Monday, 30 Jan 2023
Working professionals earn a monthly income that helps them maintain their lifestyle and basic needs. However, when they retire, they are left with no source of income, and this is where ‘super’ comes to their rescue.
Super is built with the contribution made by the employers during the tenure of the employees. A percentage of the employee’s earnings are saved in the super account by the employer to help them maintain an income after retirement.
The super account can comprise the employer’s, employee’s, and sometimes Government’s contributions. Aspiring entrepreneurs should know how employee superannuation works and how employees choose the super funds and boost the amount to ensure they meet the obligations of the ATO. So, here is everything employers should know about superannuation guarantee contributions.
All employees are eligible for a superannuation guarantee, which is the minimum amount of super paid by the employer. It is paid to employees in addition to their salaries and wages and is a part of the payroll system in a business. The recent amendment has made it mandatory for employers to contribute to the super funds regardless of the earnings of the employees.
The amount can be withdrawn only after retirement or when the employee turns 65. However, employees can withdraw in certain situations, such as financial distress or health concern. They must pay penalties and fees if they access it earlier than retirement without special circumstances.
At present, the super guarantee stands at 10.5% of the ordinary time earnings of the employee. It will get increased to 12% by 2025. It must be paid four times a year (every three months) into the super fund chosen by the eligible employee (above 18 years).
If the employee doesn’t pick a fund, your bookkeeper in Melbourne must get details of a ‘stapled super fund’ from the ATO. If eligible employees have not chosen their funds, they must provide them with the Standard choice form.
The bookkeeper must inform the employees about the employer-nominated fund (default fund). The employer pays the super to the default fund if the employee has not chosen a fund. They must have proof of providing a choice of a super fund to the eligible workers in Melbourne.
If the super is not paid by the quarterly due date by the employer or an incorrect amount is paid, the bookkeeper must submit a superannuation guarantee charge statement to the ATO and pay the super guarantee charge. The charge is not tax-deductible and includes the deficit amount, interest of 10% on the deficit amount and a $20 fee per employee for every quarter.
After the employer pays the super in Melbourne, the bookkeeper is responsible for reporting it to meet the SuperStream obligations of the business. They have to give the Tax File Number of every employee while contributing and keep the records. Bookkeepers use a cloud-based payroll system to send the super information to the ATO.
Workers in Melbourne can choose a super fund on their own or opt for the employer’s default fund. They can also continue with their existing super fund. The right way to pick an option is to measure its performance over the years and the amount of the monthly fee.
The super funds provide members with three types of insurance: life insurance, income protection and total and permanent disability insurance. So, employees must compare the premium rates and the cover amount offered by different funds for this insurance. They should also look for inclusions and exclusions in the insurance terms.
Besides insurance, employees must pay attention to investment options. The trustee of the fund invests the super money based on the options chosen by the employee. These investments are made to enhance the super amount and offer a higher income to workers after retirement.
Thus, an increase in the super amount balance depends on the investment options chosen by the employee, such as growth, conservative, balanced, cash, MySuper and ethical. Some super funds also charge a fee for additional services like financial advice.
Employees in Melbourne can keep track of their super fund by creating their myGov account and linking it to ATO to check the details of their accounts. They can also speak to the bookkeeper in Melbourne to identify the best option and maintain an ideal super account balance.
Workers must strive to increase the amount in their super accounts to enjoy a comfortable life after retirement. They can also make personal contributions to super to enjoy a luxurious life in the advanced years. They can make a ‘salary sacrifice’ to contribute an extra amount from their before-tax income or make a contribution from their after-tax income.
However, personal contributions have a cap in a financial year to make them non-taxable. The employee will have to pay additional tax if the amount exceeds the cap. Besides personal contributions, employees in Melbourne who fall in the low-income or middle-income groups are eligible for Government contributions. Employees must file their tax returns to get a co-contribution from the Government of up to $500.
Taxation on withdrawing super depends on various factors, such as the preservation age of the employee and their age at the time of getting the payment, the sources of super contributions and whether the payment is given as income or upfront.
Retirement is the time to sit back and relax. However, you need a constant income stream to ensure you can live comfortably. Thus, the government has implemented employee superannuation to allow the elderly to live with dignity.
Employees must choose the investment options carefully, keep track of their super fund and contribute personally to increase this amount to enjoy its benefits.
