If you employ people in your business, you are obligated to make payments on their behalf into a superannuation fund. Recently, the Australian Taxation Office (ATO) has undergone developments that enable them to more easily track if employers are meeting their quarterly superannuation obligations.
Since July 2019, businesses with under 20 employees are now required to use Single Touch Payroll to report to the ATO every time they pay salaries, wages, pay as you go withholding and super. Businesses with 20 or more employees should already be using Single Touch Payroll software. This means the ATO is now able to monitor if business are meeting their obligations to pay superannuation to their employees much more closely.
Single Touch Payroll does not affect your pay cycle, but it will automatically send the ATO a report with tax and super information. Super funds will also be reporting back to the ATO, and these two things together make it much easier for the ATO to track if businesses are meeting their required super obligations. In our experience as business accountants in Perth , it is critical that you ensure you are meeting your regulatory requirements so you are not caught short with a letter of review from the ATO.
1. Let your employees choose their super fund
You are obligated to let your employees choose a super fund. To do this, you must provide them with a Standard Choice form within 28 days of them starting to work for you. With Single Touch Payroll, new employees are able to lodge their Standard Choice forms electronically.
2. Inform your employees of your default fund
You must inform your employees about your default super fund which you will pay their super to if they cannot or do not choose their own super fund. Details of your default super fund should be included in section B of the Standard Choice form.
When choosing a default super fund, make sure that it complies with super law obligations and is registered by the Australian Prudential Regulation Authority. You can check that a super fund meets legal requirements by searching it on the ATO register.
3. Provide the chosen super fund with employee’s TFN
Once an employee has chosen their super fund, you must provide their tax file number (TFN) to the super fund. With the new Single Touch Payroll system, new employees can declare their TFN electronically.If you use a third party to manage your super contributions, it is your responsibility to ensure they pass employees’ TFNs to the relevant super fund. In many situations, super funds that do not have the TFN of an employee will not accept contributions.
4. Pay the Superannuation Guarantee
Super guarantee is the money you must pay to a super fund on behalf of the people you employ. If you pay an employee $450 or more per month, you will most likely have to pay super on top of their wages. Currently, the amount of super you are required to pay is 9.5% of the employee’s gross earnings. Super for your employees should be paid quarterly throughout the year before specific due dates, and your employees should be informed about your contributions.
5. Keep appropriate records
You are obligated to keep a number of records regarding super payments, including: how much super guarantee you pay for each employee; proof that you have offered each employee a chance to choose their super fund (i.e. the Standard Choice form); and receipts or other documents from the super fund or bank showing that you have made super payments.
There are many obligations employers should be aware of regarding superannuation, and with the new Single Touch Payroll reporting system, it is particularly crucial to make sure you are doing the right thing. Failing to meet any of the obligations outlined in this article could lead to costly fines and/or penalties, with business owners now being personally liable for any unpaid employee super contributions.
If you need assistance making sure you meet your superannuation obligations, why not speak to one of our qualified business accountants in Perth? At Lawrence Group, we can help take the stress out of meeting your superannuation obligations. Give us a call (08) 6220 7517 or fill out our contact form today.