    

  • What if I am a contractor?

    If you are a contractor, you are generally not classified as an employee for the purposes of the SG contribution, but this will depend on your particular circumstances.

    If you are a contractor who employs people, you will be liable to pay the 9 per cent SG contribution on their behalf.

    An employee receives salary or wages in return for their labour or services.

    You are considered to be an employee for SG purposes if you, as a contractor:

    • are renumerated wholly or principally for your personal labour * and skills
    • must perform the contractual work personally
    • are paid by reference to hours worked, rather than for the amount of work performed.

    The above applies even if you quote an Australian Business Number (ABN) in the course of payment for your services.

    Labour, in this sense, does not mean just physical labour. It includes artistic and mental effort, as well.

    If you are in doubt about your super obligations in relation to contractors, the ATO has an SG eligibility decision tool on its employer website.

    Visit the ATO website and look under the heading "Superannuation".

  • I’m not working, but can I contribute to super anyway?

    The simple answer is yes, provided you are aged under 65.

    However, you can contribute to superannuation after reaching age 65, if under age 75, by meeting the work test. The test is working at least 40 hours in 30 consecutive days during the financial year. The test must be undertaken before any contribution can be made.

    These contributions, if from after-tax income, called non-concessional contributions, may come from your own savings or investments. They do not attract the 15 per cent contributions tax applicable to employer contributions because the tax has already been paid on your savings. The other thing to remember about them is that they are tied up in your super fund until you reach preservation age.

    The other thing to remember about them is that they are tied up in your super fund until you reach preservation age and retire.

    
    

• Other issues impacting your employees

  If your employees ask you for advice about their super, remember you cannot provide them with financial advice unless you hold an Australian Financial Services Licence. Refer them to their Industry SuperFund; it will be able to help.

  • What have sales commissions got to do with me?

    Many retail superannuation funds pay commissions to financial advisers in return for selling super fund products.

    These commissions can amount to as high as 2 per cent of members’ account balances.

    In some instances trailing commissions are paid for many years while the funds remain with that particular fund or fund manager, regardless of whether the adviser provides any further service or advice. Over time, these commissions can significantly erode your employees’ retirement savings.

    Choosing a fund that:

    • charges low fees on contributions and administration
    • does not pay sales commissions to financial advisers will generally benefit your employees, provided the fund has a strong performance history.*

    * Past performance is not a reliable indicator of future performance. Employees should consider their own objectives, financial situation and needs before making a decision about superannuation because they are not taken into account in this information.

  • What if my employee wants to salary sacrifice, how do I do it?

    Some employees may choose to boost their super saving by choosing to take less salary in cash and diverting the balance, pre-tax, into super.

    There can be tax advantages in this strategy, however these will depend on the employee’s particular circumstances. For example, advantages diminish significantly if the employee earns less than $35,000 a year (based on 2009/2010 tax rates). It is at this level that employees move out of the 15 per cent tax bracket to the 30 per cent tax bracket.

    To be effective, salary sacrifice arrangements must be prospective and apply to future and not past earnings.

    The salary sacrifice cannot include annual or long service leave that has been accrued before entering into the arrangement.

    If an employee wants to sacrifice pay for higher super contributions, you and the employee should clearly state and agree on all the terms of the sacrifice arrangement and keep a written record of the arrangement.

    However, SG and salary sacrifice contributions from all employers over $25,000 in a year may result in the employee having to pay excess contributions tax of 30%, plus Medicare levy, in addition to the standard contributions tax of 15%. If the employee is age 50 or more at the end of one or more of the financial years 2009/2010 to 2011/2012 inclusive, a transitional cap of $50,000 applies for the relevant year(s). The transitional cap will then revert back to $25,000 from 1 July 2012 (this figure will be indexed).

    It is legally possible for you to calculate your employee’s SG entitlements net of salary sacrifice contributions.

    Example of salary sacrifice

    Belinda earns $45,000 a year from her job as a personal assistant. She wants to sacrifice $10,000 of that salary into her super fund to boost her employer’s contribution of $4,050. This is the amount her employer would have had to pay based on her pre-sacrificed salary amount.

    An employer would be able to claim a tax deduction of $49,050, consisting of salary paid plus the 9 per cent super contribution. Belinda would have a gross total contribution of $14,050, but would pay 15 per cent tax on this contribution, leaving her with a net amount of $11,942.50 in her super.

    
    

  • How can I help my employees find their lost super?

    As at 30 June 2008 there are more than 6.4 million unclaimed superannuation accounts valued at $12.9 billion in Australia. Unclaimed super accounts with balances of more than $200 must remain in the superannuation system.

    Chances are one or more of your employees have a lost superannuation account. You would be doing them a favour if you suggest they reunite their lost or inactive super accounts with their current active super account – the one into which you currently pay their contributions. Having more than one account, especially if one of the accounts is inactive, costs your employees extra fees.

    AUSfund, one of Australia’s largest eligible rollover funds (ERF) and owned by a number of industry superannuation funds, has more than 1.8 million lost, inactive or unclaimed super accounts. AUSfund actively seeks to reunite its members with their unclaimed superannuation.

    Visit www.unclaimedsuper.com.au. The website is continually updated, and also links through to the ATO’s lost super register. So if your employee is not on the AUSfund website, he or she may be on the ATO website.

    
    

  • What do I do about employee insurance?

    Good super funds provide low-cost and comprehensive life insurance and total and permanent disability insurance cover as part of the super package.

    Good super funds also give fund members the option of purchasing one or more units of insurance cover automatically without the need for a prior medical examination. Some members, such as those with no dependants, may require a low level of insurance, while others with families may require higher levels. Beyond a certain level of cover, a medical assessment of the employee may be required.

    The cost of this insurance cover is paid from the 9 per cent SG contribution. It is usually the most tax-efficient, and often the cheapest way employees can obtain insurance cover for them and their families because group buying power provides the most competitive premium rates and the most comprehensive cover.

    Industry SuperFunds provide a package of super, administration and insurance cover at competitive rates. Their buying power has enabled them to provide comprehensive life and disability insurance cover at some of the cheapest rates on the market.

    Many funds allow individual employees who do not want any cover – such as young employees without dependants – to opt out of taking up the insurance option.

    However, it should be noted that if employees wish to take up insurance cover at a later date they may need to be medically assessed.

    
    

• More information

  • Where do I go if I have a problem?

    If you have any queries relating to your super contribution obligations, or do not understand how contributions should be calculated, or what the penalties are for failing to pay contributions by required dates, you can obtain further information from the ATO website under the section for employers.
    

  • What if I need more information?

    Your first port of call for more information about employee super or to answer any questions you may still have in relation to the SG charge, should be the Industry SuperFund which caters for you and your employees.

    If you want to find out more about how to join an Industry SuperFund into which super contributions will be paid if your employees fail to choose their own fund, how it will work, what the investment options are, its track record and insurance options, contact the fund’s business manager.

    There are a number of funds specialising in particular industries from which to choose your default super fund. Typically, they are open to anyone to join. Visit www.fwa.gov.au to find out more.

    Good financial returns

    Please note that past performance is not a reliable indicator of future performance.

    
    

• Contacts for employers

  • Who can i contact?

    • ASIC - the Australian Securities and Investments Commission has calculators and other information to assist you in understanding superannuation.
    • ATO - the Australian Taxation Office provides information, booklets and advice regarding the tax aspects of superannuation.
    • APRA - the Australian Prudential Regulation Authority is the prudential regulator of the financial services industry, which includes most superannuation fund members.
    • Industry Fund Financial Planning
    • Industry Fund Retirement Income streams
    • Industry Fund Services
    • ME Bank - the bank offers low-cost home loans for Australian workers
    • Rainmaker Information - a leading superannuation funds rating agency. Rates funds on value for money and provides key performance figures.
    • Superpartners
    • SuperRatings - an assessor of Australia’s superannuation industry. Rates funds on value for money and provides key performance figures.

    
    

Technical advice provided by Industry Fund Financial Planning.