Superannuation guarantee

What Is the Superannuation Guarantee?

The Superannuation Guarantee (SG) is a mandatory contribution that Australian employers must make into a superannuation fund on behalf of their eligible employees. It represents the minimum amount of superannuation support an employer is required by law to provide. The SG is a key component of Australia’s retirement income system, designed to help employees build a retirement nest egg.

The Superannuation Guarantee (Administration) Act 1992 governs these obligations, which are enforced by the Australian Taxation Office (ATO). SG contributions are paid in addition to an employee’s wages and are calculated as a percentage of their Ordinary Time Earnings (OTE).

Key Elements of the Superannuation Guarantee

Several factors determine an employer’s SG obligation for each employee:

1. The SG RateThe SG rate is the legislated minimum percentage of an employee's earnings that must be paid to their super fund. As of 1 July 2024, the rate is 11.5%. This rate is scheduled to increase to 12% on 1 July 2025. Employers must apply the correct rate based on when the employee is paid, not when the work was performed. Reference: ATO - Super guarantee rates.
2. Ordinary Time Earnings (OTE)SG contributions are calculated based on an employee's Ordinary Time Earnings (OTE), which is the gross amount an employee earns for their ordinary hours of work. It’s a common point of error for employers to miscalculate OTE.Payments included in OTE:
   • Regular wages and salary
   • Commissions and most bonuses
   • Shift loadings and allowances (unless a reimbursement)
   • Payments for paid leave (e.g., annual leave, sick leave)
   • Casual loading
   • Piece rates
   Payments excluded from OTE:
   • Genuine overtime payments
   • Reimbursements for expenses (e.g., car allowances, travel)
   • Lump sum payments on termination (e.g., for unused leave)
3. Employee EligibilityGenerally, all employees are eligible for SG contributions. It does not matter if the employee is full-time, part-time, or casual, or how much they earn. However, there are some exceptions:
   • Under 18s: SG is only payable if the employee works for more than 30 hours per week.
   • Contractors: SG may apply to independent contractors if their contract is "wholly or principally for their labour." This is a key consideration for many businesses.
   • Foreign Residents: SG may be payable for temporary residents, depending on their visa status. Reference: ATO - Super guarantee eligibility.
4. Maximum Contribution BaseThere is a maximum limit on an employee’s earnings on which SG is payable each quarter. This is known as the maximum contribution base (MCB). Employers do not have to pay SG on earnings above this threshold.
5. Payment DeadlinesSG contributions must be paid at least quarterly, 28 days after the end of each quarter (e.g., the Q1 payment for July-September is due by 28 October). A major upcoming change is the Payday Super reform, which will require employers to pay super at the same time as wages from 1 July 2026.

Consequences of Not Meeting the Superannuation Guarantee

When an employer fails to pay the correct SG amount by the due date, they become liable for the Superannuation Guarantee Charge (SGC). The SGC is more than just the unpaid super and includes:

• The SG shortfall amount.
• Interest (currently 10%) on the shortfall.
• An administration fee of $20 per employee per quarter.The SGC is not tax-deductible, and late payments can lead to further penalties.

How Microkeeper Supports Superannuation Guarantee Compliance

Microkeeper's Payroll Software and Workforce Management system are designed to automate and simplify SG compliance:

• Accurate SG Calculation: The system automatically calculates SG contributions based on an employee's OTE and the current SG rate. It can be configured to apply the correct rules for different payment types, including commissions, allowances, and bonuses, ensuring compliance with ATO guidelines.
• Integrated Super Payments: Microkeeper supports seamless, SuperStream-compliant payments via an integrated clearing house, helping businesses meet their quarterly payment deadlines.
• Real-time Reporting: All SG contributions and data are submitted to the ATO with each pay run via Single Touch Payroll (STP), providing a real-time record.
• Managing OTE: The system helps businesses correctly categorise different payment types, providing a clear audit trail to support SG calculations. This is particularly useful for industries with complex pay structures, such as Mining or Transport & Logistics.
• Alerts and Reminders: The system can provide reminders for upcoming payment deadlines, helping to prevent late payments.

FAQs About the Superannuation Guarantee

Do I have to pay SG on overtime?‍

No, genuine overtime payments are generally not included in an employee's Ordinary Time Earnings (OTE) and are therefore not subject to the SG.

What is Ordinary Time Earnings (OTE)?‍

OTE is the gross amount an employee earns for their regular working hours, including things like wages, commissions, and paid leave. It excludes genuine overtime, reimbursements, and certain allowances.

Can I pay super monthly instead of quarterly?‍

Yes, you can pay super more frequently than quarterly. Many businesses choose to pay monthly or fortnightly to help manage cash flow and to prepare for the upcoming Payday Super reform.

What is the SGC?‍

The Superannuation Guarantee Charge (SGC) is a penalty for employers who fail to pay the correct SG amount on time. It includes the unpaid super, interest, and an administration fee.

Do I have to pay SG for a contractor with an ABN?‍

You may have to. If a contractor is paid "wholly or principally for their labour," they may be considered an employee for superannuation purposes and be entitled to SG, even if they have an ABN.

Best Practices for SG Compliance

• Understand OTE: Ensure you have a clear understanding of what payments count as Ordinary Time Earnings.
• Pay on Time: Meet or exceed the quarterly payment deadlines to avoid the SGC.
• Utilise Technology: Use a payroll system that automatically calculates SG and facilitates SuperStream-compliant payments.
• Keep Records: Maintain detailed records of all payments, calculations, and superannuation contributions for at least five years.

Final Thoughts

The Superannuation Guarantee is a cornerstone of Australian employment law, placing a clear responsibility on employers to contribute to their employees' retirement savings. Correctly calculating SG on Ordinary Time Earnings and paying on time are essential practices for all businesses, protecting them from financial penalties and contributing to a secure future for their workforce.

Disclaimer: This entry is intended for informational purposes only and does not constitute financial, legal, or tax advice. For tailored guidance, consult with a qualified professional or the Australian Taxation Office (ATO).

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