At first glance, employers’ responsibilities and obligations under the superannuation rules can seem complex, but they’re fairly straightforward once you look into it. Here’s what you need to know:
1. Choosing a default super fund
Employers must choose a default fund for compulsory Super Guarantee contributions. As the term suggests, it’s the fund which you pay into, on an employee’s behalf if they haven’t nominated their own super fund.
Choosing a default fund is a very important decision, as super is your staff's money, and you want to do the right thing by them. Industry SuperFunds not only perform well, they are run only to benefit your employees and do not charge joining or handling fees for your company’s super payments. Industry SuperFunds make it easy to administer your employees’ super contributions and they are MySuper authorised, so you can rest assured that you are providing your employees with a default fund which has low fees for members, historic strong returns^ and is run only to benefit them. Most ‘Modern Awards’ list the default super funds that employers must choose from for their default funds. You can use our Default Fund Finder to get a list of Industry SuperFunds that are included on the list for each relevant award.
You must ensure that your default fund offers a MySuper product. MySuper is a low cost, simple super product that meets certain performance requirements. If your current default fund does not offer a MySuper product you will need to switch to a fund that does.
If an employee wishes to choose their own super fund, they can notify you of this when they first join your company, or they may choose a fund at any time during their employment. They can even change funds, but the onus is on the employee to tell you if they have changed fund preference. For more details about choice of funds, see the Super Rules page.
2. Employer superannuation contributions
Almost all employees in Australia are entitled to a superannuation contribution, paid by their employer into a super fund.
It doesn’t matter if the employee is full time, part time or casual (depending on income and hours). Even some contractors may be entitled to super contributions.
Visit the Contribution Rules page to see which of your employees you’ll need to make super contributions for.
3. The Super Guarantee system and enterprise agreements
Unless a specific enterprise agreement or award states otherwise, employers are required to pay a set rate of superannuation into each eligible employee’s super fund.
The rate is 9.5% of the employee’s income, and is set to increase gradually over the next few years.
For super purposes, ‘income’ includes regular wage plus commissions, shift loadings and some allowances but not overtime payments. Overtime that is regularly rostered is included as income.
Most businesses make the super contributions to coincide with each payday. This is not compulsory, but contribution entitlements are calculated monthly and contributions must be made at least quarterly and reported regularly to the ATO.
Use this calculator to work out how much super you need to contribute to an employee’s super fund.
4. Reportable superannuation contributions
An employee may ask you to deduct extra super from their pre-tax income, and pay it into their super fund. This is called salary sacrifice and it gives the employee tax and retirement income benefits. In fact, salary sacrificing is an excellent way to boost retirement income. You must notify the ATO of all such payments in a Superannuation Payment Summary. Contributions made under the compulsory Super Guarantee system are not included on Payment Summaries.
5. Keep up to date
Australia’s super laws and regulations often change, even slightly. It’s important to keep up to date with new rules and obligations, however your default super fund should send you regular updates on changes to your responsibilities and procedures.
We assume that the employee is an Australian resident and has provided a tax file number to their employer.
Employees can be full time, part time or casual.
The Super Guarantee is currently set at 10% of ordinary time earnings. This rate is set to rise incrementally to 12% by 2025. The SG percentage can be manually increased in the calculator.
If monthly salary (before tax) is $450 or more, employees are generally entitled to SG payments.
Employees under 18 must also work more than 30 hours per week to be eligible for SG payments.
The maximum income on which employers must pay the Super Guarantee in 2021/22 is $58,920 per quarter ($235,680 per year). If an employee earns over this amount, the employer is not obligated to make SG contributions for anything above the limit.
This calculator is not intended to be relied upon for the purposes of making a financial decision. You should consider your objectives, financial situation and needs, which are not accounted for in this information, before making any investment or financial decisions.
You are responsible for your own investment decisions and should obtain specific, individual advice from a financial services licensee before making any financial decisions.