Superannuation – yes, it’s almost a sentence in and of itself. And yes, you’ve heard plenty about it before, but when it really comes down to it, do you really understand what it’s all about and why it can form an important part of your future plans?
Whether you’re an employer or employee – look no further – this is your guide to superannuation: the basics. Let’s start with employers.
Super for employers:
The first and biggest thing you need to know about superannuation as an employer, is that you’re legally required to pay super for all staff members. Whether they’re full time, part-time or casual, it doesn’t matter. If your staff member earns more than the threshold amount of $450 each calendar month (before tax), they’re entitled to be paid super (unless they are under 18 and work less than 30 hours per week).
If you have contractors working for your business, again, you’re legally required to pay them super contributions if the contract is wholly for their labour. If you’ve got contractors who provide just labour but they’re working under an ABN, best make sure you’ve not accidentally entered into a sham contract.
- How much do you need to pay?
Generally, if you pay an employee $450 or more before tax in a calendar month, you have to pay super on top of their wages. The minimum you must pay, or the super guarantee (SG), is currently at 9.5% of your employees’ ordinary time earnings.
- When/where do you pay?
You’re required to pay SG at least four times per year, by the quarterly due dates, into a complying super fund. As we havecrossed the line into a new quarter, your next payment due date is 28th April.
Super for business owners:
When it comes to paying yourself your own super, if your business is a Pty Ltd, technically you’re an employee of the company and you’re up for super on the salary/bonus part of your income.
However, if you’re a partner or sole trader, currently you aren’t required to pay yourself Super. That being said, it’s a good idea to think about doing so as a means of saving for your retirement. You might also want to read more about the ‘sell my business to top up my superannuation’ plan.
Super for employees:
Your employer is legally required to make a super contribution into your super fund – which is currently at 9.5% of your wage. These payments accumulate over the course of your working life so that, in theory at least, when retirement comes knocking, you’ll have a tidy sum to live off!
What about extra contributions?
Of course, you don’t have to rely solely on the contributions of your employer; you can make contributions, such as:
- Salary sacrificing super (paid before tax)
Salary sacrifice is an arrangement with your employer in which you opt to relinquish part of your salary/wages in return for your employer providing benefits of a similar value, e.g. having some of your salary or wages paid into your super fund instead of to you. Such contributions are taxed in the super fund at a maximum rate of 15% and are not considered assessable income for tax purposes and are therefore not subject to pay as you go (PAYG) withholding tax (i.e; at the end of the day you generally pay less tax).
However, there are limitations when it comes to salary sacrificing, so you might like to read more on the ATO’s salary sacrificing super.
- Non-concessional contributions (paid after tax)
Did you know you could grow your super by adding personal super contributions? These are the amounts you contribute from your after-tax income (i.e. from your take home pay).
Non-concessional contributions are made in addition to contributions made by your employer and do NOT include contributions made through salary-sacrifice arrangements.
If you contribute your PAYG tax refund, it will be tax-free! It’s just like depositing the refund into your bank account, but instead it will be going into your superannuation fund. And remember – in order for it to be a non-concessional contribution, the super fund must be aware of it, so don’t forget to let them know! There is also a non-concessional cap of $180,000.
- Government Super co-contributions
You may be eligible for either the super co-contribution or the low-income super contribution (LISC) or both, which means the government also adds to your super. And, given your eligibility, and you’ve lodged a tax return and your fund have your Tax File Number (TFN), government contributions will be paid into your fund automatically, so no need to apply or go chasing your tail.
You might like to check your eligibility or read more on the super co-contribution or the low-income super contributionor alternatively, seek professional advice.
In the next blog, “Your guide to super: now’s the time to review your growth strategy”, we’ll look at 3 simple steps for growing your super for retirement.
In the meantime, if you’d like to learn more about SMSFs or getting your financials on track, we’d be delighted to help. You can call Kerry on 6023 1700, drop us a note or connect with Kerry via LinkedIn.
