Superannuation Guarantee (Australia)

Summary

Australian employers must pay superannuation into a complying superannuation fund or retirement saving account (RSA) for their eligible employees. These payments are called super guarantee payments or employer contributions.

Further Reading: Download the Australian Superannuation and Salary Sacrifice manual from the website library.

Eligibility

Employers must pay superannuation for each employee who is aged 18 years or over.

Employees under 18 are eligible for compulsory super guarantee if they work 30 hours or more a week. Other employees may also be eligible if they work under a Labour Hire contract.

From 01/07/2013, no upper age limit exists for superannuation guarantee contributions. The Australian government removed this limit to encourage mature workers to stay in the workforce. As a result, you may need to make superannuation guarantee contributions for eligible employees aged 70 or over. We recommend that you review your superannuation payroll rules and Employee Super Funds records to ensure that you make superannuation guarantee contributions for these employees.

Employees who may not be eligible for compulsory superannuation guarantee are:

paid to do work of a private or domestic nature for 30 hours or less each week
a non-resident employee paid to do work outside Australia
a member of the Army, Navy or Air Force Reserve
a foreign executive holding a specific class of visa or entry permit
temporarily working in Australia for an overseas employer and are covered by a bilateral social security agreement.

Contributions

Employers must pay a minimum of 10.5% of an employee's Ordinary Time Earnings (OTE). Most employees have ordinary time earnings as their earnings base. However, some may have another earnings base contained in:

an industrial award
an existing agreement they have with their employer
a fund's trust deed
a law of the Commonwealth, states or territories.

You must use ordinary time earnings to calculate the minimum superannuation guarantee contributions for your employees.

Important: If you have been using a different earnings base and paid superannuation guarantee of less than 105% of ordinary time earnings, you must increase this amount to meet the minimum requirements and avoid the superannuation guarantee charge (SGC). The superannuation guarantee charge is a charge you have to pay if you do not meet your superannuation obligations.

Derive ordinary time earnings

When you set up superannuation, you can derive an employee's ordinary time earnings for superannuation guarantee calculations by either of the following methods:

Set up every allowance that is included in ordinary time earnings with Allowances | Details (iii) tab | Use in Super Calculations = "Yes"
or
Set up an allowance group that contains all ordinary time earnings allowances.

Recommended Method

We recommend that you use the ordinary time earnings allowances method because it is easier to set up and maintain than the allowance group method.

Use superannuation allowances with Calculation method = "G. Percentage of gross".
Use superannuation deductions with Calculation method = "P. Percentage of gross".
Derive ordinary time earnings from OTE allowances with Use in Super Calculations = "Yes".
Important: You must ensure that no other allowances have Use in Super Calculations = "Yes" or your superannuation calculations will be based on an incorrect Quantity value.

Allowance Group Method (not recommended)

The allowance group method is based on the following type of superannuation setup:

Use superannuation allowances with Calculation method = "A. Super calc with monthly minimum".
Use superannuation deductions with Calculation method = "I. Percentage of allowance group".
Derive ordinary time earnings from an allowance group.
Have only one allowance with Use in Super Calculations = "Yes".