The busy business owner’s guide to super

The busy business owner’s guide to super

On paper, employer super contributions seem straightforward. After all, how hard can it be to divert 9.5 per cent of an employee’s salary into a super fund?

Harder than it seems, judging by the endless revelations about businesses failing to meet their obligations. Rohan Geddes is a PricewaterhouseCoopers partner and was named Global Payroll Consultant of the Year in 2017. Below, he provides some tips on how business owners can avoid the financial and reputational damage that can arise from super mishaps.

The story behind the shrieking headlines

“Industry Super Australia released a report in 2016 saying that in 2013-14 around a third of Australian workers were underpaid by an average of around $1500 a year when it came to super contributions,” Geddes notes.

If 2.4 million Australian workers failed to get the right super in 2013-14 (and presumably things haven’t improved much since then), it suggests the problem runs deeper than a handful of dodgy operators.

“Business owners who experience cashflow issues may opt to put off making super contributions until their financial situation improves,” Geddes says. “But I don’t imagine many employers set out to avoid meeting their obligations.”

Who do I owe super to? How much do I owe them?

It’s no excuse in the eyes of the law but businesspeople who aren’t meeting their obligations are much more likely to be confused than exploitative. In their defence, there’s plenty to be confused about.

First, there’s the basic question of whose super a business owner is responsible for. If someone is their (full-time, part-time or casual) employee, is over 18 (or works more than 30 hours a week if they are under 18), and earns gross wages of $450 and above in a calendar month, they get super.

Business owners generally don’t have to pay contractors super. But sometimes they do. “Just because a contractor has other clients and an ABN, doesn’t mean a business owner doesn’t have to pay them super,” Geddes says. “If they are a self-employed contractor and engaged under a contract that is wholly or principally for their labour, they are likely to be classified as an employee for super purposes.” As Geddes points out, “This is already a headache for business owners and only likely to become more so as the gig economy expands.”

Just to make things more complicated, super is not calculated on the total amount someone makes but rather their ‘ordinary time earnings’. This includes their salary and extra payments such as commissions, shift loadings and allowances but not overtime.

“Keeping on top of employer super contributions can be complicated and time-consuming, so I always recommend automating the process as much as possible.”

So how do I get this right?

The government knows the super system is not working as planned and has introduced a range of carrots and sticks to address the non-compliance issue. On the sticks side, the ATO is conducting more audits and taking a more punitive approach to employers found to be in breach of their obligations.

On the carrot side, the ATO has introduced facilities such as SuperStream. This online clearing house makes it easy for smaller businesses to make super contributions for their entire workforce in a single electronic transaction, even if their staff are in different super funds.

“Payroll systems such as MYOB and QuickBooks link into SuperStream,” Geddes notes. “Keeping on top of employer super contributions can be complicated and time-consuming, so I always recommend automating the process as much as possible.”

Securing your own future

The one person you, as a business owner, don’t legally have to worry about paying super to is yourself. Of course, failing to do so will jeopardise your chances of a comfortable retirement, particularly if you can’t rely on setting yourself up by selling your business. Ideally, business owners should be making regular contributions to their own super accounts. If this isn’t feasible, they should at least top up their super whenever they have extra cash available.

Avoiding cashflow crises

A major cause of employer super contribution issues is employers being short on cash. A trade credit policy insuring your debtors, can help free up your cashflow, as can business insurance and tax audit insurance which aim to reduce the chances of an insurable event leaving the kitty empty. For advice about the best insurance for your needs, contact our office.