Call us on 1300 794 893

Your Money

What super payments do I need to make for my employees?

| More

I have recently started to employ people in my business and understand that I have to pay superannuation for my employees. I find superannuation jargon often very confusing and so could you explain to me about the various contributions, who can make them and for how long do I have to make them on behalf of my employees?

The ones you have to make under the Superannuation Guarantee Charge or SGC are often called compulsory super. For you, they are mandated employer contributions of nine per cent and you make them quarterly and within 28 days of the end of the quarter.

To you, like wages, they are cost and tax deduction. They’re also called concessional contributions because a tax concession applies where the appropriate tax rate on the income is reduced to 15 per cent because it is going into super, providing what is called a tax benefit. Salary sacrifice contributions are concessional contributions as well.

The compulsory contributions only have to be made on behalf of your employees until they turn 70, which surprises some people as most people retire at 65. These will be going up to 12 per cent between now and 2020.

The other contributions are non-mandated, undeducted or non-concessional. Why are there so many names? Anyway, they’re monies which have already been taxed and so there’s no 15 per cent tax on them when they’re contributed. These can be made by you for yourself or by your employees for themselves until they are 65.

Between 65 and 74, you have to pass a work test to be called a part-time worker, which is pretty easy to pass. The test requires you to work at least 40 hours in no more than 30 consecutive days in a financial year. And it doesn’t have to be in your chosen field, so if you’re a doctor, you could work in a pub and pass the work test. After 75, you can’t make anymore contributions to your fund.

One final thing I want to add and its relevant for employers — there are self-employed super contributions. This affects sole traders and partners who don’t work as employees in a company owned by themselves. So, if they don’t receive any concessional SGC contributions, they can make self-employed contributions. However, there’s a small concession and that is, if you were paid less than 10 per cent of your assessable income for tax purposes by another employer, you can make your own contributions.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Published on: Tuesday, August 23, 2011

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Related articles

Super changes in the Budget

Segregation anxiety – how to split assets

Is your business prepared for MySuper come 1 January?

Is it time to fix now?

Can I access my super without retiring?

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300