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Superannuation is a retirement savings program that helps to provide an income (e.g. pension) for retirees. Throughout an employee's working life, contributions are made to their eligible superannuation account(s) and this money is invested.
When the person permanently retires, or meets a condition such as their 'preservation age', they can be paid the sum of contributions, plus earnings, less taxes and fees. The Superannuation Guarantee (SG) is one part of the retirement income system in Australia.
As an employer, you must make superannuation contributions for each of your eligible employees under SG law, introduced from 1 July 1992. Currently the minimum employer contribution is 9.5% of an employee's 'ordinary time earnings'. The 9.5% is not payable on overtime rates, but is payable on other types of remuneration such as bonuses and commissions.
Who is eligible
Generally, you must pay SG for an employee who is:
- between 18 and 69 years old (inclusive) and is paid $450 or more (before tax) in salary or wages in a month
- employed full-time, part time, casual, or on a contract (if the contract is wholly or principally for their labour).
Employees who are under 18 years old must meet these conditions and work at least 30 hours per week to be entitled to SG contributions. You must also pay SG contributions for employees who are temporary residents of Australia.
If you're a sole trader or partner in a partnership, you don't need to pay SG contributions for yourself, but you can make super contributions as a way of saving for your retirement.
You must make SG contributions to your employees' designated superannuation funds by the 28th day following the end of each quarter (at least 4 times a year). You can claim a tax deduction for superannuation contributions that you pay by the due dates.
If you do not meet your SG obligations by the due dates, you will have to pay the Superannuation Guarantee Charge (SGC) to the Australian Taxation Office (ATO). This means that interest charges and additional administration charges will apply if you do not pay the super contributions for your employees by the due date. You will also not be able to claim a tax deduction for contributions paid to the ATO as an SGC payment.
One way to ensure that you pay superannuation contributions on time is to set up your payroll systems to make all payments before each cut-off date.
Learn more about employer superannuation responsibilities.