The Australian Taxation Office (ATO) defines superannuation as
“A system where money is placed in a fund to provide for a person’s retirement.”
All employers are required to make regular payments into a superannuation fund chosen by the employee. The employer must have a “default” superannuation fund to which superannuation contributions can be made for employees who do not choose a fund.
Payments into the superannuation fund must be made at least quarterly.
Superannuation contributions are paid at a rate of 9.5% of the employees Ordinary Time Earnings. OTEs are the remuneration that the employee regularly receives and includes performance bonuses that are referable to the results achieved in the employees ordinary hours of work.
Superannuation contributions are capped at the maximum contribution base. The maximum contribution base is the maximum Ordinary Time Earnings per quarter on which employers must make contributions. For the financial year ending 30 June 2016, the maximum contribution base is $50,810 per quarter. The maximum contribution base is reviewed each year and set by legislation.
An employer that does not make a contribution at the rate set out in the legislation must report this to the ATO and pay a “superannuation guarantee charge” that is equal to the level of contribution that the company would have made, together with an interest component and an administration charge.
Should an employer failed to pay a superannuation guarantee charge by the date that it is due, then the director of the employer becomes personally liable for a penalty equal to the unpaid amount.
Ashbrooke Law. Innovative. Commercial. Responsive.
Disclaimer
Ashbrooke Law publications are intended to provide guidance and general information. They should not be relied upon as legal advice. Formal legal advice should be sought on matters of interest arising from this article.