A. What to consider as an employer
Superannuation Guarantee and Awards
1.1 Superannuation Guarantee and Awards
Superannuation in Australia
The compulsory nature of superannuation has been a feature of the Australian employment landscape for more than 25 years. Prior to this, superannuation was provided by only long-established companies and government departments that considered it an important employee benefit in attracting, retaining and rewarding valuable staff.
Award superannuation was introduced in 1986 as part of a National Wage Case in an attempt to broaden superannuation savings to the wider working population. It is now a feature of the majority of Federal Awards and a large number of State Awards. Award superannuation challenged the notion that superannuation was a benefit only for the privileged few. The superannuation guarantee, which was applied from 1 July 1992, built on this foundation, spread superannuation to most working Australians - even to those not covered by Awards.
Superannuation Guarantee obligations
While there are no employers exempt from paying the superannuation guarantee (SG) as it applies to most of their full-time, part-time and casual employees, there are a number of employees for whom an employer is not required to provide superannuation e.g., very high or very low-income earners or some casual employees.
While all employers have an obligation under the SG legislation to pay these superannuation contributions, this does not override any other obligation required by Federal or State Awards, industrial agreements or employment contracts.
If an employer makes superannuation contributions under an Award and the Award fund is a complying fund, these contributions count towards meeting their SG obligations. But as the SG is 10% (from 1 July 2021) of each employee's earnings base, employers should ensure that no gap exists between the Award requirements and that for superannuation guarantee purposes, because penalties may apply.
Under the SG the employer must also choose between making these payments to a MySuper product or a complying superannuation fund or selected by the employee under their choice of super fund rights. If the employer does not make the payments, they might find themselves paying the Superannuation Guarantee Charge, including prescribed late payment penalties, to the Australian Taxation Office.
Where employers followed these obligations, they are able to claim a tax deduction up to the limits allowed by the ATO. Should contribution payments not be paid by the due date, and the SG Charge becomes payable, then no tax deduction will be allowed.
The ATO has issued a number of specific rulings and determinations as guidance in determining an employer's obligations, who qualifies as an employee for superannuation purposes, including the status of contractors.
Awards usually specify when contributions are due, while the government also requires SG contributions to be paid quarterly.
What are the differences between Award and Superannuation Guarantee requirements?
This table summarises the different requirements of Awards and the superannuation guarantee. This table is of a general nature only and does not purport to cover every circumstance.
|Which superannuation fund do I contribute to?||The fund or MySuper product is normally specified in the Award, but you may be allowed to pick another fund or product.||Any complying fund|
|What qualifying period exists?||It depends on the Award. Some Awards may include a qualifying period, e.g., employees may have to work three months before they are entitled to superannuation.||The qualifying period is not determined by length of service but by wages paid. An entitlement is calculated from the commencement of employment. An employee qualifies if $450* or more is paid in a calendar month.
*It was announced in the 2021 Federal Budget that the $450 threshold would be removed.
|Are part-time and casual employees excluded?||Awards may exclude part-time and casual employees.||No specific exclusions, but wage level qualifications must be met before the superannuation guarantee is due.|
|How are junior employees treated?||Generally, no different to other employees, but some exemptions as a result of age may apply.||A junior may be exempt if under 18 years of age and working not more than 30 hours per week.|
|How frequently are contributions paid?||Varies, but monthly is common.||At least quarterly|
|Can employees choose not to receive superannuation?||In some cases, an employee can choose not to participate. Employers remain bound by relevant Award provisions.||Depends upon age, if the employee is beyond normal retirement age and hours worked each month.|
Employees exempt from SG
The following employees are exempt from SG:
- Employees opting out of receiving super if they are covered by an SG employer shortfall exemption certification in relation to the employee for the quarter
- Employees who are non-residents for work executed outside of Australia
- Part-time employees under 18 years of age (working 30 hours, or less, each week).
- Employees paid for work of a domestic/private nature for not more than 30 hours each week, e.g., part-time nanny or housekeeper.
- Employees employed under the Community Development Employment Program.
- Employees who are members of the army, naval or air force reserve
Temporary COVID-19 relief measures: SG not payable on additional pay due to JobKeeper
|Background on JobKeeper payment for employers
Under the JobKeeper payment, businesses or not-for-profits that are impacted by the COVID-19 pandemic were able to access a subsidy provided by the Government to continue paying their employees. Affected employers were able to claim payment of $1,500 per fortnight per eligible employee from 30 March 2020 until 28 March 2021.
Further changes were announced on 7 August 2020 to adjust the reference date for determining employee eligibility and make it easier for organisations to qualify for the JobKeeper payment extension.
The payment rate of $1,500 per fortnight for eligible employees and business participants was reduced to $1,000 per fortnight from 4 January 2021. From 28 September 2020, lower payment rates applied for employees and business participants that worked fewer than 20 hours per week in the relevant reference period.
From 28 September 2020, businesses and not-for-profits were required to reassess their eligibility with reference to their actual GST turnover in the September quarter 2020 to be eligible for the JobKeeper payment from 28 September 2020 forward.
And further to this, from 4 January 2021, businesses and not for profits will need to further reassess their turnover to be eligible for the JobKeeper payment. They will need to demonstrate that they have met the relevant decline in turnover test with reference to their actual GST turnover in the December quarter 2020 to be eligible for the JobKeeper Payment from 4 January 2021 to 28 March 2021.
Compulsory super guarantee is not payable on amounts of JobKeeper received by the employee that exceed their usual fortnightly wage or salary. So, if an employee is receiving more than their usual salary because of the JobKeeper payment, an employer is only obliged to pay on the employee's usual salary amount. Any additional super contributions by the employer would be voluntary.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.
Last modified: Monday, June 7, 2021