Normally employers have to pay a worker super. However, this becomes confusing with the different visas that employees might be on. Some rules are listed below.
Paying super to temporary residents Temporary residents working in Australia are eligible for super guarantee. When temporary residents leave Australia, they can claim the super paid as a departing Australia superannuation payment (DASP). This is provided that they meet the requirements where you must:
Be 18 years old or over (if you are under 18 you must meet the above conditions and work over 30 hours per week to be entitled to SG) and,
Paid $450 or more before tax in a month.
Employees working overseas An employee sent to work overseas must be paid superannuation by their employer. The other country may require the employer or employee to pay super there as well if Australia does not have a bilateral agreement with that country. To gain exemption from the super payment in the other country, the employer needs to show the authorities in the other country a certificate of coverage gained from the ATO.
Employees not eligible for super
Non-resident employees, you pay for work they do outside Australia
Some foreign executives who hold certain visas for entry permits
Employees temporarily working in Australia who are covered by a bilateral super agreement. You must keep a copy of the employee’s certificate of coverage to verify this arrangement.
The Australian Tax Office (ATO) is reminding employers to check they are meeting their obligations when it comes to paying super to their workers.
To help you make sure you are meeting your requirements, consider this checklist:
Are you paying the correct amount?
You are required to pay a minimum of 9.5 per cent of their ordinary time earnings to their superannuation fund.
Are you keeping correct and up-to-date records?
It is important to maintain accurate record-keeping procedures, so you have evidence to prove you have been meeting your employer super obligations.
Are you paying super to all eligible workers?
Like your employees, some contractors you hire may also be eligible for super contributions.
Are you making payments to the right fund?
Unless a worker has not provided their details, you should be paying into their fund of choice instead of your default fund.
Are you making payments on time?
The ATO allows employers to make contributions quarterly. Always ensure you make payments on time as late payments can incur a superannuation guarantee charge, which is not tax deductible. When making payments on time, they are tax deductible against your business income.
Are you paying the right way?
It is important to send the payment and data electronically in a standard format (paying the SuperStream way). Your business may also be eligible to use the free Small Business Super Clearing House to distribute payments to your employees’ super funds.
The Tax Office is reminding individuals winding up a self-managed super fund (SMSF) that before lodging your final SMSF annual return, you must first have an audit completed by an approved SMSF auditor.
When lodging your SMSF annual return, answer Question 9 in Section A: ‘Was the fund wound up during the income year?’. You should also look to complete Question M in Section D: Supervisory levy adjustment for wound up funds. By doing so, you will reduce the SMSF supervisory levy you must pay, so you do not have to pay the levy the following year.
Remember also to pay any outstanding tax liabilities and lodge any outstanding returns. Otherwise, you may be subjected to compliance assessments and risk penalties.
The Tax Office will send you a letter of confirmation of your wound up fund, which will include:
– confirmation your SMSF’s ABN is cancelled, and
– your SMSF’s record is closed on the ATO’s system.
Avoid closing your bank accounts until all expected final liabilities have been settled and requested refunds received. You can pay outstanding tax liabilities, including the supervisory levy when you lodge your final SMSF annual return.
Any ordinary and statutory income a self-managed super fund (SMSF) earns from assets held to support retirement phase income streams is exempt from income tax – this income is commonly referred to as Exempt current pension income (ECPI).
This form of income does not include assessable contributions or non-arm’s length income.
Individuals can choose to claim their ECPI in the SMSF annual return. However, to do so, they must ensure their SMSF assets are valued at current market value. This requirement also applies when a transition to retirement income stream (TRIS) moves into retirement phase.
There are two methods an individual can use to calculate their ECPI – they are the segregated method and the proportionate method.
Generally, an individual uses the segregated method when their fund is 100 per cent in retirement phase (provided the assets are not disregarded small fund assets). If the fund has disregarded small fund assets, then the proportionate method must be applied.
With recent regulatory changes to super contributions, it is easier than ever to ensure your employer is paying you the super you are entitled to.
There are specific steps you can take to ensure you are being paid correctly. Consider the following:
Understand your entitlements
Employers have to put 9.5 per cent of an employee’s wage into their superannuation account. As of July 2017, these contributions must be made quarterly through the super clearing house. This was introduced by the ATO to prevent dishonest employers from ripping off their employees. If you have not received a quarterly payment by the 28th of the following month, contact the ATO, and they will investigate this on your behalf.
Consolidate your accounts
If you have had various jobs throughout your working life, there is a good chance you have more than one super account. If you do, you will be paying excess account fees. You should look to roll over your funds into one account and close the leftover accounts.
Research
It is advantageous to do your research and be informed regarding your super. This will guarantee you a fund that will provide you with the financial security you deserve when it comes time to retire. You can do this by researching the product disclosure statement of various funds and investigating where your contributions are being invested as well as what kinds of fees you are being charged.
Personal contributions
Making regular personal contributions to your superannuation account can mean the difference of over $100,000 when you retire. Form a plan that works for you, such as setting up a direct payment of $20 a fortnight or $100 a month. This is a great way to take ownership over how comfortably you want to retire.
Making contributions to your superannuation fund is a great way to grow your nest egg, however, there are caps on the amount you can contribute every financial year to be taxed at lower rates. Once you go over these caps, you may be required to pay additional tax.
The cap and extra tax amount will vary depending on your age, the financial year the contributions relate to, and whether the contributions are concessional (before tax) or non-concessional (after tax).
Concessional contributions
Concessional contributions include compulsory employer contributions and salary sacrifice amounts. There is a cap on the amount you can make, and payments are taxed at 15 per cent.
Non-concessional contributions
These are after-tax income contributions and are not taxed in your super fund. However, like concessional contributions, caps also apply to non-concessional payments. From 1 July 2017, the cap was reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years providing they meet the work test. The cap is indexed in line with the concessional contributions cap.
The non-concessional cap is also nil for a financial year if you have a total super balance greater than or equal to the general transfer balance cap ($1.6 million in 2017-18) at the end of 30 June of the previous financial year.
Exceeding your non-concessional contribution cap
When you exceed your non-concessional contribution cap, you need to lodge an income tax return for that year. The ATO generally issues a determination if the return is not lodged within 28 days of the due date. You can withdraw the excess non-concessional contributions (and any earnings – the earnings would then be included in your income tax assessment).
When it comes to protecting your nest egg, avoid getting caught out by a promoter of an illegal early release super scheme.
Early release super scheme scams will involve a promoter contacting you and offering to help you access your super early. They usually target individuals under significant financial pressure or those who are not knowledgeable about super laws and the repercussions and penalties involved in illegally accessing your super.
You can only access your super when you meet a condition of release.
Generally, when you:
– Are 65 years old (even if you have not yet retired).
– Reach your preservation age and retire.
– Reach your preservation age and begin a transition to retirement income stream while still working.
There are special circumstances where you may be able to access your super early.
These special circumstances include:
– Severe financial hardship
– Temporary or permanent incapacity
– Compassionate grounds
– Temporary residents leaving Australia
– Super death benefits (inheriting super)
– Super less than $200
– Terminal medical condition
To avoid falling for an illegal early super release scam, be wary if the promoter:
– charges high fees and commissions;
– requests identity documents;
– claims you can access your super and put the funds towards whatever you wish;
– and tries to persuade you to transfer or rollover your super from your existing fund to a self-managed super fund (SMSF) in order to access your super before you are legally entitled.
Employers are being reminded by the Australian Tax Office (ATO) not to forget that along with permanent residents; temporary residents are also entitled to super guarantee (SG).
In most cases, an employer will be required to pay SG on top of their employee’s wages (temporary residents included) if they pay them $450.00 or more before tax in a calendar month.
Providing the temporary resident has met all the requirements, they can submit their claim for the super that their employer has paid as a ‘department Australian superannuation payment’ (DASP) once they have left Australia.
The ATO is encouraging employers to notify their temporary resident workers of the DASP application as it will be easier for these individuals to get the required supporting documents certified in Australia and then lodge once they have left the country.
The Superannuation Guarantee Amnesty was introduced on 24 May 2018 by the Minister for Revenue and Financial Services in a bid to tackle non-payment of employee super.
The Amnesty provides a one-off opportunity for employers to self-correct any past super guarantee (SG) non-compliance without incurring a penalty. However, there is a lot of ambiguity around which employees are entitled to compulsory super payments.
Small business employers need to pay special attention to these particular areas:
Ordinary time earnings
An understanding of ordinary time earnings (OTE) is essential as it is used to calculate tan eligible employees minimum SG contributions. OTE is generally what your employees earn for their ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments. The SG is 9.5 per cent of an eligible employees ordinary time earnings (OTE).
If you make super contributions under an award, check that they are enough to satisfy both the award and the SG. Issues can occur where an agreement prevails over an award, no ordinary hours of work are stipulated, where an employee gets reimbursed, there is no award or agreements and where overtime is paid the same as ordinary hours.
Contractors
So you think you do not need to pay contractors super? Think again. Some contractors may be entitled to super.
The ATO also sees cases where employers classify employees as contractors, and consequently, forgo paying their super. If you are unsure of whether a worker is a contractor or employee, or if you unsure if your contractors are entitled to super, seek professional advice.
The ATO is encouraging taxpayers to review their super this tax time.
Finding lost super or consolidating any unwanted multiple accounts can make a massive difference to your nest egg.
There is over $18 billion in lost and unclaimed super. Those who have changed their name, address, job or lived overseas are at high risk of having lost super.
During the last five years, more than $10.7 billion of super has been consolidated from over 2.1 million accounts through ATO online services.
The ATO is also reminding taxpayers that the new super deduction is available. Most people under 75 years of age can claim a tax deduction for personal after-tax super contributions.
Personal super contributions deductions provide a level of flexibility for young people that change jobs frequently, self-employed contractors, small business employees, freelancers and people whose employers do not offer salary sacrifice arrangements.
To claim a deduction for any personal super contributions made in 2017/18, you must lodge a notice of intent to claim a deduction with your fund and receive a confirmation letter from them before lodging your tax return.
Winduss & Associates is an accounting firm which is fast becoming a leader in the Osborne Park area through outstanding service to our clients, both business and individuals alike.
Winduss & Associates offers a range of accounting services and bookkeeping services, including business advice, taxation and MYOB consulting. In addition, Winduss & Associates also works with clients in relation to the establishment and management of their self managed super funds.
About us
Firm history:
Winduss & Associates was founded in 2001 by Alan Winduss. Since establishment the firm has enjoyed significant growth and success due to its ability to retain clients and deliver consistently superior services. Winduss & Associates clients are located throughout Australia and Asia, preferring to stay with the firm when they relocate.
Our team
Our values
Employment Opportunities
