Superannuation, commonly known as ‘super,’ is a retirement savings plan for employees in Australia. By law, as an employer, you must pay a percentage of your eligible employee’s earnings into their chosen super fund or their stapled super fund where no choice has been made. In this article, we explore what you need to do to set up super for your business and ensure that you comply with your legal obligations.
Selecting a default super fund
The first step in setting up super for small businesses is to select a default super fund. This is the fund that you will contribute to if your employee has not made a choice or does not have a stapled super fund. When selecting a default fund, you should consider the fund’s performance, fees, and insurance options.
Note – The Australian Taxation Office (ATO) provides a list of default funds that meet their compliance requirements.
Offering a choice of super funds
The next step is to offer your employees a choice of super fund. You are required to offer your employees a choice of fund, and you must keep records that show you have done this. Your employees have the right to choose their fund or use their existing one. If they do not make a choice, you can contribute their super to your default fund.
Stapled super funds
If your employee does not have a stapled super fund, you must request their super fund details. A stapled super fund is a fund that follows the employee when they change jobs, and it is designed to reduce the number of duplicate accounts that employees can have.
Note – You can request your employee’s stapled super fund details by completing a ‘Stapled super fund choice form’ which is available on the ATO website.
Note – For more information on stapled super funds, download this helpful ATO reference guide for employers.
Providing your employees’ tax file numbers
Providing your employees’ tax file number (TFN) to their fund is another important step in setting up super for your business. You must provide your employee’s TFN to their fund so that they can identify the contributions you make for them and ensure that their account is not subject to extra tax. You should also ensure that your employees provide you with their TFN so that you can make accurate contributions.
Note – If a current employee has not given you a TFN declaration since 1 July 2007, they can complete the Authority to provide your tax file number to your super fund form.
Setting up electronic transfers
Setting up your systems to pay super contributions electronically to the right fund is crucial in ensuring that you comply with your legal obligations. Most super funds have an electronic payment system that you can use to pay your employee’s super contributions. You should also ensure that you make contributions at least four times a year and that you pay them on time. Late payments can result in penalties and interest charges.
Note – You must pay SG contributions by the quarterly due dates – 28 days after the end of each quarter to avoid the SG charge.
Note – Eligible small businesses can pay super for their employees through the Small Business Superannuation Clearing House.
Additional reporting obligations
You should also identify any reportable employer super contributions. Reportable employer super contributions are additional contributions that you make to your employee’s super fund that are not compulsory. These contributions include salary sacrifice amounts and bonuses. You must include these amounts on your employee’s payment summary at the end of the financial year.
Next steps
Setting up super for your business is an essential aspect of being an employer in Australia. By complying with your legal obligations, you can ensure that your employees receive the benefits of super and that you avoid penalties and interest charges.
Remember to select a default super fund, offer your employees a choice of fund, request their stapled super fund details if they do not make a choice, provide their TFNs to their funds, set up your systems to pay super contributions electronically to the right fund, and report any extra super you pay for your employees.
The ATO website is an excellent resource to explore and get further information on setting up super. However, if you require more personalised assistance in setting up your superannuation process, make an appointment to see one of SG Advisory’s superannuation experts today.
Disclaimer: The information above is general in nature and should not be considered personalised superannuation advice. Please consult one of our experienced staff as superannuation laws, regulations and the way they affect your business can differ from year to year.