Superannuation – what employers need to know
At first glance, employers’ responsibilities and obligations under the superannuation rules can seem complex, but they’re fairly straightforward once you look into it. Here’s what you need to know:
1. Choosing a default super fund
Employers must choose a default fund for compulsory Super Guarantee contributions. As the term suggests, it’s the fund which you pay into, on an employee’s behalf if they haven’t nominated their own super fund.
Choosing a default fund is a very important decision, as super is your staff's money, and you want to do the right thing by them. Industry SuperFunds not only perform well, they are run only to benefit your employees and do not charge joining or handling fees for your company’s super payments. Industry SuperFunds make it easy to administer your employees’ super contributions and they are MySuper authorised, so you can rest assured that you are providing your employees with a default fund which has low fees for members, historic strong returns^ and is run only to benefit them. Most ‘Modern Awards’ list the default super funds that employers must choose from for their default funds. You can use our Default Fund Finder to get a list of Industry SuperFunds that are included on the list for each relevant award.
You must ensure that your default fund offers a MySuper product. MySuper is a low cost, simple super product that meets certain performance requirements including a specific duty to deliver value for money for members. If your current default fund does not offer a MySuper product you will need to switch to a fund that does.
If an employee wishes to choose their own super fund, they can notify you of this when they first join your company, or they may choose a fund at any time during their employment. They can even change funds, but the onus is on the employee to tell you if they have changed fund preference. For more details about choice of funds, see the Super Rules page.
Employers can also change default funds, but before switching consider the funds’ performance, if it is run only to benefit members (not shareholders) and if the switch has been incentivised by an offer of a cheap business loan or insurance premium. While there may be an offer too good to refuse from a bank-owned super fund, it may not be in the best interests of your staff – after all, it’s about doing the right thing for your employees.
2. Employer superannuation contributions
Almost all employees in Australia are entitled to a superannuation contribution, paid by their employer into a super fund.
It doesn’t matter if the employee is full time, part time or casual (depending on income and hours). Even some contractors may be entitled to super contributions.
Visit the Contribution Rules page to see which of your employees you’ll need to make super contributions for.
3. The Super Guarantee system and enterprise agreements
Unless a specific enterprise agreement or award states otherwise, employers are required to pay a set rate of superannuation into each eligible employee’s super fund.
The rate is 9.5% of the employee’s income, and is set to increase gradually over the next few years.
For super purposes, ‘income’ includes regular wage plus commissions, shift loadings and some allowances but not overtime payments. Overtime that is regularly rostered is included as income.
Most businesses make the super contributions to coincide with each payday. This is not compulsory, but contribution entitlements are calculated monthly and contributions must be made at least quarterly and reported regularly to the ATO.
Use this calculator to work out how much super you need to contribute to an employee’s super fund.
Super Contribution Calculator
4. Reportable superannuation contributions
An employee may ask you to deduct extra super from their pre-tax income, and pay it into their super fund. This is called salary sacrifice and it gives the employee tax and retirement income benefits. In fact, salary sacrificing is an excellent way to boost retirement income. You must notify the ATO of all such payments in a Superannuation Payment Summary. Contributions made under the compulsory Super Guarantee system are not included on Payment Summaries.
5. Keep up to date
Australia’s super laws and regulations often change, even slightly. It’s important to keep up to date with new rules and obligations, however your default super fund should send you regular updates on changes to your responsibilities and procedures.
^Past performance is not a reliable indicator of future performance.
* Generally, you have to pay super for an employee if they're 18 years or over and you pay them $450 or more (before tax) in salary or wages in a calendar month. It doesn't matter whether the employee is full time, part time or casual. The maximum income on which employers must pay the Super Guarantee. In 2016/17 it is $51,620 per quarter ($206,480 per year).
Employees who are under 18 years old must meet the above conditions and work for more than 30 hours per week to be entitled to Super Guarantee.
Please note: The answers you get from this tool are based solely on the information you provide. Calculations are only estimates of potential superannuation eligibility and assume no change to hours worked or remuneration received and may not equate with the eligibility period for the calculation of superannuation entitlements. You must check the information you enter is correct, as we will not be held accountable for any incorrect calculations.