Superannuation obligations for employers
Superannuation law sets out the various rules that employers must follow in Australia. There are 9 key rules, and sticking to these will mean you are well on your way to having your employer super obligations under control. A good starting point is to make sure you are paying all super on time and in full.
Rule 1 - Pay the Superannuation Guarantee
The Super Guarantee (SG) is a compulsory contribution made by all employers on behalf of each of their eligible employees. The contribution is paid directly to each employee’s nominated super fund, or a default fund on their behalf.
If you run a business that employs staff, then it is likely you will be required to make Super Guarantee contributions.
The amount paid is set at a percentage of each employee’s Ordinary Time Earnings (OTE). The Australian Government determines the Super Guarantee rate which, in 2018/19, is set at 9.5% of OTE. OTE generally includes the employee's regular wage plus any shift loadings, commissions, paid leave and some allowances.
Some companies pay their Super Guarantee contributions at the same time as they pay their staff wages, and all employers must make payments at least quarterly.
A superannuation clearing house can save you a lot of time and paperwork if you need to pay into numerous super funds.
Visit our Superannuation Guarantee page more information.
Rule 2 - Offer a choice of funds
In most cases, businesses must allow their employees to choose their own super fund.
There are three exceptions to this rule:
- Employment is governed by an industrial instrument (e.g. a workplace agreement) which specifies the fund or funds into which payments must be made
- The employee is a member of a ‘defined benefit fund’ that meets certain conditions
- Some public sector employees of the state and federal governments
When a new employee joins your company, he or she may nominate their preferred super fund. As long as it complies with superannuation law, and the employee has given you all the appropriate information, then you must pay the necessary super contributions into that fund.
Likewise, an existing employee can notify you of their nominated super fund at any time. In both cases, employees should fill out a Standard Choice form and return it to you as soon as possible. By law you are required to give new staff members a superannuation Standard Choice form within 28 days of them starting work.
If an employee doesn’t specify a preferred super fund, then you must pay their super into a default fund with a MySuper option for contributions. More on MySuper.
Many Modern Awards specify the default funds you can choose from, and you can use our FundFinder to work out which Industry SuperFunds are listed in awards relevant to your employees.
While there’s no limit to the number of times an employee can request a change of preferred fund, you generally only need to act on their request once every 12 months.
Rule 3 - Provide a Standard Choice form
The Standard Choice form is the official document used by an employee to tell you which fund they want their super paid into.
If your staff members are entitled to choose their own super fund, then you must provide them with a Standard Choice form within 28 days of:
- Them starting employment
- Receiving a written request for a Standard Choice form (unless the employee has received a Standard Choice form in the last 12 months)
- You realising that contributions can no longer be made into the employee’s preferred fund (e.g. the fund no longer complies with Australian superannuation regulations)
- Changing your company’s default superannuation fund
Once an employee has chosen their own super fund, you have two months in which to start making payments into that fund.
If you discover that the employee is not actually a member of the fund they have nominated, you should avoid making any payments into that fund until the employee has joined. It is up to the employee to ensure they are properly registered with their chosen fund. You can tell them that, if they haven’t joined by the next payment date, you’ll automatically pay the required super contribution into the company’s default super fund.
Rule 4 - Do not attempt to influence an employee’s choice of fund
Unless you hold a Financial Services Licence you are not allowed to provide your employees with any information about any fund other than factual information or information regarding the default fund. It is up to the employee to find out how to join a fund, get product information and disclosure statements, and ensure they have filled out their membership applications correctly. You can direct an employee to government websites which allow for the comparison of different super funds.
Likewise, an employer must not try to influence an employee’s choice of fund.
Rule 5 - Calculate income correctly
Because Super Guarantee contributions are based on an employee’s income, it is vital that their income is calculated correctly.
Contributions are set as a percentage of regular ‘Ordinary Time Earnings’. This includes the employee’s regular wage plus any shift loadings, commissions, paid leave and some allowances.
There are a number of items which are generally excluded from ordinary time earnings
- overtime (other than regularly rostered overtime)
- 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
- partnership and trust distributions
- restraint of trade agreement payments
- payments for domestic or private work under 30 hours a week
You can then work out the payment using this calculator.
Super Contribution Calculator
Rule 6 - Keep proper records
You are required to:
- Keep records detailing whether employees have or have not been offered a choice of fund
- Keep records to confirm that your company’s default fund is compliant and meets minimum life insurance requirements
- Keep records for five years to show that all financial obligations have been met
- Keep copies of written information provided to employees and proof that superannuation contributions have been made to employee's chosen funds or the default fund.
Penalties may apply if these records are not kept.
Rule 7 - Keep employees informed
Under the Fair Work Act, you are obliged to include super contribution amounts on employee payslips.
You are also required to tell employees (within 28 days of starting work) which default fund their contributions will be paid into if they don’t provide details of a preferred super fund.
Rule 8 - Assist employees with salary sacrificing if requested
While you are not allowed to give financial advice to employees (unless of course you hold a Financial Services Licence), you can assist employees if they want to boost their super through salary sacrificing. Salary sacrificing arrangements must have the agreement of both the employer and employee.
A salary sacrifice contribution is a before-tax payment out of an employees’ wage into their super fund and may carry with it some good tax advantages for the employee.
You should enter into a written agreement with your employee which states the terms and conditions of the salary sacrifice arrangement. Salary sacrifice arrangements can only apply to future payments not past earnings, and there are limits to how much a person can voluntarily contribute, before they lose the tax concessions. Super funds do not differentiate between employer SG contributions and salary sacrifice amounts, therefore they are both assessed against an individual’s concessional contributions cap.
Make sure you keep written records of all salary sacrifice agreements made between you and your employees as you are required to report these amounts on the individual’s payment summary (reportable employer super contributions).
Rule 9 - Submit Tax File Numbers as required
By law, employers must pass their employees' tax file numbers (TFN) on to their super fund for authorised purposes. You need to do this no later than:
- The day on which you make the first super contribution for that employee or
- Within 14 days of receiving their TFN, if not available at time of first contribution
If a super fund does not have a TFN for one of its members, then that member can be taxed at a much higher rate and the super fund will not be able to accept any voluntary contributions made by, or on behalf of the individual. This means that eligible individuals could miss out on the co-contribution and other benefits.
Employers who fail to meet these obligations will face a financial penalty from the Australian Tax Office.
If you need any more information about the superannuation rules, simply contact your super fund or the Australian Taxation Office, and they should provide you with all the answers.
* 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 2017/18 it is $54,030 per quarter ($216,120 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.