How to pay superannuation for Australian businesses

Superannuation is a vital part of running a business in Australia. If you have employees, you must make regular super contributions on their behalf. Understanding how to pay superannuation can feel overwhelming if you’re a small business owner. Paying super correctly and on time will only become more critical under Payday Superannuation in 2016.

This blog article is here to help you navigate the superannuation process and introduce you to a tool that can make managing super easy—Payroller. The information in this article will help you better understand your obligations and how to simplify your super payments.

What are your super obligations as an employer in Australia?

As a small business owner, it’s crucial to understand your obligations to stay on top of super payments. Here’s a breakdown of the key requirements:

• Pay the correct amount: You must contribute 11.5% of your employee’s ordinary time earnings (OTE) to their super fund.
• Meet the deadlines: Super payments are due on the 28th day of the month following the end of each quarter (e.g., 28th October for the July-September quarter).
• Provide employees with a choice of fund: Employees can nominate their preferred super fund. If they don’t, you must select a default fund for them.
• Use SuperStream: All businesses must pay super electronically through a system called SuperStream. This means both the payment and the data about the payment are sent electronically.
• Submit payment via a super clearing house simplifies paying into multiple super funds. Many small businesses use the ATO’s free clearing house or Payroller’s built-in option with Beam.

You must meet these obligations to avoid penalties, interest, and additional payments. Make sure you’re keeping track of your super contributions to avoid any issues with the ATO.

Super payment obligations to part-time and casual employees

Superannuation isn’t just for full-time employees. You must also pay super for part-time and casual employees above 18 years old, regardless of what they earn. This means if you have part-time staff, you must still contribute 11.5% of their earnings to their nominated super fund.

For example, if a part-time employee works 20 hours a week and earns $600 a fortnight, you’ll need to calculate 11.5% of their earnings and ensure those contributions are paid into their super fund.

Super payment obligations to under 18 employees

Employees under 18 years old follow the same rule if they work for more than 30 hours per week, regardless of how much you pay them. This requirement ensures that younger workers are not excluded from building their retirement savings and receiving the benefits of superannuation.

The number of hours worked is the actual number of hours the employee works in that week. This should not be averaged across non-weekly pay periods or employment with other businesses.

How to pay superannuation for employees

Paying superannuation for your employees involves making contributions to their super fund based on their earnings. As an employer, you must pay super for any employee above 18 years old, regardless of their employment type and earnings. You must contribute at least 11.5% of their ordinary time earnings (OTE) into their nominated super fund.

Here’s a step-by-step process to help you understand how to pay super for your employees:

1. Calculate super contributions

You must calculate 11.5% of your employee’s ordinary time earnings (OTE). OTE includes regular wages, bonuses, and allowances but excludes overtime pay.

It’s important to ensure that you accurately calculate this percentage based on the most updated superannuation laws. Errors can lead to underpayment or overpayment, both of which can have financial consequences for your business. Regularly reviewing your calculation methods can help maintain accuracy.

2. Choose a super fund

Your employee may already have a super fund, or you can choose a default super fund. Make sure the fund complies with superannuation laws.

If your employee has a preferred super fund, they should provide you with the necessary details. If not, selecting a default fund that meets the government’s MySuper requirements ensures that your employees are receiving appropriate benefits. Check for eligible industrial awards that mandate a designated super fund.

It’s advisable to communicate with employees about their options and any changes in superannuation laws that may affect their choices.

3. Register with a super clearing house

This service helps you pay super to multiple funds in one transaction. You can use the Australian Tax Office’s (ATO) free super clearing house or a private clearing house.

Using a clearing house simplifies the payment process, saving you time and reducing the risk of errors when managing multiple super funds. Make sure to register well in advance of payment deadlines to avoid any delays in processing.

4. Submit payments

Use your payroll software or clearing house to submit timely super payments. Payments must be made quarterly—by the 28th of the following month after each quarter. Set reminders for these deadlines to ensure compliance and avoid late penalties from the ATO. Additionally, consider automating the superannuation process to streamline payments.

5. Keep records

Always keep a record of your payments and correspondence with super funds to ensure you’re staying compliant. Maintaining accurate records is crucial for future audits and for resolving any disputes that may arise regarding contributions.

Keep copies of payment confirmations, correspondence with super funds, and any relevant documentation related to employee entitlements. Regularly reviewing these records can help you stay organised and prepared for any inquiries from the ATO or other regulatory bodies.