What does contributing to super imply for business owners?

Any Aussie employer paying any of their employees over $450 a month in wages needs to make super guarantee (SG) contributions for these employees. Currently, such contributions amount to 9.5 per cent of the employee’s before-tax earnings and are paid in addition to wages.

If you’re an employer, you should remember that income is the only qualifying criteria for SG contributions. Even casual and part-time employees may be eligible. Also, remember that as an employer, you must maintain SG contribution records for five years. Any employees who’ve worked for you for less than five years will continue to be listed on your records until the completion of five years.

As an employer, you can deposit SG contributions in either the super fund chosen by the employee or your default super fund. Suppose you fail to make the contributions before the Australian Taxation Office (ATO) deadlines stipulated every quarter. In that case, you’re liable to pay an SG charge and file an SG charge statement. While you can claim a business tax deduction against SG contributions, the SG charge isn’t tax-deductible.

You also have the option of using the ATO’s SuperStream, to ensure that all SG contributions and the relevant data are transmitted electronically, accurately and on time. If you’re running a business and employing others, consider checking the ATO’s booklet to understand your super obligations, or attending their webinar on the topic.

How does super work for small business owners?

Small businesses employing fewer than 20 people or earning less than $10 million in revenue can make super contributions for eligible employees through the Small Business Superannuation Clearing House (SBSCH). The SBSCH is a free service offered by the ATO accessed through the Business Portal for employers with an Australian Business Number (ABN).

For tax professionals, you can access the SBSCH via online services for agents. To access The Business Portal or online services, you’ll use a myGovID and a Relationship Authorisation Manager (RAM). Individuals with a withholding payer number (WPN) or sole traders with an ABN can use the SBSCH via the ATO portal in their myGov account. If you’re a small business registered for a WPN, you should email the ATO the list of employees you’re making super contributions for.

Typically, employers are responsible for ensuring that the employee data transmitted through the SBSCH is accurate. They also have to transmit this data within seven days of transferring the super contributions to the SBSCH. The amount deposited will be returned to the employers if no instructions are sent within this time. An added advantage of using the SBSCH is that employers’ super guarantees are considered timely even if they’re only received by the SBSCH on or before the due date, rather than the employees’ super accounts.

How does super work for self-employed people?

If you’re self-employed, you aren’t required to make SG contributions for yourself. Still, you should consider making personal super contributions. Even as a self-employed person, you should still consider how you’ll fund your retirement.

You can even claim a tax deduction for any personal super contributions, as long as you’ve provided your Tax File Number (TFN) to your super fund. If you’re self-employed and your TFN isn’t recorded in your super fund account you’ll be taxed an additional 34 per cent on personal super contributions. It’ll also be harder to track your super contributions, and you’ll miss out on any co-contributions you may be eligible for.

Super co-contributions are usually paid by the government to people making personal super contributions despite earning a low wage and without claiming a tax deduction.

If you’re self-employed and making tax-deductible super contributions, you should remember there’s a limit on such contributions. The limit is currently $25,000 per year, and any contributions made within this limit are taxed at a concessional rate of 15 per cent. You can also roll over this limit to the following financial year. Suppose you only contribute $5,000 in a particular financial year. You can then carry forward the remaining $20,000 you could have made as concessional contributions to the next financial year.

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