Six Steps to Help Get Super Right
Super is everyone’s business. Regardless of whether you’re a franchisee or franchisor, you need to understand your super obligations. A franchisor can be held responsible if they know a franchisee is not getting their super right.
Employees rely on super to fund their retirement. For most people, super begins when they start working – full time, part time, or casually – and retirement can seem a long way off.
So, put some time aside for super; by doing so you’ll not only take care of your most valuable asset, you’ll minimise risk to your brand. Here are six simple steps to help you get it right.
Check you’re paying for the right people
You need to pay super for all of your eligible employees. Generally, an employee is eligible for super if they are 18 years of age and get paid at least $450 before tax a month.
Employees under 18 must work for more than 30 hours per week to qualify.
You have to pay super for some contractors, even if they quote an Australian business number (ABN).
If you’re a franchisee and employ an individual and pay them (greater than 50%) for their labour and they’re unable to delegate the work, then you must pay super. If your contract is with someone other than the person actually providing the labour, such as a company or trust, you don’t have to pay super.
The ATO’s employee/contractor decision tool will help you determine the difference between an employee and a contractor: ato.gov.au/calc_employeeorcontractordecisiontool
If you send an Australian employee to work temporarily in another country, you must continue to pay super contributions in Australia for them.
The other country may require you or your employee to pay super (or equivalent) there as well. Australia has bilateral agreements with some countries so you don’t have to pay super twice – provided you continue to pay compulsory super contributions for the employee in Australia.
Check you’re paying the right amount
Currently you need to pay 9.5% of your employee’s ordinary time earnings (OTE) into super.
Your employee’s OTE will be the normal hours they work, including over-award payments, commissions, shift loading, allowances and bonuses, unless their hours are specified in an award or agreement.
The ATO’s checklist at ato.gov.au/OTE will help you identify what payments are considered salary and wages for super purposes.
With your agreement, an employee can ‘sacrifice’ part of their salary or wages into super. If they choose to do this, you make super contributions to their fund on their behalf. The main benefit for your employee is that this reduces their assessable income and the amount of PAYG tax they have to pay. Instead the contributions are taxed in the super fund at the concessional rate of 15%.
Check you’re paying on time
You need to pay super at least quarterly – some super funds, awards or agreements may require more frequent payments. The payment due dates are 28 October, 28 January, 28 April and 28 July. When a due date falls on a weekend or public holiday, you can make the payment the next working day.
If you don’t pay on time and to the correct fund you will have to lodge a ‘superannuation guarantee charge statement’ form and then pay the charge liability. You can find the form at ato.gov.au/sgccalculator
Claiming a tax deduction
To claim a deduction for super contributions, your employer contributions must have been received by the employees’ super funds by 30 June. If your payments are received on or after 1 July, you can claim the deduction for the payment the following financial year.
Check you’re paying to the right place
Your employees are generally entitled to choose their super fund, unless they are under an enterprise agreement or workplace determination.
You need to provide them with a standard choice form so they can advise you of their chosen fund. You also need to nominate a default fund that you will pay their contributions into if they don’t choose a fund. The standard choice form is available for download at ato.gov.au/choiceform
The super fund selected must meet specific legal requirements. You can check whether a fund is complying by going to Super Fund Lookup superfundlookup.gov.au/
Check you’re paying the right way
You must pay the SuperStream way. This means you pay your employees’ super, and send associated data, electronically.
The data needs to be in a standard format so it can be transmitted consistently across the super system – between employers, funds, service providers and the ATO. The data is linked to the payment by a unique payment reference number.
There are a number of ways you can pay super to ensure you’re meeting the SuperStream standard. These include using your payroll system, your super fund’s online system or a super clearing house.
The benefit of a super clearing house is that you make a single electronic payment and the clearing house distributes the money into your employees’ funds on your behalf, in the standard SuperStream format.
The ATO offers a free super clearing house for small businesses with 19 or fewer employees, or annual turnover below $10 million. The service is called the Small Business Superannuation Clearing House (SBSCH) and is one option to ensure you are paying super correctly. Information on how to access the service can be found at ato.gov.au/sbsuperclearinghouse
Check you’re keeping accurate records
And of course, you need to keep accurate records. You must be able to show the ATO how much super you paid each of your employees and how it was calculated. You must also be able to show you offered each eligible employee their choice of super fund.
You can use whatever method suits you best to keep records, but they must be in English (or in a format that can be easily accessed and converted into written English).
You must keep records for five years. This is the case with tax and super. If you keep electronic records, software must be available to access older floppy discs, CDs or computer records.
Finally, you can also visit ATO Community at community.ato.gov.au to ask specific questions about your own situation.
For information on Super for employers visit ato.gov.au/superforemployers (you can also enter search terms on the ATO website).
JOHN FORD is an Assistant Commissioner, who has been has been with the ATO since 1998. He has held senior roles in a number of areas within the tax office.
Having most recently led the ATO operational response to the Panama and Paradise papers, John moved to Superannuation in February 2018 and now leads Engagement and Assurance. In this role he works closely with the superannuation industry and leads over 400 officers across the country who administer the superannuation compliance program. John is also the chair of the Superannuation Risk Committee that is responsible for identifying, assessing and ensuring treatment strategies are in place.