- How much is the super guarantee payment?
- What are the quarterly due dates for super guarantee payments?
- What is the maximum super contribution base?
- 5 step guide to making superannuation guarantee payments for your employees
- The superannuation guarantee charge
- The superannuation guarantee amnesty
- The bottom line
The Superannuation Guarantee (SG) is the official term for compulsory super contributions made by Australian employers on behalf of any full-time, part-time or casual employees who:
- earn more than $450 before tax in a calendar month,
- work in Australia (including temporary residents and working holiday makers), and
- are over the age of 18.
If an employee is under the age of 18, they must also work more than 30 hours in a week to qualify for the SG payment.
If you’re employing a contractor who meets the above criteria, you must make the SG payment based on the labour component of their contract. In other words, on the amount you’re paying them for their labour as part of their contract. This amount should be itemised on the invoice they provide for their services.
How much is the super guarantee payment?
The Superannuation Guarantee rate is currently 9.5% of an employee’s ordinary time wages or salary. SG payments can include employee salary-sacrificing contributions to a super fund.
If you’re an employer, you must make your SG payments each quarter on behalf of your employees to a complying super fund or retirement savings account. These payments are tax-deductible in the financial year they are made. They also count towards each employee’s concessional super contributions cap (which is currently $25,000 per year).
Ordinary time wages or salary includes your employee’s normal hours of work plus any of the following potential entitlements:
- shift loading,
- leave loading,
- termination payments made in lieu of notice,
- back pay.
However, ordinary time earnings doesn’t include overtime payments. The Fair Work Act defines normal hours of work as 38 hours per week, unless otherwise specified in an award or other industrial agreement..
You can choose to pay more than the 9.5% SG for an employee as part of their employment arrangement with you. However, the excess amount must be reported as a reportable super contribution on their annual payment summary. This amount isn’t included in an employee’s taxable income, but it is considered in determining their eligibility for any government benefits.
The super guarantee rate is scheduled to increase to 10% from July 2021 and then to progressively increase to 12% by July 2025, as outlined in the table below. The Labor Party has said they will fast-track the increase to 12% if they win government in the 2019 Federal Election, but they haven’t yet provided a schedule.
|Financial year||Super guarantee (%)|
|1 July 2018 – 30 June 2019||9.5|
|1 July 2019 – 30 June 2020||9.5|
|1 July 2020 – 30 June 2021||9.5|
|1 July 2021 – 30 June 2022||10|
|1 July 2022 – 30 June 2023||10.5|
|1 July 2023 – 30 June 2024||11|
|1 July 2024 – 30 June 2025||11.5|
|1 July 2025 – 30 June 2026||12|
What are the quarterly due dates for super guarantee payments?
The quarterly due dates for SG payments are outlined in the following table.
|Quarter||SG payment due date|
|1 July – 30 September||28 October|
|1 October – 31 December||28 January|
|1 January – 31 March||28 April|
|1 April – 30 June||28 July|
Payments can be made more regularly, so long as your total SG obligation for each of your employees is made by the quarterly due date. Your SG payment obligation is calculated from the date each employee starts working for you.
What is the maximum super contribution base?
The maximum super contribution base restricts the SG payment that you need to make for employees whose ordinary time wages or salary exceed a certain limit (currently $55,720 per quarter). You do not have to pay the SG on any employee earnings above this base limit, though you can choose to do so.
5 step guide to making superannuation guarantee payments for your employees
Step 1: Set-up a record-keeping system for your SG calculations and payments.
To fulfil your SG legal compliance obligations, you must keep records for 5 years that show how you calculated your SG payments for each employee, and that you provided each person with a choice of super fund if necessary (explained further in Step 3). Failure to keep appropriate SG records can attract ATO penalties.
Step 2: Work out all employees for which you have an SG payment obligation.
Step 3: Calculate your SG obligation for each employee (including whether or not your SG obligations are affected by any salary-sacrificing arrangements you may have).
For example, some awards may specify that you must continue to make SG payments for an employee at their pre-salary sacrifice level.
Step 4: Make your quarterly SG payment for each employee to a complying super fund or retirement savings account (RSA) by the due date.
It’s important to understand that if you make SG payments to a non-complying fund, you won’t have met your compulsory SG payment obligations. You can check if a fund is a complying super fund by using the ATO’s online Super Fund Lookup service. A retirement savings account is typically offered by banks and building societies.
If you’re a small business (i.e. you employ less than 20 employees or have an annual turnover less than $10 million), you can use the ATO’s Small Business Superannuation Clearing House to make your SG payments. This is a free service that allows you to make a single electronic payment that can then be automatically distributed in appropriate amounts to the super funds of multiple employees if necessary, using the ATO’s SuperStream facility.
If you’re a larger organisation, you also must use the SuperStream system for your SG payments.
The first time you make an SG payment to a complying super fund or RSA on behalf of an employee, you must provide the employee’s tax file number to the fund or account provider. Failure to do this can result in you as the employer being liable for ATO penalties.
Certain industrial awards may specify the super fund where employee SG payments must be made. Alternatively, you must offer your employee the option to choose a super fund when they commence their employment with you by providing them with a Superannuation standard choice form. You must also nominate a complying super fund that your employee’s SG payments will be paid into if they don’t choose their own complying fund.
Step 5: Determine if you need to include any reportable super contributions (i.e. any additional payments you may have made above the SG for any employee) on their annual payment summary.
The superannuation guarantee charge
The superannuation guarantee charge is levied by the Australian Taxation Office (ATO) if you fail to make your employee SG payments on time. This charge is not tax-deductible and includes:
- the shortfall amount,
- interest (currently 10%), AND
- an administration fee of $20 per employee per quarter.
If you don’t make your SG payments on time, you’ll also be required to lodge a superannuation guarantee charge statement to the ATO, otherwise you’ll be liable for an additional penalty.
When you make your late SG payment, you may be able to:
- use a late payment offset to reduce your super guarantee charge prior to receiving your assessment from the ATO, or
- carry your late payment forward so that it’s a pre-payment of a future SG obligation for the employee concerned, provided it is within the next twelve months.
It’s important to understand that the ATO prioritises the collection of unpaid SG charges. For example, if you’re a company director, they have the power to issue you with a breach notice and hold you personally liable for any outstanding SG payments. Alternatively, they can issue garnishee notices to your financial institution to direct them to divert company or business funds to pay any outstanding SG payments.
The superannuation guarantee amnesty
Parliament has been considering the Superannuation Guarantee Amnesty Bill. However, this legislation has not been passed and it is unlikely to be before the federal election is held in the first half of this year. What will happen after the election is uncertain.
The Bill proposed a one-off, 12-month amnesty opportunity for employers to self-correct any past SG non-compliance issues without facing any penalties from the ATO.
The superannuation guarantee is a legal compliance obligation for all employers in Australia. Employers who fail to comply with this obligation to their eligible employees will attract significant penalties from the ATO.
The information contained in this article is general in nature.