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Paying and reporting your employees’ Super Guarantee (SG) contributions every quarter can seem like a pretty complex task.
There’s a range of payment options and new technologies you need to understand to ensure you remain on the right side of the tax man.
To help, here’s a simple guide to help you understand your options and what you need to know.
Meeting your SG obligations
As an employer, you are required to pay quarterly SG contributions to a super fund on behalf of your eligible employees.
You are also required to pay and report your super contributions electronically in a standard format, which is called SuperStream. All your super payments and data reporting must be SuperStream compliant.
The standardised electronic format used in SuperStream is a key part of meeting your SG obligations and it’s used by employers, SMSFs and all APRA-regulated super funds.
What is SuperStream?
SuperStream was introduced in 2012 to streamline the process of making super contribution for employees. This standard was agreed to by the super industry to simplify the process of reporting and paying compulsory employee SG contributions to super funds.
SuperStream is not a tool for making super contributions, but rather an IT framework to electronically send contributions and their accompanying data.
The idea behind it is to have a standard format for data and payments so they can be transmitted seamlessly between different entities right across the super system.
SuperStream: what you need to know
The data you send using SuperStream is linked to your payment by a unique payment reference number. This allows you to make all your super contributions using a single transaction, even if the contributions are being sent to multiple super funds.
All SuperStream transmissions are encrypted and use sending and receiving protocols that all parties must follow. For employers, SuperStream makes contribution and rollover processing faster, more efficient and less prone to errors.
When you use SuperStream, you’re required to pay your super contributions electronically using electronic funds transfer (EFT) or BPAY.
Your payments and data must be sent on the same day to allow the super fund to reconcile the payment and information and to allocate your contribution to your employee’s super account.
Am I exempt from using SuperStream?
Most employers making SG contributions for their employees are required to make SuperStream-compliant contributions. There are a couple of exemptions:
- If you are a sole trader and are making super contributions for yourself. If you are a sole trader but are making super contributions for an employee, they must be SuperStream compliant.
- If you make contributions for directors or employees of your own incorporated business and it pays the contributions for you into your own SMSF. Super contributions to any other super fund than your own SMSF – or for all other employees – must be SuperStream complian
How do I make SuperStream-compliant payments?
The key to the SuperStream-compliance requirements is you need to pay your super contributions and send your employee information electronically, not manually.
You have several choices when you pay and report electronically. You can use your:
1. Payroll system
Employers using a payroll system should check with their software provider to ensure it’s SuperStream compliant.
This is important, as some payroll systems cover both super data and payments, while others only cover data. If the payroll system only provides data reporting, you will need to make your SG contributions to each super fund separately – and it needs to be done electronically.
2. Super fund’s online system
Most large super funds offer employers making employee super contributions access to an online payment service. These services are designed to make it easy for employers to meet all their reporting and payment obligations through their chosen default fund.
When registering with a super fund, some funds require employers to make contributions monthly rather than quarterly, so it’s important to check before signing up.
3. Superannuation clearing house
A super clearing house is a commercial operation providing a super transfer service to employers.
Clearing houses allow you to make a single online payment for super contributions to all your employees’ super funds. Once you register your employees’ super funds with the clearing house, you login at each payment cycle and make a single electronic transfer. The clearing house is then responsible for distributing the payments to the various super funds nominated by your employees.
Commercial clearing houses generally charge a fee per transaction. Your default super fund may have an arrangement in place with a suitable clearing house.
4. Messaging portal
Another alternative for SuperStream-compliant reporting and payments is a messaging portal. This is a tool for converting contribution data for your employees to a SuperStream-compliant format and sending the data to the relevant super funds on your behalf.
Although the messaging portal sends the contribution data for you, you still need to make an electronic payment to the super funds for your employee contributions.
Your messaging portal provider and financial institution can provide more details.
Clearing house option for smaller employers: SBSCH
For employers with 19 or fewer employees, or an annual turnover of less than $10 million, a good alternative for your SG payments can be the government’s clearing house facility.
The Small Business Superannuation Clearing House (SBSCH) is a free clearing house service managed by the ATO. It is SuperStream compliant and accessible through the ATO’s Business Portal or the ATO online service in myGov.
When using the SBSCH, you simply make a single electronic payment to the SBSCH and it distributes the payments to each employee’s nominated super fund.
If you are a small business operator or sole trader with an ABN who hasn’t used the ATO Business Portal, you will need to secure online credentials before using the SBSCH.
The SBSCH allows you to:
- Pay your contributions in a Superstream-compliant way, with the money and data sent electronically in a standard format
- Nominate a regular contribution amount for each employee
- Make a single transaction for your super contributions, with the SBSCH securely distributing the money to your employees’ nominated super funds
- Meet your SG obligations as soon as your payment and instructions are accepted by the SBSCH
- Access your transaction history.
Single Touch Payroll and SG contributions
Most employers are familiar with the new Single Touch Payroll (STP) regime introduced from 1 July 2019, but they may not know the increasingly important role it will play when it comes to SG contributions.
The STP reporting regime requires employers to report regularly to the ATO all their payments for wages and PAYG withholding, plus all their super information. Each time you run a payroll using a payroll-compliant platform, your employee payroll information is lodged with the ATO.
With the introduction of STP, the ATO has much more visibility of employer compliance with their SG obligations and has flagged it will be taking a much more active role in auditing and enforcing employer compliance. So, if you have not always paid your SG contributions on time, now may be a good time to review your internal systems in this area to avoid problems in the future.
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