Australia’s #1 Self Managed Super

Superannuation Guarantee Payments

Superannuation Guarantee Payments are the payments an employer makes towards an employee’s Super fund. This guide will help you understand when you must pay Super Guarantee Payments and how to calculate how much you must pay toward your employee’s Super fund.

Are you an employer for Super Guarantee Payment purposes? This might seem like a dumb question, surely you would know if you are an employer. However this might not be the case as by law you must pay Superannuation Guarantee Payments even in settings which are not traditionally considered a employer / employee setting.

To set the record straight you are an employer if you employ someone (verbal and written contracts are valid) full-time, part-time or on a casual basis. To put it simply you must pay super guarantee payments whenever you employ anyone for any amount of time. No surprises there. However you are also considered an employer if you pay someone for a job under a contract which consists mainly for labor. For example if you paid a graphic designer to design a website for you, you must pay the contract fee and the Super Guarantee payments.

Do all employees qualify for Super Guarantee payments? Nearly, the requirements are rather broad. All employees that are over 18 and under 69 and are paid over $450 or more in a given month qualify. The $450 are calculated before tax.

How much Super Guarantee payment must you pay?
This is rather easy, to work out your employee’s Super Guarantee entitlement you must multiply their wage under ordinary time earnings (what was established in his contract) and multiply by 9%.

When must you pay the Super Guarantee contributions?
You must pay the 9% of the employee’s ordinary time wage by the quarterly payment cut-off set out by the Tax Office. According to this program any payments made in:
1)    The first quarter, (1st July to 30th September must be paid by the 28th October.]
2)    The second quarter (1st October to the 31st December) by the 28th of January
3)    The third quarter (1st January to the 31st of March) by the 28th of April.
4)    The fourth quarter (1st April to the 30th of June) by the 28th of July.
A charge must be paid on Super Guarantee payments that are not made on time

What happens when the cutoff date falls on a weekend or public holiday?
You can still make the payment the next working day without having being late in making your Super Guarantee payment.

To illustrate these requirements consider this example:
You employ a worker named John Smith who has worked faithfully for your company for three years. You feel he deserves a raise, which you provide in the month of may, the fourth quarter of the year. For the fourth quarter John’s earnings are $10,000. You must pay a minimum (you can always pay more if you want, John would appreciate it) of $900 towards John’s Super fund by the 28th of July. If you are late in paying the Super Guarantee you will have to pay a super guarantee charge as penalty.

What is involved in self managed super funds?

If you are asking this question the chances are you know what a Super fund is. The chances are you are Australian also because for the rest of the World Super funds sound like a really boring superhero.

Self managed super funds or SMSF’s are just a Super fund where the trustee has the sole responsibility of managing the fund. The trustee being you. This opens a whole world of investment opportunities and pitfalls. Being the member and trustee of the fund you answer for the management and legal responsibilities tied to a Super fund.

As all Super funds your Super fund will receive a tax concession. Any contribution deposited in the Super will be taxed at 15%. However being allowed to manage a Super does not mean you are qualified to do so. Managing a Super fund requires a good understanding of Super law and tax regulations.

So how can you manage your own Super fund? If you are a professional financial advisor you won’t be reading this How to guide so we will start from the very basics.

1.)    The first thing you should do is contact a professional that can give you advice in managing your Super fund. A professional will be able to give you advice on how to setup the fund, what regulations you must follow and write out the documentation you need.
2.)    Once you have setup the legal and paperwork side of your fund you will need to start investing in it. How can you decide what to invest in and how much to invest? You need to start by talking with a licensed financial planner. To find out more on financial planners in Australia, please visit www.asic.gov.au for more information and details and to check your financial planner has an up-to-date license.
3.)    You will need to follow your administrative obligations which include speaking to a specialist administrator for help with running your fund.
4.)    You must also carry out a yearly audit. If you need help in how to do it please contact any of the professional associations that control the Super fund sector.

The Australian Tax office supplies the necessary information to find out what regulations and requirements are needed. The Australian Tax Office provides with details about these regulations and will help you to follow them.
It cannot be emphasized enough the risk that is found in investing your own fund. Not everybody is best suited for making financial decisions of this kind and some do not fare very well. Think hard before making this move and if you do look for good advice before starting.