When one thinks of Australia, images of kangaroos, koalas, the Sydney Opera House, and the Outback come to mind. However, there is something else very unique to Australia and that is Superannuation; just ‘Super’ for short. So what is so “Super” about Superannuation? Think of it as a mandatory 401K with a contribution funded strictly by the employer. Employees can contribute on a strictly voluntary basis via a salary sacrifice arrangement. Superannuation compliance for employers includes a lot of boxes to check, so keep reading to learn more.
Superannuation is an organizational pension program created by a company for the benefit of its employees. Super is money employers pay for their workers to provide for their retirement. It is compulsory for employers to make Superannuation contributions for their employees on top of the employees’ wages and salaries. Generally, if an employer pays an employee $450 or more before tax in a calendar month, Super needs to be paid on top of their wages.
• A Superannuation Fund is an investment vehicle that receives special tax concessions from the federal government. The cash that is held in the account is then invested in assets to generate returns for retirement.
• The minimum an employer must pay is called the Super Guarantee (SG).
• The SG is currently 9.5% of an employee’s ordinary time earnings and may increase annually. It should hit 12% by 2025.
• Employers must pay SG at least four times a year, by the quarterly due dates.
• Employers must pay and report Super electronically in a standard format, ensuring they meet SuperStream requirements. You can read about SuperStream in our recent blog at this link.
• Employee Super payments must go to a complying Superannuation Fund (i.e. a Super Fund) – most employees can choose their own fund.
• Employers need to contribute on time or pay the Super Guarantee charge.
• Funds deposited in a Superannuation account (Super Fund) will grow typically without any tax implications until retirement or withdrawal.
There are thousands of different Super Funds in Australia. Based on statistics released from 2017, there were around 600,000 Super Funds in Australia. Australian laws require that employers can not limit the choice of Superannuation Funds by employees unless they receive contributions in accordance with specific requirements.
Newly hired employees need to complete a Standard Choice Form within 28 days of hire. The form can be downloaded from the Australian Taxation Office (ATO) website at www.ato.gov.au. The employee will need to provide written details of the Super Fund chosen and information on how contributions are to be made. They must provide a written statement from the fund stating that it is a complying fund or, in the case of self-managed funds, a statement from the ATO confirming this.
If an employee has not elected a Super Fund, or does not have one, the employer must enroll that employee into the company’s default Super Fund. Every employer should have a default Super Fund set up for such purposes.
As mentioned, payments into the thousands of Super Funds need to be done electronically based on fairly recent SuperStream Regulations. Employers can work with Super Clearing Houses to manage this process. A Super Clearing House allows for the management and payment of all of an employer’s superannuation contributions online, and from one location, regardless of which fund employees choose. This can save much time if an employer has multiple payments to make to different funds. The Super Clearing House will distribute the payments to the employees’ funds.
Celergo is able to assist you in managing this Super process. Please contact us for more detail!
**This article is for informational purposes only. It is not intended to constitute legal advice.