Superannuation guarantee is legislated to increase from July 1, 2021 and last week the Treasurer announced a review into retirement incomes. Superannuation is on the economic agenda and the rate at which superannuation is paid could be changing in the future. It’s an important part of the Australian economy – it’s estimated that at June 2019, assets totalling $2.9 trillion were held in superannuation funds! So I thought it timely to go back and do a refresh of exactly what superannuation guarantee is, what your responsibilities are as an employer and what are your rights as an employee.
What is superannuation guarantee?
Superannuation Guarantee is the compulsory amount contributed by employers on behalf of their employees. The rate is currently 9.5%. It was first introduced in 1992 at a rate of 3% and progressively increased to the current rate. It is legislated to continue increasing to 12% by 2025.
How much must an employer contribute?
If you are paid $450 or more in a calendar month, your employer must pay superannuation to a superannuation fund on your behalf. If you are under 18, you must also work more than 30 hours in a week to qualify. The amount paid will depend on your ordinary time earnings. This is the amount you usually earn in a week and includes commission, loadings and allowances and bonuses but super guarantee is not paid on overtime. If you earn more than $55,270 (2019/20 financial year) in a quarter, your employer pays a maximum of $5,250.65 in superannuation for the quarter. The maximum amount that can be contributed in a year is $25,000 (2019/20 financial year).
Can you choose where your superannuation is paid?
Generally, yes your employer must allow you to choose your own superannuation fund. The exception are instances where there is a workplace agreement in place or you are a public sector employee. Your employer should provide you with a standard super choice form within 28 days of you commencing employment. If you don’t notify your employer of your preferred super fund, they must still make payment on your behalf by the due date, but it will be paid into an employer nominated fund.
How do I know how much superannuation has been paid?
Employers are obliged to provide the amount of superannuation which will be paid on your payslip. However, employers only need to remit the superannuation owing each quarter by specified due dates. It can be done more frequently but must be done at least quarterly.
The following table summarises the dates superannuation should be paid:
|
Quarter |
Due date |
|
1 January – 31 March |
28 April |
|
1 April – 30 June |
28 July |
|
1 July – 30 September |
28 October |
| 1 October – 31 December |
28 January |
The employer is also required to notify the Tax Office that payment has been made.
What if an employer forgets to pay their employee’s superannuation?
If the payment is not paid to the employee’s superannuation fund by the due date, depending on how late it is paid, may be subject to a superannuation guarantee charge. This is the equivalent of the amount that should have been paid plus an administrative charge and interest on the outstanding balance. The amount is not tax deductible to the business if it isn’t paid on time.
If you are concerned that your employer hasn’t paid your superannuation, you are able to check what has been received by your superannuation fund. If it hasn’t been paid, then in the first instance, you should check with your employer. If you still think it isn’t being paid, you are able to report the matter to the Tax Office who will investigate.
What’s the difference between super guarantee and super salary sacrifice?
Super guarantee is compulsory. You can also choose to sacrifice some of your salary into superannuation. It isn’t compulsory. Something to watch is that if you salary sacrifice make sure your employer does not reduce the amount of their minimum super guarantee that they pay. Legislation to correct this anomaly is currently before parliament but at the date of posting, hasn’t been passed.
What if I’m self employed?
You are able to make a tax deductible contribution up to the limit of $25,000. The amount you pay is your personal choice and is not subject to the amount you earn. Note that in this case, you must notify your super fund that you intend to claim a deduction for the amount. In turn, the fund must acknowledge that they have treated the contribution as a deductible contribution. This must be done prior to lodging your tax return.
Lost super & multiple super funds?
While not strictly on topic, I like to take every chance I can to nag everyone to check whether you have any lost superannuation and to make sure you only have one super fund account. It’s easily done using your myGov account.
If you have further questions about how to make sure you’re paying the right amount for super or whether your employer is paying the right amount of super on your behalf, I’m more than happy to chat with you and offer a FREE 30 minute initial consultation. You can easily book online here and I look forward to helping you sort your taxes!