When I owned my businesses I hated paying the compulsory superannuation with a passion. It wasn’t paying the money. No. It was getting together all the information required to actually make the payment. Paying the money was the easy bit, but the day or so work before-hand was a nightmare and probably one of the reasons I have grey hair today.
Being an employer means that there are things you must do and one of these is pay the Superannuation Guarantee contribution for all your eligible employees to either their nominated fund or a default fund on their behalf. It is the law and the Australian Tax Office (ATO) cross checks your Business Activity Statement (BAS) returns to your super contributions to ensure that it is being paid correctly. If you want to avoid an audit, which is both time consuming and costly, I will give you four steps which will make compliance both easy and pain free. HINT: if you skip to step 4 there is really one only step – simple!
But before the four steps, let me give you the basic rules:
- In 2014/15, Employers must pay 9.5% of their “Ordinary Times Earnings” to the employees nominated fund
- Employers must allow the employees to choose their own fund except
- if you pay under an industrial instrument such as a workplace agreement;
- the employee is a member of a “defined benefit fund”
- a certain defined public sector employee
- Employers must provide employees with the Standard Choice form (which is a form of the Australia Taxation Office) to give details of their superannuation fund
- Employers cannot influence their employees to choose a particular fund
- Employers must calculate superannuation correctly and keep records of this calculation and advise employees of the amount paid to their superannuation fund.
- Remember there are exemptions for employees
- if paid less than $450 in any month
- employees aged over 70 or under 18 (seek advice if you are unsure how to calculate
Confused? I bet you are so here are the four steps I promised:
- Use a Superannuation clearing house, in fact as from 1 July 2014 if you employ 20 or more people it is compulsory that you do so, besides it does make it easier for you. There are many superannuation companies who provide this service, most of them for free. If you have under 20 employees you can use the Federal Governments small business superannuation clearing house – its absolutely free!
- Put the ATO Standard Choice form in your induction pack for new employees regardless of whether they will meet the threshold or not. Having this completed form on file will save you time when preparing your quarterly return.
- Have a default fund because most employees don’t provide details of their fund to you for a number of reasons, but it is your legal responsibility to pay super on their behalf. Having a default fund means that you can still pay the compulsory super for employees that haven’t given you their details. That makes it simple and easy, but make sure that your default fund is MySuper approved. Most are, but you have to ask the question.
- Find a trusted compulsory superannuation advisor. All MySuper approved funds will have a team that look after small business, some even have a team dedicated to franchisees just like you. Use them! In most cases they are free and there is no obligation to have your own personal superannuation with them. They will provide the clearing house, the standard choice form and the default fund. Look for someone who has a genuine interest in your business, they are an integral part of your team when you are a high performance franchisee.
More information on the guide to superannuation for employers from the Australian Tax office can be found here.
Elizabeth Gillam founder and CEO of Franchisee Success creates High Performance Franchisees. Having owned and operated three franchised food businesses; Boost, Healthy Habits and Bucking Bull; she knows what it takes to operate a profitable food franchise. In her recent book, Upsize your PROFIT – 6 steps to running a profitable food franchise she outlines how franchisees can ACE their franchised business unit.