Super for small businesses

Super for small businesses

Running a business and employing people involves lots of obligations. One of those is paying your employees’ superannuation.

Usually, super is a compulsory payment made by employers to a superannuation fund or retirement savings account (RSA) on behalf of their eligible employees. All employers must make these payments for eligible employees as part of the Superannuation Guarantee legislation.

Super can seem very complex and confusing. These notes give a high-level outline of the obligations that small business owners have in relation to their employees’ super.

Who do I need to pay?

Employers will generally have to make superannuation payments on behalf of their employees.

This applies to all employees, whether they’re full-time, part-time or casual. However, some special provisions relate to those aged under 18 or who are a domestic worker.

The definition of employee is also quite wide and includes some persons who are regarded as contractors in other contexts.

The ATO has a specific SG Eligibility Decision Tool to assist employers in working out their SG obligations.

Where do I pay it?

Most Australian employees are entitled to choose the fund that best suits their needs. As an employer, you must offer eligible employees the right to choose their own fund or RSA via a standard choice form, which is issued by the ATO.

This form must be offered to an employee within 28 days after any of these events happen:

• a new employee commences working for you
• an existing employee requests a form (unless you’ve already given them a form within the past 12 months)
• you become aware that a fund you are contributing to for an employee can no longer receive your contributions
• you change the fund you have selected as your ‘default fund’.

A standard choice form does not have to be provided when an enterprise agreement, made before 1 January 2021, specifies the fund to which contributions are to be paid.

The form must also say what fund the contributions will be paid to if the employee does not make a choice and they do not have an existing, ‘stapled’ fund. This is called the employer ‘default fund’. For more information about this, see the ATO website.

Once employees have chosen their preferred fund, you have two months and then all super contributions must be paid into this account. If they are not, as an employer you run the risk of being penalised by the ATO.

Choosing a fund is not compulsory for an employee. If an employee who starts work for you from 1 November 2021 does not choose a fund then you must pay their contributions to their existing ‘stapled’ fund, as advised by the ATO. If the employee does not have an existing ’stapled’ fund, you should contribute to the ‘default fund’ that you listed on the choice form.

To make it easier for small businesses to meet their obligations, eligible employers can pay their superannuation contributions to the Small Business Superannuation Clearing House. The Clearing House is a free online superannuation payments system that aims to reduce the time and money it takes to pay super into multiple accounts. Employers can use the Clearing House if they have 19 or fewer employees, or annual aggregated turnover of less than $10 million.

To find out more information about which employees are eligible for choice and your own obligations as an employer, visit the Australian Taxation Office’s, Superannuation Guarantee Eligibility Decision tool.

How much do I need to pay and when do I pay it?

For 2023-24, all employers must pay a minimum of 11 per cent of an eligible employee’s ordinary time earnings (OTE); that is, the amount they are paid for their normal hours of work, not for overtime.

This amount will increase in coming years. See the About super page for more information.

Super contributions must be paid into an employee’s account at least every three months by designated quarterly cut-off dates^*:

^* The Government has announced that employers will, from 1 July 2026, be required to pay an employee’s compulsory superannuation contributions to their fund on the same day that they pay their salary and wages, instead of up to three months later. This announcement is not yet law.

Claiming super contributions as a tax deduction

Eligible employers are entitled to claim a full tax deduction for compulsory super payments made on behalf of employees.

What happens if I don’t meet my super obligations?

There are a number of penalties that may apply if you have not meet all your obligations under the SG. Ways to run afoul of the superannuation guarantee include:

• not paying employees the full amount of super they’re entitled to, also known as a Superannuation Guarantee shortfall
• not paying super to an employee’s fund of choice, referred to as choice liability
• not making payment by the quarterly cut-off date
• not handing out a choice of fund form to new employees when this is required.

Employers who haven’t observed the Superannuation Guarantee rules must lodge a statement with the ATO and pay a super guarantee charge. The size of the charge will depend on the amount owed to the employee, the amount of interest accrued on what is owed and how many employees were affected. The ATO website has more information about the Superannuation Guarantee charge and statement here.

For more information on other penalties may apply, visit the ATO superannuation page for employers.