One of the perks of being employed are the benefits associated with making life outside of work, well, work. Of the many benefits included in an employment package, the retirement fund is probably the big enchilada of them all. For employees, it guarantees that their standard of living does not drop after retirement, but for businesses, it contributes to the overall well-being of society. Through superannuation, the employee contributes an allotment to the fund when they receive their pay and your company matches the amount.
Paying into a superannuation fund is mandatory by Australian labour laws, and it requires employers to contribute when the salary paid on any given month for earnings of $450 or more. The fund covers most employees, but there are guidelines that determine who is eligible to participate. Furthermore, as of July 2018, employers are required to implement the single touch payroll reporting system, so contributions to the fund can be reported in real time.
Continue reading to learn more about superannuation and what your responsibilities are as an employer.
Who Is Covered By The Fund?
There are three employee classifications that the fund covers. Full-time, part-time, and casual workers are eligible to participate in the fund. They can even participate up to the transition to retirement stage. Temporary residents are also covered and can withdraw from a departing Australia superannuation payment plan when they leave the country. Employees who are company directors or family members working in your business are eligible to participate. Domestic workers who qualify have to be working more than 30 hours a week and have to make at least $450, and work that qualifies as domestic is work done for your family, home or household affairs.
Who Is Not Covered?
While the plan covers most employees, there are some who are not covered by the plan. Employees who are not Australian residents doing work outside of the country are not eligible to participate, and neither are foreign executives with visas or entry permits. Employees paid under the Community Development Employment Program and members of the military are not eligible. Temporary employees working under a bilateral super agreement do not qualify, but employers should keep a copy of their certificate to claim the exemption. Finally, foreign employers do not have to pay for resident workers if the work is done outside of Australia.
What Is Single Touch Payroll?
Single touch payroll (STP) is a system that requires employers to install software that allows them to submit payroll information in real time to the Australian Tax Authorities (ATO) each time pay cycle. Employers with more than 20 employees are required to install software that will provide more oversight on behalf of ATO to employer contributions made to the fund while it is voluntary for smaller employers. Every time that your business contributes to the pension fund the information will be sent electronically to the ATO.
Why Is It Relevant To Superannuation?
STP serves a number of purposes where superannuation is concerned. For one, employers do not have to worry about going back and having to submit paperwork to amend information with the ATO, as STP will update the information in the next pay cycle. Furthermore, this system streamlines the process for new employees, making the process more efficient and timely.
The Importance Of Employer Contributions
Making employer contributions to this fund is an important part of employing people in the country. Typically, employers are required to make payments quarterly (28 days after the end of each quarter), but this all depends on the fund, as some employers are required to make monthly payments. If you miss a payment, you are generally assessed a surcharge. Fortunately, these superannuation payments are tax deductible in the year they are made, but again, there are requirements.