Any business operating in Australia is required by law to pay superannuation payments to their employees. These are retirement payments that build up over the course of your working life, so citizens are not completely reliant on their state pension when they finish working.
As an employee, you don’t really need to think much about it, so new business owners often find that they are out of their depth. This guide will tell you everything you need to know about superannuation and how to make sure that your business is operating within the law.
What Is Superannuation And Why Is It Important?
Superannuation is a retirement savings plan, which is required by law. The majority of the contributions are made by employers, but individuals can put money in if they want to. Depending on the income level of the employee, there may also be extra contributions made by the government. The money that is put into the superannuation account is then invested, so the savings grow into a healthy retirement pot. That’s why finding the right organization to handle superannuation is so important.
Superannuation is important for small businesses because it’s a legal requirement. However, it’s also an effective way to boost employee motivation because, by choosing a good superannuation fund for them, you show them that you are invested in their future.
How Do You Choose A Fund?
In some cases, employees may choose their own superannuation fund that you pay into. However, many people prefer their employer to choose because they don’t really know what they are looking at. When choosing a fund, it’s important to consider the people that are running it. A company like Ballast, for example, is a good choice because it is owned by Wayne Blazejczyk, who has significant experience working in different areas of the finance industry. When a superannuation fund is managed by people with extensive investment experience, it is far more likely to grow in value. You should also look at the investment options and the long term performance of the fund to get an idea of how reliable it will be in the future.
As well as the investment performance, you need to consider practical things, like the fees you will be charged, extra benefits that are offered, and whether they have industry-specific funds available for businesses like yours.
When choosing a fund, make sure that you take your time because the future security of your employees is at stake.
How Much Do You Have To Pay?
This is the big question that most small business owners have about superannuation. All employers are legally required to pay a minimum amount into their employees’ superannuation funds, and this is currently 9.5% of their normal earnings. It’s down to you to calculate this amount and it does include bonuses, allowances, and back pay for employees that no longer work for you. Overtime pay is not included. If you make mistakes with your calculations and contribute the wrong amount, you could be fined. There are also contribution caps, so if your employee makes over a certain amount, you won’t have to pay superannuation on all of it.
Any mistakes with superannuation payments can be very costly, so make sure you know what you are doing and if you are struggling, seek advice from an accountant.