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Superannuation Obligations for Business Owners

What does the employer contribute?

Employers must contribute to an employee's superannuation fund. This is called the Superannuation Guarantee, which came into operation on July 1, 1992.

The Superannuation Guarantee (Administration) Act tells employers that they must pay the following percentages of an employee's wages (excluding overtime, leave loading and fringe benefits):

Year

% of ordinary time earnings

1997-98

6%

1998-99

7%

1999-00

7%

2000-01

8%

2001-02

8%

2002-03

9%

Are any employees left out?

Yes. The Superannuation Guarantee (Administration) Act says that employers do not have to pay the Superannuation Guarantee in certain circumstances, for example:

  • employees earning less than $450 per month;
  • employees under the age of 18 who work less than 30 hours per week;
  • employees over the age of 70;
  • certain employees who are not resident in Australia and are paid for work outside of Australia.

What if compulsory contributions are not made?

All employers must tell the Tax Office every year about the contributions that have been made for employees. The Tax Office can audit the employer's accounts, and charge interest on any outstanding payments, plus administrative fees.

Can the employer pay more?

An employer can make payments above the compulsory superannuation guarantee as:

  • a reward for a worker's performance;
  • a type of co-payment, where the employer's contribution increases in line with the employees voluntary contribution; or
  • a "salary-sacrifice" - this is where the employer makes a contribution that would otherwise be paid as salary.

Note: There are contribution limits. Contributions above these limits may not be tax effective. You may want to suggest to an employee that they get financial advice before extra superannuation contributions are made.

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