The Superannuation Guarantee, also known as the Super Guarantee or SG for short, is a regular payment paid into your employee’s super fund to assist and supplement retirement savings and the Age Pension. It is now fixed at 9.5 percent of their base wage.
This contribution is linked to their pay or pay package and is paid in addition to it, with compliance mandated by the Superannuation Guarantee (Administration) Act 1992.
The minimum percentage that companies must pay is planned to rise over time, with the next increase to 10% expected on July 1, 2021.
Who is eligible for SG payments?
The majority of your employees should be protected under SG laws. Employees who are paid $450 or more (before tax) in a calendar month who work full-time, part-time, or casually should generally be eligible for super contributions.
You need to pay SG contributions for employees who are at work or on leave such as:
- Paid sick leave
- Long service leave
- Annual leave
- Workers’ compensation (in some circumstances)
Under the legislation, you don’t have to pay SG contributions for employees who are:
- Earning less than $450 in a calendar month
- Under 18 years of age and working less than 30 hours a week.
- Away from work and not receiving pay, such as on parental leave or approved leave without pay.
How much super do you need to pay?
As an employer, you must pay a minimum of 9.5% (will increase to 10% by 1 July 2021) of each eligible employee’s ordinary time earnings each quarter. If your employees are covered by an award or employment agreement that specifies a higher super contribution than 9.5%, you must pay that higher amount.
Ordinary time earnings (OTE) are usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift-loadings and allowances, and generally does not include overtime payments.
How it works with Xero
Xero automatically applies the correct rates for superannuation. Like tax tables, it stores superannuation guarantee (SG) rates and retrieve the right percentage based on the payment date of your pay runs.
If a contribution increases, you’ll need to pay your employees the new minimum amount. The new rates apply to the payment date of a pay run, not the pay period.
The Statutory Rate option automatically applies to your existing employees’ pay templates and superannuation lines if the:
- Contribution type is SG Contribution.
- Calculation type is Statutory Rate.
- Percentage applied on the employee’s pay template is 9.50%.
Any superannuation lines you add default to the statutory rate option for new employee pay templates.
Xero doesn’t automatically cap super contributions. If you have an employee whose earnings are in excess of the maximum contribution base, you’ll need to update their pay template manually.
If your employees don’t have the correct SG rate for the year, it could be because the payment date of the pay run is not correct, or contributions are set up in a way that means automatic updates haven’t been applied.
SG Rate Increase
The SG rate will increase to 10% on 1 July 2021, and then continue to increase until it reaches 12% on 1 July 2025.
Contributions must be paid on a quarterly basis. However, you can also choose to pay monthly or fortnightly. Once you’ve decided how you’re going to pay your employees’ super, then all you need to do is ensure you meet the payment deadlines.
For more information on the superannuation guarantee call the ATO on 13 10 20, or visit the ATO website.
Dai is a Master of Business Administration graduate of the University of New England, Registered BAS Agent and member of the Institute of Certified Bookkeepers. For 16 years he owned, operated and managed businesses in the tourism and hospitality industry – particularly Accommodation, Event Management, and Food & Beverage Management. In recent years, Dai has worked in the Not for Profit sector, Real Estate, Motorsports, and Motor Trades industry and business services, in Finance, Administration, and Practice Management roles, before becoming a Professional Bookkeeper in 2009.