Superannuation law sets out the various obligations (or rules) that employers must follow in Australia. There are nine key obligations, and sticking to these will mean you are well on your way to having your employer super contribution obligations under control. A good starting point is to make sure you are paying all super on time and in full.
1. 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 state and federal government employees
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 Default Super Fund Finder 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.
2. If an employee doesn't make a choice, check for a stapled fund
As of 1 November 2021, all eligible Australian workers will be stapled to their main existing superannuation fund. This means that if new employees do not supply details of a nominated fund, employers must use the ATO database to check if they have a stapled fund. As long as the stapled fund complies with superannuation law then you must pay the necessary super contributions into that fund.
If an employee doesn’t have an existing super fund and doesn’t nominate one, 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.
3. 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 eligible employee’s Ordinary Time Earnings (OTE). The Australian Government determines the Super Guarantee rate which, in 2022/23, is set at 10.5% 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.
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.
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*.
We assume that the employee is an Australian resident and has provided a tax file number to their employer.
Employees can be full time, part time or casual.
The Super Guarantee is currently set at 11% of ordinary time earnings. This rate is set to rise incrementally to 12% by 2025. The SG percentage can be manually increased in the calculator.
Employees under 18 must work more than 30 hours per week to be eligible for SG payments.
The maximum income on which employers must pay the Super Guarantee in 2023/24 is $62,270 per quarter ($249,080 per year). If an employee earns over this amount, the employer is not obligated to make SG contributions for anything above the limit.
This calculator is not intended to be relied upon for the purposes of making a financial decision. You should consider your objectives, financial situation and needs, which are not accounted for in this information, before making any investment or financial decisions.
You are responsible for your own investment decisions and should obtain specific, individual advice from a financial services licensee before making any financial decisions.
6. Keep proper records
You are required to keep records:
- Detailing whether employees have or have not been offered a choice of fund
- To confirm that your company’s default fund is compliant and meets minimum life insurance requirements
- Five years to show that all financial obligations have been met, and
- 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.
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 their preferred super fund.
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 employee's 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).
Note: From 1 January 2020, salary sacrificed contributions can no longer be considered super guarantee contributions. For example, if your employee elects to salary sacrifice 5% into their super, you will still be required to pay the current super guarantee rate or more of your employee's ordinary time earnings, and the salary sacrifice amount, into their super to avoid the super guarantee charge. Your employee's salary sacrifice agreement should be in addition to the compulsory Superannuation Guarantee. You should not include any part of your employee's salary sacrifice into mandatory super contributions.
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 that 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.