Superannuation

To avoid paying the superannuation guarantee (SG) charge under superannuation legislation, an employer must make the required superannuation contributions to a superannuation fund for the benefit of the employee.

Employers need to be aware of the following obligations under the Act:

• The SG rate is 10.5% from 1 July 2022 and will eventually reach 12% on 1 July 2025.
• Employees who are over eighteen years of age must be paid superannuation contributions.
• Employers are required to pay super contributions to employees who are under 18 years of age if they work more than 30 hours per week.
• Employers will make SG payments for eligible employees, regardless of age.
• Employers will need to follow the Australian Government Australian Taxation Office SuperStream standard when making super contributions on behalf of their employees. This is the system for employers to electronically track their superannuation transactions. It provides a consistent, reliable electronic method of tracking linked data and payments for superannuation. The SuperStream process creates a single channel to interact with multiple funds. Employers can comply with SuperStream by either using a software solution that conforms to SuperStream or a service provider who can arrange SuperStream compliance on their behalf eg an outsourced payroll provider or a commercial clearing house.
• Ensure you are using a default fund that is registered by Australian Prudential Regulation Authority (APRA) and offers a MySuper product (these are cost-effective super products with a basic set of features).
• From 1 November 2021 if a new employee does not choose a super fund, employers need to request the employee’s ‘stapled super fund’ details from the Australian Taxation Office (ATO). A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.
• Employers will need to keep accurate records of actual super contributions paid including date they were paid to the employee's super fund.
• Further superannuation rights and obligations may also apply under the employee's relevant award or agreement.

Ordinary time earnings (OTE)

Ordinary time earnings are usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, over-award payments, shift-loading, bonuses and allowances but doesn't include overtime payments. Payments for work performed outside an employee's ordinary hours of work are not ordinary time earnings. This is the case whether the payments are:

• calculated at an hourly rate
• paid a specific loading, or an annualised or lump sum component of a total salary package, which is expressly for overtime hours paid as overtime.

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Increases to superannuation

There will be a phased increase to 12% which will allow employers to take the increased SG contributions into account when negotiating future wage settlements.

While employers will take increases in SG contributions into account when negotiating future wage agreements, future wage increases are expected to be sufficient to ensure that overall real wages continue to grow.

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Schedule of SG increases

Remember that the changes do not affect the current superannuation rights and obligations under the employee's relevant award or agreement.

Consult your accountant for assistance in following the SuperStream standard and for specific superannuation and taxation advice.

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Voluntary employee contributions

In addition to employer superannuation contributions, an employee may make voluntary superannuation contributions.

An employee may request, in writing that their employer deduct a specific amount from their post-taxation wages and pay on their behalf, an additional superannuation contribution to their nominated eligible superannuation fund, subject to the rules of the relevant superannuation fund.

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Superannuation Clearing House

If you are a small business with 19 or fewer employees or an annual aggregated turnover of less than $10 million, the free Small Business Superannuation Clearing House is available to help you meet your super guarantee obligations.

You can register for the service by visiting Small Business Superannuation Clearing House Australian Taxation Office.

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Superannuation for contractors

If your business engages independent contractors (including sole practitioners), there are some circumstances where contractors may be considered employees for superannuation guarantee purposes, and principals are responsible for making super contributions for them.

To identify whether this applies to your contracting arrangements, use the Australian Tax Office Super guarantee decision tool.

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Further resources

• ATO: Work out if you have to pay super 
• ATO: Super Fund Lookup
• ATO: Stapled super funds: what you need to know