Congrats on starting your own business – it’s an exhilarating journey! Navigating the Australian business landscape means becoming familiar with some fundamental essentials, like superannuation. Whether you’re a one-person show or gearing up with a team, having a clear grasp of these requirements is crucial.
From the superannuation basics to deciding whether to contribute as a single-employee company, this introduction to superannuation requirements for new business owners will walk you through your most pressing questions.
Superannuation Basics
A superannuation, or super, is a retirement account that holds the guaranteed contributions an employer pays to their employees. This account is not part of an employee’s wages or salary but is in addition to it. Employers are obligated to contribute to qualifying employees’ accounts, so this process assures Australians they will have some savings for retirement.
Who is Owed Superannuation Payment?
All employees over 18, regardless of hours worked or wages acquired, are entitled to a deposit into their super from their employer. Employees under 18 are only entitled to super contributions if they work more than 30 hours a week. Small businesses are not exempt and must comply with super contribution requirements, even for family members employed by their business.
Specific working arrangements have exceptions, like situations involving private workers or domestic help. If an employee of any age works less than 30 hours a week through a private arrangement, the employer does not need to contribute funds to their super, no matter how much that employee is paid.
High-income earners can also opt out of the superannuation arrangement, but this is not generally a concern for a new business owner.
How Much Does an Employer Pay into a Superannuation Account?
At the time of writing, an employer is required to pay at least 11% of wages or salary earned during regular business hours (meaning that they are not obligated to pay into the super for wages earned through overtime) into an employee’s superannuation account. If an employer does not pay on time or negotiate a higher contribution into an employee’s contract, the amount may differ.
How Does a New Business Owner Deposit Superannuation Funds?
All employed Australians must have a superannuation. If an employee does not already have one, business owners must allow the employee an opportunity to choose their fund using the standard choice form. Once your employee has provided their superannuation account information, you can contribute funds directly into the account through your payment system or use the Small Business Superannuation Clearing House.
An employer is obligated to make these payments at least every three months in compliance with the government’s cut-off date for each quarter. This means that for wages or salary paid between 1 January to 31 March, the super must be deposited by 28 April. For 1 April through 30 June, contributions must be paid by 28 July. For monies earned between 1 July and 30 September, super contributions must be added by 28 October, and lastly, all super contributions from 1 October to 31 December must be deposited by 28 January.
Is a Self-Employed Business Owner Required to Pay into Their Own Superannuation Account?
The short answer is no, but good reasons exist to consider contributing funds to your superannuation. The most compelling reason is that retirement savings are an excellent investment and can afford you opportunities you may not have otherwise. Even if you love what you do, stepping back and enjoying your savings after retirement is important.
Superannuation accounts offer benefits such as tax breaks and government-assisted contributions to self-employed persons, and building the account can be very simple. In the same way you would for an employee, set up a regular transfer into your super. You can decide how much to contribute by establishing a regular wage or transferring a lump sum from your business revenue.
The money you contribute to your super is tax-deductible, but make sure that you alert your account holder that you are now contributing as a self-employed person.
What are the Consequences of Not Complying with the Superannuation Guarantee?
A superannuation guarantee is a legal obligation that all businesses must comply with. If you neglect your responsibility, you must report the incident to the Australian Taxation Office (ATO) and pay a super guarantee charge. Common superannuation mistakes include:
Late Payments
Your employees are entitled to receive contributions from you as their employer at least once during the above mentioned quarters. You can make the contributions more often to avoid more considerable fees if a late payment occurs, or you can choose to have deposits made automatically.
Choice Liability
If you do not allow your employees to choose their super fund’s holder and pay their contribution to an account they did not consent to, you are liable and required to correct the situation.
Paying the Full Amount Owed
Excellent record-keeping is the best way to keep your new business running smoothly and avoid confusion. Keep track of what you pay your employees, contribute to their supers as soon as possible, or set aside their dues before organising other financial obligations to avoid paying a fee.
Final Thoughts for the New Business Owner
Owning your business is a great way to contribute to your wealth and the Australian economy. Ensure that your business complies with all legal requirements, including those for properly handling superannuation accounts. Consider your retirement savings, and keep diligent records.
Anytime you have questions about how to comply with Australian law or best manage your finances, speak with a financial advisor for sound advice. Contact Super Network today to discuss your new business possibilities.
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