Paying workers – Superannuation: Tax basics for small business

As an employer, you must pay super for your
eligible employees and certain contractors. This obligation is called the superannuation
guarantee. Your employees may also be eligible to choose the super fund you pay their super
into. If you operate your business as a sole trader
or partnership, you are not an employee of the business and the super guarantee rules
don’t apply to you. However, if your business employs workers, then you will need to pay
super for your workers. Like any self-employed person, you can make
personal contributions to a super fund for yourself, as a way of saving for your retirement.
Most self-employed people can claim a deduction for contributions they make until age 75.
When considering making a contribution to your super, keep in mind that contributions
you make may be subject to extra tax if they exceed the contribution limit for that year.
It’s best to seek professional advice when considering your own super. If your business operates as a company or
a trust, you are likely to be a director and an employee. In this case, the super guarantee
rules apply to you in the same way as they apply to other employees. Directors should also be aware that under
the law, they may become personally liable for the payment of a penalty equal to the
unpaid super debts of their company, if they are not paid in full by the due date. As an employer you’ll need to know a few rules
about paying super. You must firstly work out which workers are
eligible. Once you’ve done that you must work out how much to pay and do this at least quarterly. Any of my employees who are paid at least
$450 before tax in a calendar month are covered by the super guarantee law, whether they work
full-time, part-time or on a casual basis. That’s right unless they fall under one of
the other exceptions. The exceptions include employees under 18 years and employed for
30 hours or less in a week, and employees paid to do work of a domestic or private nature
– such as a nanny or a housekeeper – for 30 hours or less in a week. I heard the definition of employees can include
other people, not just employees? That’s right. The definition of ’employees’
is extended, for super purposes, to include some additional categories of workers, including
company directors and individual contractors who wholly or mainly supply labour. Once again,
if the person falls under any one of the exceptions, you don’t have to pay super for them. If you’re not sure who is eligible, you can
use the superannuation guarantee eligibility decision tool, available on the ATO’s website. To work out how much to contribute, you’ll
need to multiply the super guarantee rate by the employee’s ordinary time earnings.
You can use the super guarantee contributions calculator, available on the ATO’s website,
to help you calculate this amount. Ordinary time earnings are usually the amount
your employee earns for their ordinary hours of work. It includes commissions, over-award
payments, shift loading, certain bonuses and allowances but doesn’t include overtime and
reimbursements. There is a checklist on the ATO’s website
to help you work out what’s included in ordinary time earnings. Any existing super obligations you have under
an industrial award or work place agreement count towards the minimum level of support
you must provide. However, an employee’s own contributions (for
example, amounts they ask you to deduct from their salary after tax) do not count towards
your obligations. You must pay the super contributions you make
for your employees on a quarterly basis into a complying super fund or retirement savings
account. If an employee chooses a fund and provides
all of the necessary information to you, you must start paying contributions to the chosen
fund within two months. If an employee doesn’t choose a fund, you
can pay the contributions into the fund you have chosen as your employer-nominated or
default fund. A super fund is complying if it meets specific
requirements and obligations under super law. You can check the register of complying super
funds by visiting the Super Fund Lookup website. The Australian Government offers a free clearing
house service to small businesses with 19 or fewer employees. The
Clearing House lets employers pay their super contributions to a single location. If you haven’t met your super obligations
as an employer, you have to lodge a Superannuation guarantee charge statement – quarterly and
pay a superannuation guarantee charge to the ATO. You must pay the super guarantee charge if
you don’t pay enough super contributions for your eligible employees, if you don’t pay
on time, or if you don’t pay super contributions to your eligible employee’s chosen super fund. Once you lodge a statement and pay the super
guarantee charge, the ATO will transfer the super guarantee shortfall amount and any interest
to your employee’s chosen super fund. The superannuation guarantee charge statement
and calculator tool is available on the ATO’s website to help you complete the form and
calculate your liability.

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