How much should I be contributing?
Superannuation, money saved away during your working life to fund your retirement. Sure it can be hard to care about superannuation as a business owner when you’re at least 30-40 years away from accessing it but what if the ATO helped you save for your retirement? Many business owners do not consider the great tax incentives superannuation can offer.
3 Little-known Facts
Now I have covered the importance of super let’s dive into 3 little-known facts about super relevant to you!
It might sound simple enough but do you know your superannuation obligations as an employer? Generally, if you pay an employee more than $450 (before tax) in a calendar month you have to pay super on top of their wages (ordinary earnings). The current superannuation rate is 9.5% and it must be paid quarterly into the employee superannuation fund by the 28th of the following month. A recent change also requires that you pay and report super electronically in a standard format (Superstream compliant).
“It might sound simple enough but do you know your superannuation obligations as an employer?”
A couple items to note about your obligations, Ordinary earnings can exclude payment for overtime, allowances, bonuses, etc – a full list can be found here.
Just because a worker might be considered a contractor (on an ABN) you can still be liable for superannuation particularly in the contract is wholly or principally for that person’s labour.
Have you ever paid your employees superannuation late? That super you have paid isn’t tax deductible and a superannuation guarantee charge statement must be prepared (interest and administrative charges apply too). A disastrous result for something that can be easily overlooked. Best practice is to prepare the payment on the 20th are quarters end to allow enough time for the contributions to hit the employees fund by the 28th cut-off.
“Have you ever paid your employees superannuation late?”
Lastly, concessional contributions have a cap each year, currently $25,000. This means employer contributions, salary sacrifice and personal contributions (you wish to claim a deduction for) are taxed at 15% up to the $25,000 cap. If you go over your cap you will be taxed at your marginal income tax rate. Contributions towards the cap are added up when that are received in your super fund, not the period the super relates to. Let me give you an example, the June 2018 Super is due of the 28th of July 2018. Let’s say you want to salary sacrifice another $5,000 for the June quarter to be included in your 2018 Financial Year cap. The $5,000 will actually be paid on the 28th of July and count towards your 2019 Financial Year cap. This has caught out a few business owners I know; thus, if in doubt speak to your superannuation fund and/or your accountant.
What to do next
Superannuation sounds easy enough but there are a few pitfalls that catch many business owners off guard. If you can avoid these pitfalls, superannuation can be used as an effective method to boost your funds for retirement and save on tax. Who wouldn’t like to pay less money to the ATO and keep more money in their pocket (when you retire)?
If you have any queries about your retirement fund or simply want to know what you can do in order to ensure you’re making the most of your superannuation do not hesitate to contact our team at Accodex.
Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your trusted Accodex Accountant for help.
Written By: Joshua Gloede
An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.
Extremely dedicated to making sure his clients understand the significance of budgeting and planning, Josh has often emphasized the importance of understanding and respecting your cash flow, – or as he likes to refer it – the lifeblood of your business.