While most employers do the right thing when paying their employees’ super contributions, some make their payments late and in a few cases, not at all.
In 2011-12, the Australian Taxation Office (ATO) received 19,440 complaints from employees about 13,399 individual employers regarding unpaid superannuation. But while employees are likely to spot if they haven’t been paid their super at all, considerably less would recognise if their super payments were falling short of the mark, so it’s important to understand what you should be receiving.
How much should you receive?
The superannuation guarantee (SG) scheme requires all employers to provide a minimum level of superannuation support in each quarter for their employees. At present, the minimum level of support is generally 9% of ordinary time earnings, although this amount will gradually increase to be to 12% by 2019-2020.
The ordinary time earnings of an employee is the lesser of:
- The total of the employee’s earnings for ordinary hours of work and earnings for over-award payments, shift loading and commission (but not including lump sum payments on termination of employment for unused annual leave, unused long service leave or unused sick leave), and
- The ‘maximum contributions base’ for the period. For 2012/13, this is $45,750 (indexed annually) for each quarter.
This means that an employer’s liability to make SG contributions for each quarter is limited to 9% of $45,750, even if an employee’s ordinary time earnings for the quarter exceed that amount.
For example, if an employee’s ordinary time earnings in a quarter is $75,000 ($300,000 ÷ 4 = $75,000), the employer only has to pay $4,118 (9% x $45,750 = $4,118). Therefore, over the course of the year, $16,472 ($4,118 x 4 = $16,472 pa) in concessional contributions would be contributed into their super account based on their approximate ordinary time earnings for the year. This amount falls well short of their $25,000 concessional contribution cap for the year.
The actual level of superannuation support provided in respect of each employee is measured on a quarterly basis, that is the three month period commencing 1 July, 1 October, 1 January and 1 April.
The SG scheme applies to all employers in respect of their full time, part time and causal employees with only limited exceptions. In general terms, an ‘employee’ is a person who is paid a salary or wages in return for work or services rendered, and who receives payment for work under a contract that is wholly or principally for that person’s labour. The ‘employer’ is the person liable to make the payment.
The SG charge that is imposed if the employer fails to make sufficient SG contributions is based on the employee’s salary or wages for the quarter.
Sacrifice into superannuation
Because the SG legislation doesn’t prescribe how the minimum level of employer contributions for employees is to be funded, contributions made by an employer after an employee enters into a salary sacrifice arrangement may be an acceptable way for an employer to fulfil its obligations.
Choice of fund
As well as providing the required level of SG, employers must also give their eligible employees a choice as to the fund into which their SG contributions are paid. If the employee fails to choose, or chooses a fund that cannot be used by the employer, the employer may choose the fund.
As an employee, you may initiate the choice process by giving your employer a written notice proposing a particular complying super fund  or your employer must give you a standard choice form and thereby initiate the choice of fund process.
Your employer must act on your choice of fund.
It is important to note that you may not be eligible under the SG to choose a super fund if for example you work under a state industrial award, a federal industrial agreement such as an Australian workplace agreement (AWA), if you are in a particular type of defined fund or if you have reached a certain level in a defined benefit fund.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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