Employer’s guide to Superannuation Guarantee (SG) contributions: Which employees are eligible?

The SG is money you pay to your workers to help provide for their retirement, and it generally forms part of their remuneration package. The amount is a set amount of an employee’s salary or wages, with the percentage set by the government.

If you have eligible employees, you must pay their SG contributions at least four times a year by the quarterly due dates and you must report your contributions electronically in a standard format.

Current SG rate

The current rate for calculating SG payments is 9.5% of your employee’s salary and wages, although this percentage rate changes. The 9.5% rate is based on your employee’s ordinary time earnings (OTE) and is currently legislated to continue until 1 July 2021, when it will increase to 10%.

The SG rate was originally set to increase to 10% in July 2015, but the government legislated to slow the gradual increases in the rate, delaying the increase to this level by seven years until 1 July 2021.

Superannuation Guarantee rates (2002 to 2026)

As an employer, if you don’t pay the required SG contributions into your employees’ super accounts by the quarterly due date, you may have to pay a Superannuation Guarantee Charge (SGC) to the ATO. The SGC includes all the SG amounts owing to an employee, plus interest and an administration fee.

Employers who don’t make their required SG payments into the correct super fund by the due date must report and rectify the missed payment by lodging an SG Statement and paying the SGC.

Am I an employer?

Work arrangements are no longer as straightforward as in the past. Whether or not you’re an employer and required to pay SG for your workers is not always easy to determine.

It’s worth noting that the definition of ‘employee’ used to determine whether an individual is entitled to SG contributions is outlined in Section 12 of the Superannuation Guarantee (Administration) Act 1992 and is not the same as the one used in tax law. The definition is further outlined in Superannuation Guarantee Ruling SGR 2005/1.

Who is eligible to receive the SG?

The short answer is that if you are paying an employee aged 18 or over $450 or more (before tax) in a calendar month, you must make an SG contribution on behalf of your employee in addition to their wages.

If your employee is aged under 18, they must also work for more than 30 hours per week to qualify for SG payments. You must make an SG contribution on top of their wages each week they work more than 30 hours.

Employees who are a company director or a family member working in your business are also eligible for SG contributions.

If your employee is receiving a super pension or annuity while still working (this includes employees who qualify for transition-to-retirement payments), you must still make SG contributions on their behalf.

Common employee situations

Contractors

In general, if you have an agreement with a contractor that is mainly for their personal labour and skill rather than a set result, and the contractor must perform the contracted work personally, they are considered an employee for SG purposes.

This means you are required to make SG contributions on their behalf, even if the contractor provides you with their Australian Business Number (ABN).

In situations where you contract a company, trust or partnership rather than a particular person to provide the labour, you are generally not required to make SG contributions on the contractor’s behalf. 

An easy way to check if you are required to pay SG contributions for a contractor is to use the ATO’s Super Guarantee Eligibility Decision Tool.

Temporary residents

You are also required to make SG contributions on behalf of temporary residents like backpackers or working holiday makers, as they are entitled to receive SG payments.

When a temporary resident eventually leaves Australia, they are allowed to claim their super (less the relevant tax) through the Departing Australia Superannuation Payment (DASP) program.

Employees working overseas

If you send one of your local employees overseas to work temporarily, you are still required to pay SG contributions for the employee.

SG payments are required even if the other country requires you or your employee to pay super (or its equivalent) in that country. It’s worth noting Australia has a number of bilateral agreements in place with certain countries so you’re not required to pay super in those jurisdictions. You must, however, continue to pay SG contributions for your employee in Australia.

To receive an exemption under a bilateral agreement, you must provide the authorities in the other country a certificate of coverage, which can be obtained from the ATO. You can apply online for a certificate or phone the ATO on 13 10 20.

If you apply for a certificate of coverage for an employee working overseas, you must declare you will continue to make SG contributions into a super fund for them while they are overseas and will keep records of these payments. If you fail to comply, the certificate of coverage will be cancelled, and the relevant foreign authorities notified.

Domestic workers

If you employ someone to undertake domestic or private work for you that takes more than 30 hours a week and you pay them $450 or more (before tax) in a calendar month, you are also required to make SG contributions on their behalf.

The ATO defines ‘domestic or private’ work as work that relates personally to you – not your business. This work relates to your home, household affairs or family and usually covers tasks such as nannying, housekeeping or caring.

If you engage an employee using money you receive from the National Disability Insurance Scheme (NDIS) for domestic help or caring work, you may also have to make super contributions for them. This only applies if you choose to manage your NDIS plan yourself.

Self-employed

If you are self-employed and operate as a sole trader or in a partnership, you are not required to make SG contributions on your own behalf. You may, however, choose to make personal contributions as a way of saving for your retirement.

Who’s not eligible to receive SG contributions?

• Non-resident employees you pay for work they do outside Australia
• Senior foreign executives holding specific visas and entry permits
• Members of the army, navy or air force reserve for the work they carry out in that role
• Employees who opt out of receiving super if they have provided you with an SG employer shortfall exemption certificate covering a specific quarter. For more information, read SuperGuide article Calculating your employees’ SG contributions? The rules to help get it right.
• Any employee temporarily working in Australia who is covered by a bilateral super agreement. (Keep a copy of your employee’s certificate of coverage to verify that they are exempt.)

If you are a non-resident employer, you are not required to pay super for resident employees for work they do outside Australia.