About compulsory contributions

As an employer, it's important you fully understand your superannuation obligations as failure to meet these minimum requirements could mean financial penalties from the Government.

Meeting these requirements doesn’t have to be difficult. Firstly, determine if you’re considered an employer for superannuation purposes. Generally, if you employ a person under a verbal or written contract on either a full-time, part-time or casual basis, then you are. However, it’s best to check your eligibility with the ATO.

Employers are required by law to pay contributions on behalf of an eligible employee. These contributions are usually referred to as Superannuation Guarantee Contributions (SGC) and are typically 9% of your employee’s salary or ordinary times earnings, which could include award payments, bonuses, commission and allowances.

Eligible employees are:

• Between 18 and 69 years of age inclusive;
• Paid $450 (before tax) or more in a calendar month; and
• Work full-time, part-time or on a casual basis.

In some circumstances you may need to not have to make SG Contributions for employees who do not meet the above criteria. We suggest you have a look at the ATO website for more information.

Contractors
If you hire contractors wholly or principally for their labour and they’re not free to engage other people to perform the work, you may be required to pay their superannuation contributions, even if they quote an Australian Business Number (ABN).

Self-employed?
Self-employed people can choose whether or not they wish to have superannuation. However you may want to consider superannuation as a way of saving for your retirement.

In most cases, self-employed people can claim a full tax deduction on contributions made up to age 75. Directors who receive salary or wages are generally entitled to superannuation contributions from their employer, provided they meet the eligibility requirements.

Tax deductibility for employers
Employers can usually claim a deduction for all contributions made on behalf of employees under the age of 75. However, employer contributions and deductible personal contributions will be assessed against the concessional contributions cap.

The information above is intended as a guide only. If you are unsure about who you need to make contributions for we suggest you contact the ATO.

Making contributions

1. Calculate your employee's ordinary time earnings (OTE) per calendar month
From 1 July 2008, employers must use ordinary time earnings (OTE) as defined in superannuation guarantee law to calculate the minimum superannuation guarantee contributions for their eligible employees. Ordinary time earnings are generally what your employees earn for their ordinary hours of work, including:

• Over-award payments
• Bonuses
• Commissions

Please note, this is not an exhaustive list, for more information on OTE, refer to the ATO website.

2. Work out what 9% of your employee's salary or OTE comes to
This is the minimum SG contribution that you are required to pay on your employee's behalf.

For more information on how to calculate your employees contributions, visit the ATO website.

When to make payments
Employers are required to pay these contributions by a cut off date quarterly.

Missing the quarterly cut off
If you fail to make your payments by the cut off you'll need to lodge an SG charge statement with the ATO and pay the SG charge.

You'll need to do this if you don't pay:

• Your contributions by the cut off date
• Enough contribution for each eligible employee
• Superannuation to each employee's chosen fund

The charge applicable is the employee's SG shortfall amount, nominal interest of 10% p.a. and an administration fee of $20 for each employee where there is a shortfall.

Visit the ATO to access the SG Charge Statement and Calculator to calculate work out the relevant charge.

Where contributions are paid
You must pay contributions into a complying superannuation fund or RSA. Most employers select a superannuation fund they present to their employees as the business’ nominated fund, but in most cases, employees have the right to choose which superannuation fund is right for them.

The information above is intended as a guide only. If you are unsure about who you need to make contributions for we suggest you contact the ATO.