Records an employer needs to keep relating to Superannuation

As an employer you are required to maintain records relating to employees' choice of fund. The method of keeping such records is flexible but there are certain requirements to maintain records relating to choice of fund as indicated by the Australian Taxation Office website.

These records include:

• details of employees who do not have to be offered a choice of superannuation fund. For example, if an employee is not eligible to choose because the certified agreement they are employed under requires superannuation support to be provided

• confirmation that your fund meets the insurance requirements. These could be a copy of the product disclosure statement provided by the fund, or a record of a telephone conversation with an authorised representative of the superannuation fund about the level of insurance it offers
  
  
• evidence that shows you have provided the Standard choice form to all eligible employees. For example, you may issue the Standard choice form by email and keep copies of the emails, and
  
  
• the written information the employee provides when they nominate their chosen fund, and
  
  
• receipts or other documents issued by the fund showing that you have made superannuation contributions for that employee to the chosen fund.

Further information can be found on the Taxation Office website. You can use the Superconnect Clearing House to maintain records of payment showing all contributions made on behalf of employees and the funds to which these contributions have been sent.

Superannuation Tools

You need not be on your own to make decisions about your employees' eligibility to receive Superannuation Guarantee Contributions. The Australian Taxation Office provides a nice lot of decision and calculation tools that can be used online. Each of these tools are designed specifically for employers to make decisions and calculations relating directly to super contributions.

Perhaps one of the first tools you need to use is the tool to decide who is not eligible for super contributions. Of importance here is the decision tool to decide whether a worker is classified by the Australian Taxation Office as an employee or a contractor. If you are in doubt as to whether a worker is eligible for super payments you can also use the SG Eligibility Decision Tool.

To calculate the amount of super that should be paid for each of your workers the Superannuation Guarantee Contributions Calculator is a handy little tool. This can be used to list each of the payments and provides a list of Funds to which amounts of money should be paid.

Super is paid on ordinary times earnings. If you are not sure what your employee's ordinary times earnings is you can visit the page Using ordinary times earnings to pay super. You may also need to visit the page Changes You May Need to Make from 1 July 2008 to ensure you are calculating your employees' super contributions correctly. The Taxation Office also provides a thorough checklist to enable you to decide if certain payments made to your employees should be counted as ordinary times earnings.

A complete guide from the Australian Taxation Office is found in the pages titled, "Employers Superannuation Essentials."

Of course the simplest way to actually pay your employees' superannuation contributions is by using the Superconnect Clearing House. By using this tool you can keep track of all super contributions, maintain a list of all data required to make payments and you can add or delete entries to keep them up-to-date.

Advice on supplying an employees TFN

This is an important question: do you need to supply an employee's Tax File Number (TFN) to the employee's chosen super fund?

As of July 1, 2007, when your employee fills out a TFN declaration form, you must pass it on to the super fund.

If you do not pass on your employee's TFN you will be guilty of an offence and liable to pay a penalty. Further, your employee may have to pay extra tax on the contributions made to the super fund, and more, your employee may miss out on the Federal Government's super co-contribution payments.

If you make employer contributions for an employee, you need to give the fund the TFN within 14 days of receiving the employee's TFN declaration form. But if you do not make a contribution for the employee for that period, you may pass the TFN on when you make a contribution.

When do I have to pay super for former employees?

Generally speaking your responsibility to pay SG contributions on behalf of employees ceases when they leave your employment.

However, the last payment may not be due to be paid until after the employee leaves, particularly if your payroll system is such that contributions are paid on a certain day of the month that may be after the date of the employee leaving. In this situation you are still required to make the final SG payment on behalf of the employee.

There will also be situations where you will be paying employment termination payments (ETP) as employees leave your employment. In most cases you will be making a lump sum payment to the employee.

If the employee would prefer you to transfer their ETP to their accumulated super fund you can only accommodate their request until June 30, 2012 and should make sure that the payment fits in under the current transitional arrangements.

For further information about this you should visit the Australian Taxation Office site.

What if my employee has not become a member of the fund he nominates?

Quite frankly, this is not your problem as an employer. It is up to the employee to find out how to join the fund that they nominate and to obtain product disclosure statements, information and application forms for that fund.

You need to tell your employee that she/he needs to have joined a fund of their choice by the next due date for super payments to be made, otherwise their super contributions will be paid into the default fund chosen by you.

It is important to remember that as an employer you are not permitted to provide any research, comparisons, or product disclosure statements for any other fund other than your default fund, and you must not try to influence your employee in any way or provide them with financial advice when choosing a super fund.

If you pay super contributions into a super fund that your employee has nominated but not joined, those super contributions may be automatically rejected. Your employee must be a member of a fund they nominate.

In fact, if you use the Superconnect Clearing House, the system will not allow you to pay a super contribution to a fund without the member number. This means that you will not be allowed to make the mistake.

Selecting a default fund for your company

As an employer you must choose an employer-nominated fund for employees who do not exercise their right to choose a super fund.

Through the introduction of Choice of Fund Legislation most employees are now eligible to choose their own super fund. However, most employees contribute to their employer-nominated fund rather than selecting another fund. This is mostly because most employees are not focussed on building their retirement nest egg.

Employers, though, need to select a fund wisely so that their employees who contribute to that fund are well served. In choosing a default fund, employers must consider whether the fund meets prudential regulatory requirements, has effective procedures in place for following up arrears in payments, has a representative trustee structure, and complies with relevant legislation.

Regardless of what fund you choose for the default fund you can serve your employees well by making all payments to that fund through Superconnect. At Superconnect we have electronic connection with hundreds of funds and can electronically make the payments and send advice slips to the relevant fund through the Superconnect Clearing House.

How to handle "Do-It-Yourself" funds

Suppose a new employee of your brings with him his own "Do-It-Yourself" fund. How do you handle paying contributions to such a fund? Is this OK to pay superannuation contributions to an employee's own fund?

Rather than choose a retail fund to receive and administer super contributions, some employees have chosen the option of setting up their own self-managed fund. Provided that the employee has established the DIY fund properly it is quite all right to pay super contributions into such a fund.

If you as an employer registers with Superconnect you will find it quite easy to make payments to any DIY fund as Superconnect specializes in working with DIY funds. You must however ensure that you obtain the correct details in order to make payments to such a fund. When you register with Superconnect you can obtain a list of information you will need when making payments to the DIY fund.

If an employee is considering establishing a DIY fund they need to know that running such a fund is not for the feint hearted. Running a fund requires that the employee needs to comply with legal and tax requirements, as well as making investment decisions and fund administration. Generally a lawyer or tax accountant can direct your employee to the right channels to establish a DIY fund.

Where can I get super information and help?

Perhaps you have just started in business and you need some help in deciding what to do about super. Maybe your accountant has not really explained to you how super works in Australia. If you have any queries to your super contribution obligations, or do not understand how contributions should be calculated, or what penalties are for failing to pay contributions by required dates, you can obtain further information from the Australian Taxation Office website.

For a first port of call you should go to www.ato.gov.au/super and look under the section for "Employers Superannuation Essentials". The advice is divided into two sections: Basic Topics and Advanced Topics. You will find a wide range of articles in these two sections detailing just about everything an employer needs to know. You can also find a large number of fact sheets and publications on the ATO website as well some of which contains information relevant to employers and other publications that can be supplied to your employees.

Then, you may have all the information you require but find it difficult to pay super each month. This is where you can be helped by visiting with Superconnect Clearing House. Through the clearing house you can make payments to any number of super funds. Really, this is the best way to ensure that super payments are sent, on time, and to the right super funds. Find out all about it and register. It costs nothing to register . . . registration is free.

How the Superconnect Clearing House Pays Contributions

One question I have been asked a number of times now relates to how the monies you pay on behalf of your employees are actually paid to the superannuation fund administrators. That is a good question.

For the majority of superannuation contributions, the monies that are deducted from the employers bank are then aggregated in the Superconnect Clearing House and are paid to each Superannuation Fund Administrator electronically. That means Superconnect credits those monies directly to a fund administrator's banking account and then provides electronic advice on what that payment consists. This is true for hundreds of fund administrators and also many hundreds of do-it-yourself funds as well.

For the minority of funds, once the monies are aggregated, Superconnect Clearing House makes payment to these fund administrators by cheque and also provides an advice slip as to what those monies are to be credited. This, we must stress is being phased out as we bring many, many more fund administrators online.

What do I need to tell my employees about Super

As you would already know the requirement to give employees a quarterly statement of how much super you paid into their chosen fund was discontinued in 2005.

However, you are required to tell your employees the default fund into which their super contributions will be paid within 28 days of them starting work with you. You are also required to add the name of the fund and the amount of super contribution on the employee's payslip if you are covered by the Workplace Relations Act.

These laws, relating to super contributions, are administered by the Department of Employment and Workplace Relations. You can obtain further information about these laws by going to www.dewr.gov.au.

Avoid the Superannuation Guarantee Charge

If you fail to pay employee super contributions, you may incur a penalty. The penalty is called the Superannuation Guarantee Charge.

The Superannuation Guarantee Charge penalty is incurred if you fail to pay the 9% of ordinary time earnings into an eligible employee's chosen super fund, or, alternatively, into the default fund, or fail to make all your payments by the quarterly cut-off dates each year.

If you incur the penalty you will have to pay the amount of unpaid super based on salary and wages, plus interest at the rate of 10% a year and a $20 per employee per quarter administration fee to the Australia Taxation Office. You will not be able to claim this charge as a tax deduction.

One way you can ensure that you will never incur the SG Charge is to use the Superconnect Clearing House. Through using the Superconnect Clearing House you can ensure timely payments, a sure method of the funds arriving at the correct super fund, and an audit trail showing payments for each employee.

To avoid incurring the Superannuation Guarantee Charge when using the Superconnect Clearing House you should make your payments 10 days prior to the closing date. This will give enough time for payments to be received by the fund(s) of choice and will ensure arrival before the due date.

Records an employer needs to keep regarding choice of fund

As an employer you are required to maintain records relating to employees' choice of fund. The method of keeping such records is flexible but there are certain requirements to maintain records relating to choice of fund as indicated by the Australian Taxation Office website.

These records include:

• details of employees who do not have to be offered a choice of superannuation fund. For example, if an employee is not eligible to choose because the certified agreement they are employed under requires superannuation support to be provided

• confirmation that your fund meets the insurance requirements. These could be a copy of the product disclosure statement provided by the fund, or a record of a telephone conversation with an authorised representative of the superannuation fund about the level of insurance it offers
  
  
• evidence that shows you have provided the Standard choice form to all eligible employees. For example, you may issue the Standard choice form by email and keep copies of the emails, and
  
  
• the written information the employee provides when they nominate their chosen fund, and
  
  
• receipts or other documents issued by the fund showing that you have made superannuation contributions for that employee to the chosen fund.

Further information can be found on the Taxation Office website. You can use the Superconnect Clearing House to maintain records of payment showing all contributions made on behalf of employees and the funds to which these contributions have been sent.

Tools to calculate and provide decisions relating to Super

You need not be on your own to make decisions about your employees' eligibility to receive Superannuation Guarantee Contributions. The Australian Taxation Office provides a nice lot of decision and calculation tools that can be used online. Each of these tools are designed specifically for employers to make decisions and calculations relating directly to super contributions.

Perhaps one of the first tools you need to use is the tool to decide who is not eligible for super contributions. Of importance here is the decision tool to decide whether a worker is classified by the Australian Taxation Office as an employee or a contractor. If you are in doubt as to whether a worker is eligible for super payments you can also use the SG Eligibility Decision Tool.

To calculate the amount of super that should be paid for each of your workers the Superannuation Guarantee Contributions Calculator is a handy little tool. This can be used to list each of the payments and provides a list of Funds to which amounts of money should be paid.

Super is paid on ordinary times earnings. If you are not sure what your employee's ordinary times earnings is you can visit the page Using ordinary times earnings to pay super. You may also need to visit the page Changes You May Need to Make from 1 July 2008 to ensure you are calculating your employees' super contributions correctly. The Taxation Office also provides a thorough checklist to enable you to decide if certain payments made to your employees should be counted as ordinary times earnings.

A complete guide from the Australian Taxation Office is found in the pages titled, "Employers Superannuation Essentials."

Of course the simplest way to actually pay your employees' superannuation contributions is by using the Superconnect Clearing House. By using this tool you can keep track of all super contributions, maintain a list of all data required to make payments and you can add or delete entries to keep them up-to-date.