Superannuation Guarantee – The Basics

Last month’s blog discussed how directors can be personally liable for employee entitlements. This month we look at the Superannuation Guarantee (SG) basics, like how to calculate SG and what your obligations are as an employer under this regime.

What is Superannuation Guarantee?

The SG requires employers to provide enough super support for their employees. Employers are obliged to contribute a minimum percentage of each eligible employee’s earnings (ordinary time earnings) to a complying superannuation fund.

What is the minimum percentage?

The current SG percentage is 9.5%. This percentage will remain at this level until 30 June 2021 and will increase to 12% as follows:

Where an employee’s earnings are above a certain limit, SG is not applicable. This is called the maximum contribution base and is indexed annually. The current limit is $55,270 per quarter. Accordingly, if the employee has earnings over this amount, SG is not applicable to the amounts above this limit.

What earnings does SG apply to?

SG applies to ordinary time earnings (OTE). Although a payment might be part of an employee’s salary or wages, it may not meet the definition of OTE and might not have SG applicable. The Australian Taxation Office (ATO) have put together a checklist of the common salary or wage items and whether they are classed as OTE. This can be found here.

How often do you pay SG?

Super for employees are due for payments at least four times a year as follows:

When the due date falls on a weekend or public holiday, payment must be made on the next working day. Please note, super contributions are considered paid when the super fund receives them. Be aware that it can take time for the super clearing house to make payment to the fund.

Employers can make contributions on a more regular basis than quarterly if they want to, as long as the total SG obligation is paid by the due date.

When is SGC applicable?

If the minimum super amount is not paid on time and to the correct fund, employers may have to lodge a Superannuation guarantee charge statement and pay the superannuation guarantee charge (SGC).

The charge is made up of:

  • SG shortfall amounts

  • Interest on those amounts (currently 10%)

  • An administration fee of $20 per employee, per quarter.

The SGC statement needs to be lodged with the ATO and any SGC is paid directly to the ATO. Please note, if the super liability is paid late to the fund, an SGC still needs to be lodged. The late payment may be eligible to be offset against the SGC debt or carried forward as a pre-payment of a future contribution for the same employee. Any balance of the SGC needs to be paid directly to the ATO.

Is SG deductible?

Yes, the contributions made to super for employees are deductible in the financial year that they are received by the super fund. For example, if the June quarter contributions are paid after 30 June, they are not deductible until the next financial year.

Any super payments that may attract the SGC are not tax deductible.

If you would like more information about this or need help getting your superannuation obligations in order, or if you have any questions about anything at all, please do not hesitate to contact us or call us on (07) 3425 1115.

General Advice Warning – The information in this article is educational and general in nature. It does not take into consideration your personal financial or taxation information, goals and objectives. Please ensure you seek appropriate financial and taxation advice.

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