Management
March/April
2003
The
Superannuation Guarantee -
what are your obligations as an employer?
By
Geoff Coy, Certified Practising Accountant
ccountant, Geoff Coy looks at some recent changes to the
Superannuation Guarantee and your obligations as an employer.
What is the superannuation guarantee?
The Superannuation Guarantee (Administration) Act 1992 (SGAA) has applied
since 1 July 1992 and was introduced to ensure that most employees receive
employer superannuation support.
From 1 July 2003 employers must make their superannuation
contributions on a quarterly basis. The due date to make these contributions
is the 28th day of the month following the end of the relevant quarter.
Payment of the SG charge and lodgement of the statement is due on the
14th day of the second month following the end of the quarter.
The contribution percentage that applies to employers
for the 2002/03 financial year and beyond is 9%.
Employers need to provide a set minimum amount of superannuation
support into a complying superannuation fund or for their employees.
Prior to 1 July 2003 employers who do not provide a minimum level of
superannuation support for their employees by 28 July following the
end of the relevant financial year will have to lodge a Superannuation
Guarantee Statement and pay the Superannuation Guarantee Charge to the
Australian Taxation Office.
Who is covered under
the superannuation guarantee?
The superannuation guarantee legislation applies to all employers
for most of their full-time, part-time and casual employees.
An 'employer' is someone who uses the services of an employee,
and may be an individual, firm, company, trust, Government, public authority,
non-profit organisation or a non-resident who has employees working
in Australia.
As well as its normal meaning, 'employee' includes company
directors, some artists, sports people and several other categories.
Individuals working under a contract wholly or principally for their
labour are employees for superannuation guarantee purposes, even if
they quote an Australian Business Number (ABN).
Are any employees exempt
from the superannuation guarantee?
Employers do not have to make superannuation contributions for some
categories of employees. The most common of these categories include
employees who:
- are paid less than $450 in a month;
- are aged 70 or over;
- are under 18 years of age and working for not more
than 30 hours a week;
- are paid to do private or domestic work for not more
than 30 hours a week for a non-business employer;
- have vested benefits in excess of their pension Reasonable
Benefits Limits (RBL) and who elect not to receive any more employer
contributions.
What is an earnings
base?
The earnings base is usually specified in a superannuation fund trust
deed, a law, an industrial award or an agreement with the employee.
In most cases it is an amount related to the employee's earnings and
changes in line with changes in the employee's earnings. In a few limited
cases, the earnings of a 'standard' employee may be an acceptable earnings
base.
If there is no acceptable earnings base relevant to the
employee, then the default earnings base called ordinary time earnings
(OTE) must be used. OTE is the total of the employee's earnings for
ordinary hours of work and also includes the following payments:
- Commission;
- Allowances;
- Bonuses;
- Overtime and penalty rates;
- Unused annual leave, long service leave and leave loading;
- Redundancy and ETP's;
- Sick Leave, bereavement leave, maternity, paternity
and other
- Top up payments to cover jury duty and duty with reserve
forces.
The following are examples of payments that are NOT
part of salary and wages:
- Expense reimbursements;
- Workers Compensation payments;
- Dividends;
- Partnership and trust distributions;
- Pension payments;
- Payments made to enter into a restraint of trade.
Are you an employer?
You are an employer if you engage workers under an employment contract
(oral or written). In addition, you are classed as an employer, if you:
- have some control over your workers;
- are responsible for payment of wages or salary;
- have the power to dismiss or hire workers;
- Under the superannuation guarantee legislation, an
employer also includes someone who engages contractors under a contract
wholly or principally for their labour.
Who is an employee?
An employee is someone who works either full-time, part-time
or casually, for an employer. Employees include people working under
a contract wholly or principally for their labour, company directors,
some artists, sports people and others providing services in connection
with artistic or sporting displays.
Is a contract worker an employee? Yes. Someone who works
under a contract which is wholly or principally for their labour is
an employee of the other party to the contract.
What is a contract for labour? A contract, either made
orally or in writing, is a contract for labour if it expresses or implies
that some work must be performed by the party to the contract.
The superannuation guarantee provisions do not apply when
a contract is made with someone other than the person who will provide
the labour. This includes a company, trust, partnership or when the
person is free to hire other people to perform the work even if the
person ends up performing the work themselves.
A contract is wholly or principally for labour if labour
is the principal component of the contract. All relevant indicators
must be weighed up when deciding whether a contract is principally for
labour.
Are people who quote an Australian Business Number
(ABN) covered by the superannuation guarantee? Sometimes. The relationship
between the contracted parties needs to be assessed. Individuals who
work under a contract wholly or principally for their labour are employees
for superannuation guarantee purposes, even though they may quote an
ABN. The superannuation support is calculated on the labour component
of the contract.