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Small Business Superannuation – Everything You Need to Know

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If you’re a small business owner with employees, it is necessary to know the rules relating to superannuation schemes. Let’s look at what, when and where pensions are paid to small business owners.


What Is Superannuation?

The Australian Government regulates the Superannuation Guarantee (Super) and requires employers to provide an adequate level of pension. Employers must contribute a minimum percentage of each personnel’s salary to a super fund or super savings account.


Why Is There a Supplement to Pension Contributions?

A pension supplement is paid to employees to help them retire.


Under What Circumstances Is a Supplement Payable?

“Super” is paid to all employees over 18 who earn more than $450 before tax in a calendar month. Workers under 18 and domestic workers, such as nannies, must receive a bonus if they work more than 30 hours a week. Some contractors must contribute to a pension scheme. You can check this with your accountant or with the Australian Taxation Office (ATO) on the employer benefits page.


How Much Do I Have To Contribute to My Pension Scheme?

The guaranteed contribution for 2019 is 9.5% of the employee’s ordinary remuneration (OTE). OTE includes commission, shift differential and bonuses, but not overtime pay. To find out how much you need to pay into the super fund, you can use the ATO’s contribution calculator to determine how much you need to pay into the employee super fund.


Where Are Super Payments Made To?

Employees have the right to designate a super fund. If they do, you’ll need to transfer the benefits to the option they’ve chosen – a qualifying super fund or a pension account. You can check if a fund or account qualifies at superfundlookup.gov.au. If the employee has not specified a preferred fund, one of the MySuper funds should be selected by default.  


When Should I Make a Payment?

You must pay your benefit four times a year – on October 28, January, April and July. You can pay more regularly if you wish. Some super funds actually require employers to make monthly contributions.


How Are Payments Made?

You must pay into a pension fund or account. If you don’t pay into the correct account, your company can’t meet its obligations. The money is not tax-deductible, and you may be subject to various penalties. You must also meet the ATO SuperStream requirements. As of July 1, 2016. The ATO has required all employers using SuperStream to pay for additional insurance. “SuperStream is an ATO initiative to make it easier for employers to apply for and pay for supplementary insurance. The system processes money and related data and sends electronic information to employers, funds, providers and ATOs in a standard format.  

This is why many small businesses use the Superannuation Clearing House (SCH). With funds like Nationwide Super, employers have access to a free SCH system that allows them to pay all employees in a single online session, regardless of their number. This online service is not only free but also makes it easier to contribute to savings. It saves time because you can make payments for all your employees at the same time. Also, you only need to enter employee details once. Each time you need to make more contributions, their details are saved. This also avoids costly mistakes that can lead to penalties. You can see how much you have paid and where.


What Happens If I Forgot to Pay Earlier?

If you don’t pay your benefits on time, you may have to pay a guarantee fee set by the ATO. You will also have to pay arrears (wages) if the worker is no longer your employee. It’s best to get back on track as soon as possible and actively work with your accountant and the tax authorities to resolve the situation. Thousands of Australian small businesses need an injection of extra cash flow every year. If you want to take advantage of this opportunity, buy new equipment or simply want help understanding the Australian superannuation system, contact SJB Bookkeeping in Hampton Park. 


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