Superannuation Guarantee and SuperStream

Posted on October 4, 2023 by Angus Jones

One day, you look forward to retiring and enjoying the Superannuation you have earned throughout your career. From 1 July 2022, you must pay Super to all employees. The only exception will be employees under 18 who work less than 30 hours. The Super payment is known as the Superannuation Guarantee (SG) contribution and is paid into a superannuation fund as part of their wages. In this guide, we will explain what you must do and how you go about paying Superannuation.

The superannuation guarantee scheme requires employers to provide sufficient superannuation support for their employees. Employers must contribute a minimum percentage of each eligible employee’s earnings (ordinary time earnings) to a superannuation fund or retirement savings account (RSA).
ATO

WHY do I have to pay Superannuation?

Superannuation is a government requirement to help workers provide for their retirement.

The SG is currently calculated at 11% of an employee’s ordinary time earnings.
The super guarantee rate increased from 10.5% to 11% on 1 July 2023.
Businesses will be fined if they do not pay Superannuation or pay super at the correct rate.

WHAT else do I need to understand?

The employer must pay the SG at least four times yearly by the quarterly due dates.

you must pay (via electronic funds transfer or Bpay) and report super electronically in a standard format, ensuring you meet SuperStream standards
your superannuation payments must go to a complying superannuation fund – most employees can choose their own fund
if you don’t pay the SG on time, you may have to pay the superannuation guarantee charge
This does not apply if you are self-employed or a sole trader, and your super contributions are only for yourself
Due dates for the contribution payment each quarter are 28 January, 28 April, 28 July, and 28 October

Super Administration

Whilst the SG is a cost to the business from a wages perspective, the good news is that the administrative part of the process has been made simple for small businesses. Instead of making individual payments to each employee’s super fund, you make a single payment totalling all employee contributions. You have these choices:

If your Payroll software is SuperStream compliant, you can use it for the process. Ensure that the system covers both the SuperStream-compliant information and the payment.
The Small Business Superannuation Clearing House (SBSCH) offered by the ATO is a free service you can use to make superannuation guarantee (SG) contributions. Eligible businesses have 19 or fewer employees or an annual aggregated turnover of less than $10 million. The big benefit here is they will split the payments across all the different super choices your employees may have made.
Large Super funds have the facility to do it for you. Check with your fund to see if this is possible for your business.
A messaging portal can take your information and make it SuperStream compliant, then send it to the relevant funds. You also provide them with a single payment to cover all employees.

HOW do I pay an employee Superannuation?

When a new employee starts who falls into the SG, you should:

Offer your employees a choice of funds and provide them with the standard choice form.
Provide them with information to help them understand Superannuation and investment options. Note: You cannot provide investment advice unless you are a licensed advisor.
Provide the employee Tax File Number to their fund
Keep records showing you have offered a choice and have paid. These records must be in English and kept for five years.

HINT

This process will be further simplified if you use an automated payroll tool (see our essential guide on payroll software).

Employees may also make additional salary sacrifice contributions that will be taxed at a concessional rate of 15% up to a limit at which point extra tax must be paid. (This might have the benefit of reducing the employee’s tax obligation). You are required to report this through the same mechanism above as an employer.

Your obligation to pay Superannuation to any one individual is capped. Current rates can be found here.

SUMMARY – Superannuation Guarantee

Superannuation is compulsory for all employees earning more than $450 a month. Employees can choose their fund, and you must report all payments to the ATO, which offer a special service if you have under 19 employees. Remember to budget for this cost in your business calculations.

Contractor – using or being one

Posted on July 14, 2020 by Angus Jones

Your small business may not be ready to take on an additional employee so a contractor may be a better solution or perhaps you would like to start your own business as a contractor. This guide will look at both sides and help you understand the implications of using or being a contractor.

A contractor or sub-contractor, freelancer or consultant is a person that provides goods or services under a written contract or a verbal agreement. Unlike employees, contractors do not work regularly for an employer but work as required. Contractors are usually paid on a freelance basis and often work for themselves using their own tools and processes.

WHY should you use or consider becoming a contractor?

By Using a contractor, you can:

Increase or decrease workers based on business needs
Get fast access to skilled workers for different tasks
End contacts quickly with no reason
Normally no payments for Superannuation, holiday or sick pay and payroll taxes
Save on liability insurance, as contractors must have their own

By Becoming a contractor, you can:

Be your own boss
Earn more money if your skills are in demand
Work the hours that suit you including part-time
Test out a company before committing to a full-time job

WHAT do you need to understand about contractors?

Contractors have workplace rights and protections but have different responsibilities relating to insurance, taxation, and superannuation. In Australia, the Independent Contractors Act 2006 in conjunction with the Fair Work Act 2009 protect the rights and entitlements of independent contractors.

Under the Fair Work Act 2009, independent contractors are protected from:

adverse action – for example, a business cannot terminate a contract with an independent contractor because they make a complaint to a regulator about their workplace rights
coercion – for example, a business cannot threaten to take action against an independent contractor to coerce them not to exercise their workplace rights
abuses of freedom of association – independent contractors are free to join, or not join, a trade union or employer group

The Independent Contractors Act 2006 allows independent contractors to ask a court to review a contract because it is ‘unfair’ or ‘harsh’. The court may consider:

the terms of the contract when it was made
the relative bargaining strengths of the contract parties and, if applicable, anyone acting on their behalf
whether there was any undue influence or pressure, or any unfair tactics used against, a party to the contract
whether the contract provides remuneration that is less than that of an employee doing similar work
any other matters the court thinks is relevant

The court may order:

the terms of the contract to be changed (for example, they may be added or removed)
the whole contract or part of the contract be ‘set aside’ (that is, have no effect)

All workers in Australia are entitled to a safe and healthy workplace. This means that employers — including self-employed contractors — must comply with the relevant state or territory’s workplace health and safety laws.

Sham contracting is illegal and is when an employer attempts to disguise an employment relationship as a contractor relationship. This is usually done to avoid responsibility for employee entitlements.

HOW do you hire a contractor or become a contractor?

In Hiring a contractor, you should be careful in checking their credentials to ensure they have the right experience, attitude and skills. You will need to carefully plan how they will integrate into your workflow and ensure you pay them promptly or they may not continue to turn up. A contractor may not be an employee but you need to treat them as part of the team to get the best result. Make sure you engage a contractor in a legally binding way in writing and consider what other documents may be required like a Non-Disclosure Agreement. Ensure you keep accurate records of their hours and or completion of set tasks.

In Becoming a contractor, you essentially start your own business. See our guide on starting a business. This process will include writing a business plan which will help you be realistic about things like future income. You will need to keep track of your business so read our guide on Record Keeping as well as considering setting up a separate bank account.
Insurance is important as you most likely will not be covered by your employer so consider taking out liability, income protection and asset (protect your tools) insurance.

If as a contractor you are paid wholly or principally for your labour your employer must pay for your superannuation, if not you should consider making voluntary personal contributions. Be sure to review our guides on Business structure and GST as you may need a separate tax file number and your services will be subject to GST if your business turnover is above $75,000. If you do not have an Australian Business Number (ABN) your hirer may legally withhold tax at the top rates.

HINTS

Unsure if someone is an employee or contractor? See the Fair Work Table here https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/independent-contractors-and-employees

If your business engages contractors, it’s a good idea to have a Contractor Agreement in place with each contractor you engage. This sets clear expectations about the scope and standard of services to be provided, fees and payment, confidentiality, IP ownership and termination processes. A lawyer can draft a contractor agreement for your business.

Keep track of your contractors’ hours and how much they’re costing you. Use your accounting software to produce reports so you can see whether you are getting value for money. Over time you will discover the right mix of employees and contractors that works for your small business.

SUMMARY – skilled supply of labour and materials

Contractors work for themselves and offer other businesses and individuals a skilled supplier of labour and possibly materials. Both the contractor and the hirer have flexibility around hours and hirers do not have to provide for holiday and sick pay or payroll taxes. Contractors have workplace rights and protections but have different responsibilities relating to insurance, taxation, and superannuation.

Hire Staff – hiring the right people

Posted on July 14, 2020 by Angus Jones

A business is only as good as the people it employs. Do they work hard, do they work smart, are they loyal or do they just want that paycheck and be out of there. This guide will look at if you have a need to hire staff, defining the role they will do and the task that must be completed. Will they be full time, part-time, casual, or a contractor?

The common types of employment are:
full-time: an employee who works 35+ hours per week on an ongoing basis
part-time: an employee who works less than 35 hours per week and has a guaranteed minimum number of working hours
casual: an employee whose work hours may vary each week, depending on the work available
fixed term: an employee who works for a fixed period of time e.g. 3 months
shift workers: an employee who works shifts and gets an extra payment for working shift hours
An employee works in your business and is part of your business. A contractor is running their own business.
contractor can be great for short term projects and can also be paid by the hour without superannuation requirements.

WHY hire staff?

You may not have the skills or the time to do some tasks, or perhaps your time is better spent working on other parts of the business. If so and its time to hire staff assuming their efforts will drive more profit than their salary.

WHAT do I need to understand before you hiring staff?

Ask yourself, what level of skill will this person have and how much will you need to pay to attract the right candidate? You do need to comply with government legislation in regard to award pay levels which can be found here https://calculate.fairwork.gov.au/findyouraward and discrimination laws here https://www.humanrights.gov.au/our-work/employers/quick-guide-australian-discrimination-laws

HOW to hire staff?

Finding candidates

To find the right candidate, you can either do this yourself or use a recruitment agency. A recruitment agency will charge you either a set fee or a percentage of the employee’s salary. If you can afford this it offers a great way to only interview a small number of vetted candidates. If you decide to do this yourself make sure you don’t hire the first person you interview. Even if they turn out to be the right person you need a point of comparison. You can find people by word of mouth, an advertisement in your window, the local paper, social media post, or a post on your website or newsletter. A job board like LinkedIn or Seek is handy and with a small fee, it will significantly increase your pool of candidates.

Candidate selection starts before the interview stage where you decide who you will interview. Many businesses may have 100 applicants for 1 position. Start by setting the criteria that are most important from a skill perspective to perform the job, for example, must have managed people before. If the candidate has not they are out of contention. Seek has a function where you can ask candidates set questions during the submission process. Once this is determined start reducing your list of candidates down to around no more than six people. Your time is valuable and you cannot interview everyone. A very important criterion is to ensure the candidates have the right to work in Australia. There are ways around this but require a significant investment of time and regulation. https://www.business.gov.au/People/Hiring/How-to-hire-an-overseas-worker Even those with working or student visas have restrictions, students only being able to work 40 hours in a fortnight and holiday visa workers are not able to work for someone for more than 6 months.

Interview

Now it is time to interview. Consider where you will interview them, for how long, by whom, and specify if you want them to bring anything. Remember they are interviewing you as well as you interviewing them. A candidate wants to understand your business, and you as the boss, to decide if they indeed want to work for you. So some points to consider include what you wear, how you treat them and what questions you ask. You do not want to be a tyrant and you are not their friend so remember to treat them with respect. A successful practice is to ask each candidate the same questions and to rate them against each other. That way you have a clear comparison and a method of comparing the person you interviewed today with the one two weeks ago who you can hardly remember. You should take into consideration how each person fits with the skills set you defined earlier, how they will fit into your organisation culture, if they can show you their previous achievements and if they are passionate (remember a small business is only as good as its people).

In some industries it is common practice to test potential employees through a trial. We recommend that you pay them and give them a proper opportunity to show their worth.

You have now found the right person but before you hire them on the spot it is a wise idea to check references. Unfortunately, some people do lie, and the more you are sure about someone the better things will work out. Okay, all that checks out and the person has great references. Now it’s time to make them an offer. The offer needs to be clear around working hours, salary, place of work, anticipated start date, and may include additional items like employee confidentiality or IT policies. A template for an employment offer can be found here. https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/templates

On-boarding

Once they accept, congratulate them and provide them with any further information to ensure they know the next steps, like what time you need them and what the dress code is, etc. Now comes the hard bit. Unsuccessful candidates interviewed with you and chances are they put a bunch of effort into that process. You need to contact them and let them know they were unsuccessful. Ideally be specific with the reason, for example, they lacked a specific skill, so they can improve next time rather than some generic statement like the other candidate was better.

The big day has now arrived for your new employee. Before they turn up you need to plan to induct them into your business and decide what they need to be taught and by whom. Chances are it is you and it will take a lot of effort to begin with, but if done well you will have a happy and hardworking employee in no time.

You are now responsible for a new employee both personally and from a legislative perspective. If you don’t already have systems in place you must consider reporting like timesheets, payroll and taxation, superannuation, annual and sick leave, insurance, and workplace health and safety. (Be sure to check out our essential guides on these topics)

HINT

Candidates may attempt to negotiate employment terms such as wages. Always listen but remember it does not mean you have to compromise.

Additional information can be found here

SUMMARY – Hire the right people

Your people are your business. Having the right employees is critical to your success. To Hire staff can be a rewarding process and will become simpler the more experience you gain.

Payroll – paying employees

Posted on July 14, 2020 by Angus Jones

Within your small business, people are your most valuable resource but unless they are a family member they are unlikely going to work for free. This means that you will need to pay them. That sounds easy but you have to deduct income tax, pay superannuation, accrue holiday and sick leave and the list goes on. In this guide, we will look at payroll requirements, explain how you pay tax, and look at some of the solutions to make it easier.

There are 10 minimum entitlements you have to provide to all employees called The National Employment Standards (NES). The 10 minimum entitlements of the NES are:
Maximum weekly hours.
Requests for flexible working arrangements.
Parental leave and related entitlements.
Annual leave.
Personal/carer’s leave, compassionate leave, and unpaid family and domestic violence leave.
Community service leave.
Long service leave.
Public holidays.
Notice of termination and redundancy pay.
Fair Work Information Statement.
Note there are some exceptions for casuals. More details can be found on the NES website

WHY should I care about payroll?

The payroll process is important as a small business need to do two things:

Pay employees the right amount at the right time, every time. Fairwork provides a base pay calculator which can be found here. https://calculate.fairwork.gov.au/FindYourAward
Withhold the appropriate amount of tax, provide that to the Australian Tax Office with the required reports, and as part of this keep accurate records. You also need to provide the employee with a payslip and keep records for 7 years.

WHAT you need to know about Payroll and Tax

Three types of tax must be paid:

PAYG withholding – Pay As You Go tax is the employer assisting the employee meet their end of year tax liability. You must register to start the process, you must ensure the worker is entitled to work in Australia and you must withhold the tax every time you issue payment to your staff. Details on how to pay this tax can be found later in this guide. More details can be found on your obligations here. https://www.ato.gov.au/business/payg-withholding/
Payroll Tax – This is a state-by-state tax and is a tax on your business not the employee. It is calculated as a percentage of your total wage bill once you exceed a certain threshold. Further details can be found here. Threshold and payroll tax rates, as well as payment requirements, can be found here:
1. ACT Revenue Office
1. Northern Territory Revenue
1. NSW Revenue
1. Business Queensland payroll tax
1. Revenue SA
1. State Revenue Office of Tasmania
1. State Revenue Office Victoria
1. WA Office of State Revenue
Fringe benefits Tax – FBT is a tax that employers pay when they provide certain benefits to their employees, including their employees’ family or other associates. The benefit may be in addition to, or part of, their salary or wage package. More details and how to pay can be found here https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/ A common example of this may be FBT payable on a company car used for work and pleasure.

A further requirement in the payroll process is the payment of Superannuation. If you pay an employee more than $450 a month then you must contribute a further legislated amount to an employee’s chosen superannuation fund. https://www.ato.gov.au/Business/Super-for-employers/

Leave is also an entitlement that must be calculated but is not compulsory on the payslip. The types of leave include:

Annual Leave – workers accumulate leave from the day they start at a rate of 4 weeks for every 12 months worked. It does not apply to casuals and should be accrued in your accounts so you know that you have a debt that must be paid at some time.
Parental Leave – Also known as Maternity leave, it is an entitlement of leave when a child is born or adopted. To be eligible you must have worked for at least 12 months for your organisation and the leave is up to 12 months unpaid. https://www.fairwork.gov.au/leave/maternity-and-parental-leave
Sick and carer’s leave – Full-time and part-time employees can take paid leave to help with personal illness or injury, caring responsibilities, and family emergencies. Employees are entitled to 10 days of sick leave for every year of service. Casuals get none. https://www.fairwork.gov.au/leave/sick-and-carers-leave/paid-sick-and-carers-leave
Public, Religious, and cultural holiday – Employees are entitled to paid leave on Public holidays that fall on a normal working day. Religious and cultural holidays do not have entitled leave however if you do not allow employees to celebrate these it can be discrimination. A simple solution is to celebrate them together through work events.
Long service leave – Employees get long service leave after a long period of working for the same employer. Most employees’ entitlement to long service leave comes from long service leave laws in each state or territory. https://www.fairwork.gov.au/leave/long-service-leave
(Casuals are entitled to LSL in some states and territories)

Allowances and deductions may also form part of the payment process with additional funds provided for uniforms or travel, normally the subject of some sort of award. https://www.fairwork.gov.au/awards-and-agreements/awards Deductions may include a car lease payment or an extra employee-contributed super payment coming out of their scheduled pay.

HOW do you pay an employee properly?

The more employees you have, the more complex your payroll becomes. You might have a mix of employees on hourly wages and salaries. Throw in some contractors, staff on commission, overtime, expense claims, allowances, and leave entitlements, and your payroll can be different every time you run it. Your options are:

By hand: Either on paper or a spreadsheet. Note this may not meet tax office requirements.
Payroll software: Apps can calculate pay and deductions and even fill out tax forms for you. Be sure to read our essential guide on payroll software.
Payroll service providers: You can outsource your payroll to experts. Some providers will do absolutely everything for you. Others will help with specific tasks.
Accountants and bookkeepers: You do not have to go to a specialist payroll company. Many accountants and bookkeepers can do payroll for you.

Now that you have managed to work out how to pay your employee you also have to report and pay the Australian Tax Office. You will have to abide by the Single Touch Payroll reporting guidelines. https://www.ato.gov.au/business/single-touch-payroll/in-detail/single-touch-payroll-employer-reporting-guidelines/ You will report to the ATO every payday how much your employees were paid, how much tax was withheld and what contributions were made to superannuation.

HINTS

Be sure to read our essential guides on Superannuation, roster management, and Payroll software.

SUMMARY – Adhere to Government Regulation around Payroll

Paying an employee is a complicated process with government regulation around conditions, awards, and taxation. It is important that you understand and follow the regulation and ensure your employees are paid the right amount on time every time.

There are lots of great tools and assistance available to help make this process easier.

Courier options for small business

Posted on July 8, 2020 by Angus Jones

Lots of small businesses are not in the delivery business indeed most don’t even sell a product, but from time to time you may need to get a document or parcel across town or interstate. This guide will look at courier type options you have to get a document, a parcel or even a large machine from A to B.

A Courier company is one which delivers messages, packages and mail and is known for their speed, security, tracking service and specialisation.
A Taxi truck is a truck with a driver that can be hired.

If you are looking for an ongoing logistics solution see our guide on freight solutions– delivering to the customer.

WHY should I use a courier or taxi truck?

Your time can be better spent than doing a one-off delivery. Although freight charges in Australia keep going up it can still be quite inexpensive to have an item delivered.

WHAT are my choices to have something delivered?

First, you need to know two things:

How urgent is the delivery? Is the delivery time critical like a blood delivery or an important contract? If it is not critical is delivery ok in a couple of days? Put very simply, the faster the service the higher the cost.
How big and heavy is the item? If you want to move a shoebox-size parcel then you will have lots of easy choices but moving something the size of a car can be a little more complicated. Note that some restricted items like most liquids require specialist transport and if something is highly valuable you may wish to make special arrangements.

Your simplest choice is to visit Australia Post where you can organise a few days or next day delivery for standard items.

In most capital cities in Australia, bicycle couriers are available to deliver documents and small parcels quickly, such as zoom2u.

Your next choice is to use a courier company who will arrange pick up and delivery of items either locally or interstate. The big advantage here is they will come to your premises.

Larger items can be ferried using a taxi-truck business whom will have various sized trucks to move your freight from A to B, such as Allied Express.

Valuables can be moved by a Precious cargo specialist who should also offer full liability, like Armaguard.

International freight can also be done through Australia Post including priority envelopes otherwise talk to an international specialist like DHL.

HOW do I pick a courier company?

Australia Post has a handy postage cost and delivery calculator https://auspost.com.au/parcels-mail/calculate-postage-delivery-times/#/. They also sell parcel post and express satchels in 10 packs to save visiting the post office every time.

To compare courier costs, you can visit these comparison sites to get instant quotes
Compare couriers
Parcel 2 courier

HINTS

Couriers charge by both volume (dimensions added up) and weight. If you have a light bulky item you will pay based on the volume. If you have a tiny heavy item you will be charged by the weight.

Parcel tracking is a great way to understand if the receiver has received that urgent package.

SUMMARY – delivery on time

Your time is not well spent delivering a parcel to the other side of town. Delivery costs increase the faster you want something delivered with overnight being a sweet spot between cost and time. Competition means you can get the best price simply by visiting a comparison website.