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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 employees 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 employers 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 employers 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. Its 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 employers 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 employers 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 employees 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 employees earnings base. You then multiply the charge percentage by the employees earnings base. This is the amount you will need to contribute to the superannuation provider. For the 2001/2002 financial year your employees 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 employees earnings base An employees 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 employees earnings base is usually stated in a superannuation funds 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 employees 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 employees 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 employees earnings base. If the funds 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 youre 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 employers 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 employees earnings base An individual employees 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 employees 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. Its 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 employees 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 employees 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 funds 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 employers 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 Governments 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 Governments rules. Why must contributions be paid into a complying fund or RSA? This is to protect employees from funds which dont 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 funds 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 employers 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 employees 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 youll 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 employers 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 employees 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 employees 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 As 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 employers guide General interest charge If you lodge the statement but dont 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 employees 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 employers 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 youre 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 members 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 employers 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 doesnt 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 employers tax file number; the employees tax file number (if known by the employer); the employees 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 persons legal representative. Will the SHAR pay interest? The amount of interest paid will depend on whats 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 employers 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 employers guide To simplify the identification of publications, the ATOs 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
