Superannuation guarantee How to understand and meet your superannuation guarantee obligations.

A guide for employers
Superannuation guarantee
How to understand and meet your
superannuation guarantee obligations.
Australian
Taxation Office
This work is copyright. You may download, display, print and reproduce this material in
unaltered form only (retaining this notice) for your personal, non-commercial use or use
within your organisation. All other rights are reserved. Requests and inquiries concerning
reproduction and rights should be addressed to:
The Manager
Legislative Services
AusInfo
GPO Box 1920, Canberra ACT 2601
or by email:
[email protected]
Information is current as at 1 July 2001
© Commonwealth of Australia 2001
ISBN 0-642-18225-6
ATO publications
This publication is available free from the Australian Taxation Office (ATO), which
prohibits any party from selling this publication.
Please get help from the ATO or a professional tax adviser if you feel this publication does
not fully cover your circumstances. We regularly revise our publications to take account
of changes to the law and you should make sure that this edition is the latest.
As part of our commitment to produce accurate publications, taxpayers will not be
subject to penalties if they can demonstrate that they based a tax claim on wrong
information supplied by the ATO. However, interest could be payable depending on
the circumstances of each case.
An overview
What is the superannuation guarantee?
What is the purpose of the superannuation guarantee?
How to meet your obligations
The superannuation guarantee charge
5
Part
When to pay the superannuation guarantee
Important dates
7
Part
Does it apply to you?
Are you an employer?
Who is an employee?
Exemptions
8
Part
How it affects existing superannuation schemes
Award superannuation
Employees' personal superannuation
10
Part
Working out what you should pay
What is your charge percentage?
Determining an employee’s earnings base
Self assessment for the superannuation guarantee
What is a contribution period?
Tax deductibility of superannuation contributions
11
Part
What are ordinary time earnings and salary or wages?
Ordinary time earnings (OTE)
Salary or wages
15
Part
Which superannuation provider?
Why must contributions be paid into a complying
fund or retirement savings account (RSA)?
How to check if a superannuation fund complies
The Australian Prudential Regulation Authority (APRA)
16
Part
The superannuation guarantee charge
Disadvantages of having to pay the superannuation
guarantee charge
Calculating the superannuation guarantee charge
When to pay the superannuation guarantee charge
What will the Australian Taxation Office (ATO) do
with the money?
17
Part
Record keeping
Do you have to lodge returns?
The appeals and review process
20
Part
Protecting small amounts of superannuation
Member protection rules
Superannuation Holding Account Reserve (SHAR)
22
Part
Keeping track of superannuation
The Lost Members Register
25
Where to get more information
25
1
2
3
4
5
6
7
8
9
10
11
Contents
Part
The superannuation guarantee
3
About
this
guide
4
An employer’s guide
The superannuation guarantee is a Commonwealth Government
program which began on 1 July 1992. It affects every employer in
Australia so it is important you understand your obligations.
This guide will help you understand how the superannuation
guarantee works. We suggest that you also talk to your employees. Your
professional tax or financial adviser can also help you meet
your obligations.
For easy reference this guide contains 11 parts. Part 1 provides an
overview of how the superannuation guarantee affects you.
Further parts cover specific areas of superannuation guarantee.
What is the superannuation guarantee?
The superannuation guarantee was introduced to ensure that as
many Australians as possible have access to superannuation
and to provide higher standards of living in retirement for future
generations. The superannuation guarantee has applied since
1 July 1992.
Under the superannuation guarantee, you need to provide
sufficient superannuation support for your eligible employees
or pay the superannuation guarantee charge to the Australian
Taxation Office (ATO). Superannuation support you provide for your
employees, will usually be tax deductible up to certain limits.
If you do not already provide your eligible employees with sufficient
superannuation to avoid the superannuation guarantee charge you
should:
• increase the amount of superannuation already provided
to at least the level set out in the superannuation
guarantee legislation; or
• introduce employee superannuation where none exists, at the
level set out in the superannuation guarantee legislation.
Part
1
An overview
If you are already providing the required level of superannuation
(eg. through award superannuation and/or the superannuation
guarantee) you do not need to provide additional superannuation.
If you do not at least provide the required level of superannuation set
out in the superannuation guarantee legislation you must pay the
superannuation guarantee charge.
What is the purpose of the superannuation guarantee?
The aim of the superannuation guarantee is to provide better incomes
for Australians in retirement. The age pension will be available for
those who need it. However, in most cases the superannuation
guarantee will ‘top up’ the age pension.
The superannuation guarantee will reduce the need for future
generations of taxpayers to pay extra to fund full age pensions
for the increasing number of retired people. It is also an
efficient way of ensuring compliance with existing award
superannuation arrangements.
The superannuation guarantee
5
Part 1
An Overview
How to meet your obligations
The superannuation you provide must be paid to
a superannuation provider (see Part 7).
For the 2001/2002 year you should provide each eligible employee
with minimum superannuation contributions of 8% (the
charge percentage) of each employee's earnings base.
This percentage will increase gradually to 9% for all employees
by 1 July 2002 (see table at p.11).
As the superannuation guarantee is self assessing, there is no need
for you to fill in any forms or lodge returns as long as you provide
sufficient superannuation support. However, you need to have kept
adequate records (see Part 9) to prove you have given your
employees the minimum support required.
The superannuation guarantee charge
The contribution period ends on 30 June each year but you have
another 28 days to pay. If you fail to meet this requirement you
will have to lodge a Superannuation Guarantee Statement and pay
the superannuation guarantee charge to the ATO by 14 August.
The superannuation guarantee charge is not tax deductible
and includes interest and an administration fee in addition to the
superannuation required under the superannuation guarantee
(see Part 8).
6
An employer’s guide
For each financial year the contribution period ends on 30 June. Even
though you have another 28 days to pay. It is recommended that you
make contributions regularly over the year.
As award superannuation will continue to apply you should also
check that you meet the requirements set out in any relevant award.
(See Part 4).
Under the income tax laws, you will need to make contributions in
the financial year that you want to claim a deduction. You will need
to pay by 30 June to claim for that tax year. Superannuation paid
after 30 June but before 28 July can be claimed as a deduction in the
next year.
Important dates
30 June of each year
Contributions must be paid by this date to qualify for a tax deduction in
the current financial year.
1 July of each year
New limits apply for tax deductible superannuation contributions.
Part
2
When to
pay the
superannuation
guarantee
28 July of each year
Deadline for superannuation guarantee contributions to be made
to a superannuation provider.
14 August of each year
Deadline for lodging the Superannuation Guarantee Statement and
paying the superannuation guarantee charge.
The superannuation guarantee
7
Part
3
Does it apply
to you?
The superannuation guarantee applies to all employers. It’s up to you to
check that your existing employee superannuation arrangements
comply, and make changes where necessary.
Are you an employer?
You are an employer if you employ workers under an employment
contract (oral or written) on a full-time, part-time or casual basis.
You may be an employer if you:
• have some control over your employees;
• are responsible for the payment of wages or salary; or
• have the power to dismiss or hire employees.
All governments, their statutory authorities and municipal bodies have
to provide the same minimum contributions as the private sector.
You may also be an employer if you make payments under a contract
that is wholly or principally for labour even if an Australian Business
Number (ABN) is quoted. The contract must state or imply that the
work has to be done by the person who signs the contract.
If you make a contract with someone other than the person who will
actually be doing the labour, the superannuation guarantee does not
apply. Cases where this would happen are:
• if you make a contract with a company or a partnership; or
• if the person you have the contract with is free to hire other people
to perform the work, even if the person ends up performing the
work themselves.
The provisions of the superannuation guarantee apply to all employers
including:
• non-resident employers who have employees working in Australia;
• Commonwealth and tax exempt Commonwealth authorities;
• tax exempt organisations; and
• family companies and trusts paying salary or wages.
Labour includes mental and artistic effort as well as physical work. For
example, a person who is required to play an instrument at a series of
concerts would be, for superannuation guarantee purposes, an
employee of the person who made the contract with them.
There are no provisions to treat related employers as one employer.
Each is treated as a separate employer. However, deductions for
contributions to superannuation funds on behalf of employees are
limited where employers are associated. (see Part 5).
8
An employer’s guide
Who is an employee?
Generally, an employee is an individual who receives payment in the
form of salary or wages in return for their labour or services. An
employer should make superannuation contributions on behalf of all
their employees (subject to the exemptions listed below).
Part 3
Does it apply to you?
A person may also be an employee for superannuation guarantee
purposes if they are engaged under a contract that is wholly or
principally for their labour even if an ABN is quoted. Further
information is provided in rulings available from the ATO.
Exemptions
You do not have to provide superannuation support for some
limited categories of employees. These categories are:
• employees paid less than $450 in a calendar month;
• employees aged 70 years and over;
• employees under 18 years of age working 30 hours, or less,
per week;
• non-resident employees paid for work done outside Australia;
• resident employees paid by non-resident employers for work
done outside Australia;
• some foreign executives who hold certain visas or entry permits
under the Migration (1993) Regulations and Migration Regulations
1994. For further information please contact the Superannuation
Helpline on 13 10 20;
• employees paid to do work of a domestic or private nature
for not more than 30 hours a week, eg. part-time nanny
or housekeeper;
• employees who receive payments under the Community
Development Employment Program (CDEP);
• a member of the Army Reserve. The Army Reserve is not required to
provide superannuation support; and
• employees electing not to receive superannuation guarantee support
because their accumulated superannuation benefits exceed the
pension reasonable benefit limit.
The superannuation guarantee
9
Part
4
How it affects
existing
superannuation
schemes
10
An employer’s guide
Any contributions made within the required time under existing
superannuation arrangements with a superannuation provider will
count towards meeting the requirements of the superannuation
guarantee.
Award superannuation
The superannuation guarantee complements rather than replaces
award superannuation. Existing award superannuation obligations
remain. Award superannuation contributions made to a
superannuation provider count towards the minimum level of
superannuation support.
Provided an employee’s award superannuation meets the
minimum level set out in the superannuation guarantee, you do
not have to take any further action. If the award superannuation is
below the required level of the superannuation guarantee, you
should make further contributions up to that level or you will have
to pay the superannuation guarantee charge.
Employees’ personal superannuation
If employees pay their own personal superannuation this does
not count towards meeting your obligations under the
superannuation guarantee, even if you put the employees’
money into the fund for them.
Part
To work out the level of support required to avoid the
superannuation guarantee charge you must first determine
the following two factors:
• the charge percentage; and
• an employee’s earnings base.
You then multiply the charge percentage by the employee’s
earnings base. This is the amount you will need to contribute
to the superannuation provider.
For the 2001/2002 financial year your employee’s earnings
base is $25 000 and your charge percentage is 8%.
Example
The minimum support required for 2001/2002 year is:
$25 000 x 8% = $2000
You should make a $2000 superannuation contribution
on behalf of this employee by 28 July 2002 at the latest
to meet the level of support required to avoid the
superannuation guarantee charge.
5
Working out
what you
should pay
Note: Superannuation contributions need to be made by
28 July each year.
What is your charge percentage?
Your charge percentage can be found in the following table. Charge
percentages for years prior to 2001/2002 can be obtained by calling the
Superannuation Helpline on 13 10 20.
Financial Year
Percentage Charge
2001/2002
8
2002/2003 and beyond
9
Determining an employee’s earnings base
An employee’s earnings base is the dollar amount (or ‘superannuation
salary’) to which you apply your charge percentage to calculate the
minimum superannuation due to that employee.
An employee’s earnings base is usually stated in a superannuation fund’s
trust deed, an industrial award or an existing agreement made with the
employee.
Many existing award or other superannuation arrangements state an
earnings base which meets the requirements of the superannuation
guarantee. The earnings base used must be based on an amount related
to an employee’s earnings.
The superannuation guarantee
11
Part 5
Working out what
you should pay
Example
A fund which states that contributions are to be 5% of an employee's
base wage plus tool allowance establishes an earnings base of base
wage plus tool allowance. However, a fund which states contributions
are to be 3% of $20 000 regardless of an employee's earnings is not
considered to have an earnings base.
Which earnings base?
This depends on whether you were contributing to a superannuation
fund for employees on 20 August 1991. The earnings bases which may
be accepted for superannuation guarantee purposes include an
earnings base you used:
• before 21 August 1991, regardless of whether it equals ordinary
time earnings (provided it has not been reduced);
• in a complying superannuation fund or other superannuation
arrangement set up after 20 August 1991 (provided it is equal
to or above the employee's ordinary time earnings); or
• in an applicable award, regardless of when it was set up.
Note: If you do not have an acceptable earnings base you will use
the employee’s ordinary time earnings (OTE) as the earnings base (see
Part 6 for a definition of OTE).
An obligation to make contributions may create an earnings base.
If a contribution satisfies several obligations, there may be more than
one earnings base for that contribution (in which case you can measure
the contribution against either base).
Employers contributing to a superannuation fund
before 21 August 1991
If the fund specified an earnings base, use this as your employee’s
earnings base.
If the fund’s trust deed was amended after 20 August 1991
(reducing the earnings base) then you will have to use an
earnings base equal to or greater than OTE.
Employers first contributing to a complying superannuation
fund after 20 August 1991
You can use an earnings base of an industrial award under which
you are required to contribute superannuation. This award base
can be used even if it is lower than OTE. However, if you’re not
contributing under an award, you must use a base which is equal
to or greater than OTE.
Flat dollar and ‘standard employee’ earnings bases
A flat dollar earnings base is one where contributions are required
at a flat rate, as set out in the appropriate award.
An example would be where an industrial award requires
a contribution for each employee of $15 per week.
12
An employer’s guide
A ‘standard employee’ earnings base is one where the contributions
required for all employees are based upon the contributions applicable
to a certain, stated, class of employee.
Part 5
Working out what
you should pay
A ‘standard employee’ earnings base can only be used if you were
using this method to calculate superannuation contributions for your
employees before 21 August 1991.
If you have a flat dollar or ‘standard employee’ earnings base you
should check with the ATO to see if it is acceptable.
When to measure an employee’s earnings base
An individual employee’s earnings base is defined at the latest of:
• the beginning of a contribution period;
• the first day of employment; or
• the day on which you began to contribute to
a superannuation provider.
This is important if the base changes during a contribution period.
You would always work out how much the earnings base comes to at
the end of the contribution period.
Maximum earnings base
There is a maximum limit on any individual employee’s earnings
base for each quarter of any financial year, and you do not have
to provide the support for the part of earnings above this limit.
The limit for each quarter in the 2001/2002 financial year is $27 510.
This maximum limit is indexed each year, with new limits being
announced by the ATO in a Superannuation Guarantee Determination.
Self assessment for superannuation guarantee
The superannuation guarantee is administered on a self assessing
basis. It’s up to you to assess your existing superannuation
arrangements (if any) and make any new arrangements required
to satisfy the superannuation guarantee.
How to work out your actual level of support
Your actual level of support will be measured differently depending
on what type of fund you contribute to. There are two types of funds,
accumulation superannuation funds [including retirement savings
accounts (RSAs)], and defined benefit funds.
The difference between an accumulation fund
and a defined benefit fund
Both are acceptable for superannuation guarantee purposes.
With an accumulation fund you contribute at a certain rate and an
employee’s benefits are based on these accumulated contributions
plus earnings. Therefore, your actual support is based on the actual
contributions made to the fund.
The superannuation guarantee
13
Part 5
Working out what
you should pay
With a defined benefit fund you make whatever contribution rate is
required to provide an employee with a defined benefit. This defined
benefit may be a multiple of an employee’s final salary, or a specified
amount, or both. In this case your actual level of support needs to be
calculated by an actuary (a type of financial professional who
specialises in statistical analysis), and you need to obtain a benefit
certificate showing the notional employer contribution rate.
The fund’s trustee or your financial adviser will be able to tell you what
sort of fund you are contributing to.
How to work out whether your level of support is sufficient
You can work out whether your actual level of support in any
contribution period is sufficient in the following ways:
• with an accumulation superannuation fund, the actual percentage
you contribute of each employee's earnings base would have to be
at least equal to your charge percentage;
• with a defined benefit superannuation fund, the benefit certificate
would have to show that the support you are giving an employee is
at least equivalent to your charge percentage.
What is a contribution period?
This is the period over which the level of your superannuation
support is measured.
For the 1993/94 financial year and later financial years each quarter
will be a contribution period. However, contributions may be made
annually, at the latest, by 28 July of the following financial year.
Tax deductibility of superannuation contributions
Generally, superannuation contributions are deductible for
income tax purposes in the year you make them, up to certain limits.
The following limits apply to employers and their associates claiming
deductions for contributions made for the benefit of an employee.
Deduction limits based on age of employee
Age of Employee
Under 35
35 to 49
50 and over
2000/2001
$11 388
$31 631
$78 445
2001/2002
$11 912
$33 087
$82 054
Note: Age of the person for whom the contribution is made at the date
of the last contribution for the year. Call the Superannuation Helpline
on 13 10 20 for deduction limits for previous years.
There have been recent legislative amendments in relation to the
taxation provisions affecting superannuation contributions. If you have
any queries in relation to your entitlements, call the Superannuation
Helpline on 13 10 20.
Getting deductions sooner
In any year, contributions paid after 30 June but before the
28 July superannuation guarantee contribution deadline cannot
be claimed as a deduction until the end of the next financial year.
For example, superannuation contributions made on 30 June 2002
can be claimed as a deduction in the 2001/2002 year. Contributions
made on 28 July 2002 can be claimed as a deduction in the
2002/2003 year.
14
An employer’s guide
Ordinary time earnings (OTE)
OTE, for superannuation guarantee purposes, is the total of the
employee's earnings for ordinary hours of work, over-award
payments, shift loading and commission. The ATO has a ruling
available which explains this further (Superannuation Guarantee
Ruling SGR 94/4).
Salary or wages
Under the superannuation guarantee, salary or wages are
generally any periodical payment made to a person in return
for work or services and includes:
• commission;
• director's fees;
• remuneration for being a member of the Federal or State
Parliaments, or a member of the Legislative Assembly
of a Territory;
• payments for performing in artistic, sporting and promotional
displays or providing services in connection with such displays;
• payments in connection with the making of any film, tape or disc;
• payments for any TV or radio broadcast;
Part
6
What are
ordinary time
earnings
and salary
or wages?
but does not include:
• payments to people employed to do part-time work of a private
or domestic nature for not more than 30 hours a week; or
• fringe benefits.
Note: For more information on salary or wages, a ruling
(Superannuation Guarantee Ruling SGR 94/5) is available from the ATO.
The superannuation guarantee
15
Part
7
Which
superannuation
provider?
To satisfy the requirements of the superannuation guarantee your
contributions must be paid into a superannuation provider.
A superannuation provider is a complying superannuation fund or
RSA.
A complying fund is a superannuation fund which complies with
the Federal Government’s rules.
Most existing funds do comply but you should check that it
complies for superannuation guarantee purposes. This section
explains how to do this.
Many employers also have an award obligation to pay into a
specified fund. Employers who fail to pay into such a fund may
not be meeting award obligations. You should check any relevant
industrial award for details.
From 1 July 1997 banks, building societies, credit unions and life
insurance companies are able to provide superannuation in the
form of RSAs. To satisfy the requirements of the superannuation
guarantee, employers are able to open an RSA to accept
contributions for an employee. All RSAs comply with the
Government’s rules.
Why must contributions be paid into a complying fund
or RSA?
This is to protect employees from funds which don’t meet
Government rules and to make sure that the benefits are fully
vested and preserved on behalf of the employee.
Vested means that the superannuation benefit belongs to
employees when they leave the fund, eg. if they move jobs
or stop working.
Preserved means the benefit is only payable on retirement on
or after age 55.
How to check if a superannuation fund complies
First ask the fund’s trustees or managers if the fund complies.
The fund should indicate that they intend to accept superannuation
guarantee contributions and continue to meet government
standards. You need to confirm this before you make any
superannuation guarantee contributions to the fund and keep a
record of this advice.
Check with your employer organisation, a relevant trade union or
other adviser for help in choosing the most suitable superannuation
provider for your needs.
To obtain further information on the compliance of a particular
superannuation fund, you can call the Superannuation Helpline on
13 10 20 for the cost of a local call.
16
An employer’s guide
If you do not make the minimum contribution for any employee for
a contribution period by the due date of 28 July you will have to pay
the superannuation guarantee charge. You must then lodge a
Superannuation Guarantee Statement with the ATO by 14 August.
This statement is available from the ATO or by calling the
Superannuation Helpline on 13 10 20 for the cost of a local call.
The superannuation guarantee charge is required to be paid at the
same time as lodging the Superannuation Guarantee Statement.
This means you will have to pay more than if you had paid directly
for your employee’s superannuation.
Disadvantages of having to pay the superannuation
guarantee charge
The disadvantages involved in paying the superannuation
guarantee charge are:
• the charge is not tax deductible, unlike most superannuation
contributions;
• you also have to pay interest and an administration fee;
• the shortfall calculation is based on salary or wages which
is usually more than the earnings base (see Part 5);
• the general interest charge (GIC) is imposed if the superannuation
guarantee charge is paid late. From 1 July 2001, GIC will be
calculated on a daily compounding basis. The GIC is tax deductible;
• there are penalties for failure to provide a Superannuation Guarantee
Statement. These are also not tax deductible; and
• you’ll have to put time into preparing a Superannuation
Guarantee Statement.
Part
8
The
superannuation
guarantee
charge
Calculating the superannuation guarantee charge
The three parts of the superannuation guarantee charge are:
• the total of an employer’s individual superannuation
guarantee shortfalls;
• an interest component; and
• an administration fee.
The superannuation guarantee charge is the total of these three parts.
The individual superannuation guarantee shortfall
This is based on the individual shortfall percentage which is the
difference between the charge percentage and the actual percentage
of support.
To work out the individual shortfall for each of your
employees, multiply the employee’s salary or wages paid in the relevant
contribution period by the employee's individual
shortfall percentage.
You cannot use an earnings base when calculating an individual
shortfall. You must use total salary or wages. This is why you
must first calculate each employee’s individual shortfall
percentage before you can work out the dollar amount of each
individual shortfall.
The superannuation guarantee
17
Part 8
The superannuation
guarantee charge
For the 2001/2002 financial year Employer A's charge percentage is 8%.
Employee B has only been provided with annual superannuation
support equivalent to 4.5% of Employee B's earnings base.
The earnings base of Employee B is ordinary time earnings (OTE).
Example
Employee B's OTE is: $25 000
Amount of contributions paid: $1125 (1125 ÷ 25 000 = 4.5%)
Employee B's salary is: $30 000 per year
Employee B's individual shortfall percentage is: 8% – 4.5% = 3.5%
Employee B's individual shortfall is: 3.5% x $30 000 = $1050.
The interest component
This is to make up for the interest that is lost to employees because
their employer failed to provide sufficient superannuation support in
a contribution period.
It is worked out by multiplying the total of all the individual shortfalls
for the year by a set interest rate. The rate is 10% per annum.
Interest is calculated from 1 July (at the start of the financial year)
until the date the superannuation guarantee charge is payable ie.
14 August of the following financial year or the date you lodge your
Superannuation Guarantee Statement, whichever is later.
Example
Employer A’s total individual shortfalls are $9000.
Employer A lodges a Superannuation Guarantee Statement on
14 August 2002.
The interest component calculation is as follows:
$9000 x 10% x (410 ÷ 365) = $1010.95
Note: There are 410 days between 1 July 2001 to 14 August 2002.
The administration fee
This is part of the cost of collecting and distributing the
superannuation guarantee charge back to individual employees.
There is a fixed administration fee of $50 and in addition $30
is charged for each employee for whom there is a shortfall.
When to pay the superannuation guarantee charge
The superannuation guarantee charge is payable on 14 August
or the date your Superannuation Guarantee Statement is lodged,
whichever is later.
Extension of time to pay
The Commissioner of Taxation has the power to grant an extension
of time in which employers can lodge a Superannuation Guarantee
Statement and pay the superannuation guarantee charge. A request
must be in writing and include reasons why the request for such an
extension has been made. The Commissioner does not have the
discretion to extend the time in which you can make superannuation
contributions. The interest component of 10% still applies while an
extension of time is in place.
18
An employer’s guide
General interest charge
If you lodge the statement but don’t pay the charge, a late payment
penalty called the GIC will accrue from the date of lodgment to the
date your superannuation guarantee account is fully paid.
Part 8
The superannuation
guarantee charge
From 1 July 2001 amendments to legislation changed the benchmark
rate applied for the purposes of calculating the GIC rate. The change
means the 90-day Bank Accepted Bill rate replaces the Treasury Note
yield rate in providing a benchmark for formulating the GIC and
amounts of interest paid by the Commisioner. The term ‘base interest
rate’ is defined as the monthly average yield of 90-day Bank Accepted
Bills. The replacement rate is published in the Reserve Bank of
Australia Bulletin which will provide a table identifying the appropriate
monthly average to be used for each quarter.
The change to the legislation also provides for the reduction in the
margin added to the ‘base interest rate’ for the purposes of calculating
the GIC rate in that it will be reduced from 8 percentage points to 7
percentage points. This means the GIC rate for a day is the rate
worked out by adding 7 percentage points to the base interest rate for
that day, and dividing that total by the number of days in the calendar
year. The base interest rate for a day depends on which quarter of the
year the day occurs.
Penalties
There are heavy penalties for:
Having a ‘Tax shortfall amount’
If the amount of superannuation guarantee charge you pay is less than
it should have been, then you have a ‘tax shortfall amount’. If the tax
shortfall amount is a result of you making a false and misleading
statement then the base penalty amount that can be imposed is 75% of
the tax shortfall. This base penalty amount may be varied according to
the circumstances of the case.
Failing to keep records
If you fail to keep records adequately the maximum penalty that may
be imposed is $2200.
Not providing a statement when required
If you fail to provide a statement when required, you will be liable
for a late lodgment penalty. The maximum penalty is 200% of the
amount of the charge payable.
Entering into avoidance arrangements
If you enter into an arrangement to reduce or avoid your liability for the
superannuation guarantee charge, you may have to pay a base penalty
amount of 50% of the charge avoided. The base penalty may be varied
according to the circumstances of the case.
The Commissioner of Taxation can reduce penalty charges in some
circumstances (some are listed in the Superannuation Guarantee
Ruling SGR 94/3, available from the ATO).
What will the ATO do with the money?
The amounts collected, less the administration fee and certain
penalties, will be redistributed to those employees for whom
you have not provided the minimum superannuation support.
The relevant amount can then be credited to a superannuation provider
of the employee’s choice.
The superannuation guarantee
19
Part
9
Record keeping
The superannuation guarantee is self assessing. This means you
need to calculate how much superannuation support to provide.
If you do not provide sufficient superannuation support, you must
calculate how much superannuation guarantee charge to pay by
completing a Superannuation Guarantee Statement.
You must keep records that adequately explain your transactions in
relation to the superannuation guarantee.
You must keep documents that show how you calculated the level
of support provided for each employee.
In addition, if you are liable to pay the superannuation
guarantee charge, you have to keep details of the calculation of
the amounts shown in your Superannuation Guarantee Statement.
These amounts are:
• each individual superannuation guarantee shortfall;
• the interest component for the year; and
• the administration fee for the year.
There is no required form of record keeping for superannuation
guarantee. You can decide on the format which most suits you.
As with income tax records, they must be in English and be kept
for five years. If the records are not in a written form (eg. in an
electronic medium such as magnetic tape or computer disk), they
will have to be in a form which is readily accessible and easily
converted into written English.
As with other business dealings you should keep records which
affect your liability such as advice from the trustees about the fund to
which you are contributing. The records can be examined by tax
officers and there are penalties for failing to keep accurate records.
Note: If you are required to pay award superannuation further
record keeping provisions may apply and you should check your
relevant award or regulations.
Do you have to lodge returns?
If you have met the level of superannuation support prescribed under
the superannuation guarantee, you do not have to send a
Superannuation Guarantee Statement to the ATO.
If you have a shortfall you will have to lodge a Superannuation
Guarantee Statement by 14 August and pay the charge to the ATO.
Note: The Superannuation Guarantee: Instruction Guide and
Statement are available from the ATO or from the ATO
Superannuation website at www.ato.gov.au/super, or by calling the
Superannuation Helpline on 13 10 20 for the cost of a local call.
20
An employer’s guide
The appeals and review process
Your Superannuation Guarantee Statement is treated as an assessment
when it is received by the ATO.
Part 9
Record keeping
The procedures for objections and appeals under the superannuation
guarantee are similar to those for income tax.
You have a right to object to an assessment within 60 days.
If your objection is not allowed in full, you may appeal to either the
Administrative Appeals Tribunal or the Federal Court within another 60
days. In any case, you can ask for your assessment to be amended at
any time within four years.
You still have to pay the superannuation guarantee charge even if
you’re objecting or appealing against your assessment. However, if you
are successful, you will get a refund.
The superannuation guarantee
21
Part
10
Protecting
small amounts of
superannuation
The introduction of the superannuation guarantee in 1992 has meant
that some people have had superannuation for the first time. Some of
these new superannuation accounts have small balances. These
balances have often been reduced by fees and charges. For this
reason, new rules that protect small superannuation accounts have
been in place since 1 July 1995.
Member protection rules
Superannuation funds who elect to ‘member protect’ are required to
protect balances of less than $1000 which contain some compulsory
employer contributions. Administrative fees and charges must be
limited to ensure they are not more than investment earnings on
a member’s balance. RSAs are also subject to the member
protection rules.
Funds which cannot meet these rules cannot accept superannuation
guarantee contributions. They are required to transfer existing
balances of less than $1000 to a fund which will member protect, or
to an Eligible Roll-over Fund (ERF). An ERF is either a
superannuation fund or an approved deposit fund which is eligible to
receive benefits automatically rolled-over from other funds. All ERFs
will protect members’ small superannuation amounts.
Note: Small superannuation amounts are still subject to deductions
for tax and insurance premiums. They may still be affected by
investment returns.
How do you find out if a fund protects small
superannuation amounts?
You should ask the fund which receives your current superannuation
guarantee or award contributions if it protects small superannuation
amounts.
Superannuation Holding Accounts Reserve
Employers are encouraged to pay contributions into a
superannuation fund which protects their employees’ small
superannuation amounts from administration fees and charges
or to an RSA. There is, as a last resort, a collection system
administered by the ATO known as the Superannuation Holding
Accounts Reserve (SHAR) for employers who cannot find a
superannuation provider.
The SHAR collection system has been in place since 1 July 1995.
The SHAR is not a superannuation provider. This means it is not
required to meet all the obligations relating to superannuation
providers and can therefore be run at a lower cost.
22
An employer’s guide
Does the SHAR provide death and disability cover?
The SHAR does not provide death and disability cover for employees.
Employers paying into the SHAR should inform their employees
that cover is not provided. Employers who use the system should
consider whether they need to take out separate cover to meet
award or other obligations.
Part 10
Protecting small
amounts of superannuation
Who may use the SHAR?
If your employees are covered by an industrial award or agreement
you must pay into the fund specified in that industrial award or
agreement. Therefore, you should check to see if you can use the
SHAR to meet these obligations. If your existing fund doesn’t offer
member protection, you should attempt to find a superannuation fund
that does, or an RSA. You should only use the SHAR after
taking these steps.
For more information on the SHAR, contact the Superannuation
Helpline on 13 10 20 for the cost of a local call.
Are payments to the SHAR tax deductible?
Employers are only entitled to a tax deduction on the first
$1200 paid into the SHAR for each employee per year.
Where to lodge
There are two ATO branches processing SHAR Deposit Forms. You
can lodge your Deposit Form into SHAR at any ATO, and it will be
forwarded to the appropriate branch.
Alternatively, you can look up your business postcode in the list below
to find the branch where you can lodge your Deposit Form direct.
0800-0899 Moonee Ponds
2745-2899 Bankstown
2000-2490 Bankstown
2900-2921 Moonee Ponds
2500-2551 Moonee Ponds
3000-3996 Moonee Ponds
2558-2568 Bankstown
4000-4891 Bankstown
2569 Moonee Ponds
5000-5999 Moonee Ponds
2570-2571 Bankstown
6000-6992 Moonee Ponds
2572-2738 Moonee Ponds
7000-7470 Moonee Ponds
Postal address
PO Box 2000 Bankstown NSW 1888
PO Box 2000 Moonee Ponds VIC 3039
When can the payments be made?
For payments to satisfy the superannuation guarantee requirements for
the 2001/2002 year they must be made by 28 July 2002.
What needs to be sent with the payments?
Payments must be accompanied by:
• the employer’s tax file number;
• the employee’s tax file number (if known by the employer);
• the employee’s name and address;
• details of payments in relation to each employee;
• the amount of the payment; and
• date of termination of employment (if applicable).
The superannuation guarantee
23
Part 10
Protecting small
amounts of superannuation
How can the payments be claimed?
The ATO will transfer entitlements from the SHAR to a
superannuation provider on receipt of a written request from the
employee. The transfer must be for the whole of the balance as
partial withdrawals will not be allowed.
Direct payments to an individual can only be made on receipt of
a withdrawal request in cases of:
• disability – requires certification from two legally qualified
medical practitioners;
• financial hardship – as determined by the receipt of specified
Commonwealth income support payments. For further information
contact the Superannuation Helpline on 13 10 20.
•
•
•
•
A letter should be included from the Commonwealth department
or agency administering the payment to confirm the details.
non-residency – if not in employment within Australia and the
individual is at least 55 years old when he or she gives the
withdrawal request for the payment;
aged 65 years or over;
if the balance is less than $200 and employment with any
employer that has made a deposit has ended; or
death – to be paid to the person’s legal representative.
Will the SHAR pay interest?
The amount of interest paid will depend on what’s left when
administrative costs are recovered from the earnings of the SHAR.
Will the payments be reduced by fees and charges?
Not while they are in the SHAR. However, when the balance is
transferred to a suitable superannuation fund, the amount will be
treated as an employer contribution and at that stage will be taxed.
24
An employer’s guide
The Lost Members Register
Since the superannuation guarantee was introduced in
1992, many people have had superannuation for the first time,
particularly part-time, casual and seasonal workers.
As people change jobs, they sometimes lose track of their
superannuation benefits. Because of this, there are many
superannuation benefits in Australia whose owners are ‘lost’.
The ATO has built a register of lost members, so that people
who may have lost contact with their benefits could regain
control of their superannuation money. The register is called
the Lost Members Register (LMR). The LMR holds lost
member details from superannuation funds, excluding self
managed superannuation funds in Australia. People are able
to access the LMR to find out if they have a lost benefit
by calling 13 10 20.
Need more information?
Further information on this topic can be obtained by:
• visiting the ATO superannuation website at
www.ato.gov.au/super
• phoning the Superannuation Helpline on 13 10 20
for the cost of a local call
• obtaining A Fax from Tax 13 28 60
• if you do not speak English and need help from the
ATO, phoning the Translating and Interpreter Service
on 13 14 50
• people with a hearing or speech impairment with access to
appropriate TTY or modem equipment can communicate with
the ATO by first contacting the Australian Communication
Exchange Relay Service on 13 25 44.
Part
11
Keeping
track of
superannuation
The superannuation guarantee
25
Notes
26
An employer’s guide
To simplify the identification of publications,
the ATO’s Superannuation Business Line has colour coded
material addressed to a particular audience
A guide for intermediaries
Colour scheme for all publications
addressed to intermediaries
A guide for individuals
Colour scheme for all publications
addressed to individuals
A guide for employers
Colour scheme for all publications
addressed to employers
A guide for retirement product providers
Colour scheme for all publications
addressed to retirement product providers
Australian
Taxation Office
NAT 1987-10.2001