Paying Superannuation For Employees

Are you paying the right amount of superannuation for your employees? It’s that time of the year again, where the Australian Bureau of Statistics (ABS) release the indexation factors that are critical in determining various superannuation thresholds. While the super guarantee is still frozen at 9.5%, the maximum contribution base will increase to $54,030 per quarter (or $216,120) for 2018-19. Employers are not required to provide the minimum super guarantee for the part of employees’ wages above the maximum contribution base.

Apart from any part of an employees’ wages above $216,120, employers are required to make minimum super contributions of 9.5% of an employee’s ordinary time earnings if you pay the employee $450 or more (before tax) in a calendar month. The superannuation payments must be made by quarterly due dates to the nominated superannuation fund of each employee. This is regardless of whether an employee is full-time, part-time, casual, a family member, a company director, those who receive a super pension or annuity while still working, or temporary residents.

You should note that the ATO considers certain contractors that are paid mainly for their labour to be employees for super guarantee purposes. This is the case even if the contractor quotes an ABN. According to the ATO, employers must make super guarantee contributions of 9.5% on what you pay your contractors if they are paid:

• under a verbal or written contract that is wholly or principally for their labour;
• for their personal labour and skills which may include physical labour, mental effort or artistic effort; or
• to perform the contract work personally.

If you’re not paying the right amount of super for your employees and some contractors, beware, the ATO uses sophisticated data analytics to identify employers at high risk of non-compliance.

The ATO also takes a differentiated approach to compliance and penalties depending on the compliance history of the employer and how actively they try to meet their superannuation obligations. Therefore, it pays to be in the ATO’s good books as they may take a more lenient approach if your business has any discrepancies in super guarantee payments to your employees.

Employers who are unwilling to meet their super guarantee obligations can expect the ATO to take firm compliance action including the imposition of penalties such as the super guarantee charge, a Part 7 penalty (up to 200%) for late lodgement of the super guarantee statement, failing to provide information when requested, and an administrative penalty (up to 75%) may also apply for an employer who makes a false and misleading statement.