What is ‘Superannuation’?
Superannuation (Super) in Australia is the arrangement in place to enable people in Australia to accumulate funds to provide them with income in retirement. It is made up of employer’s contributions, employee’s own personal contributions, and is further encouraged by the government and supported with tax benefits. The employer must put an amount equal to 9.5% (current minimum contribution rate) of the employee’s regular wage or salary into the employee’s super fund. This is an extra payment on top of the employee’s wages or salary, and is known as the super guarantee contribution (SGC).
Employees must be given the choice by their employer as to in which fund their SGC will be paid. All employers must also have a default fund and should the employee not provide details of their own fund by the end of the payment quarter, the employer must forward the employees SGC amount into this default fund.
There are two types of Super funds. A Regulatory fund is governed by the ‘APRA’ (Australian Prudential Regulation Authority) and is controlled by a corporation such as Hostplus, Rest or Australian Super. These funds control and invest the members money. An employee can easily become a member of one of these funds by simply filling in a registration form.
The other type of fund is a Self-Managed Super Funds (SMSF). If you require further information regarding this structure, please contact your in country accountant.
What is ‘SuperStream’?
The Australia Tax office has announced previously effective 1 July 2015, employers must use the SuperStream to make super contributions on behalf of their employees. All employers with 20 or more employees need to be fully “SuperStream” compliant by the 30th June 2015. Employers with fewer than 20 employees have until the 30th June 2016 (extended to 28 October 2016) to complete the SuperStream implementation.
SuperStream is a new set of requirements governing the flow of information and payments to Super Fund. It is a set of government reforms aimed at improving the efficiency of reporting and payment of employee superannuation in Australia - to improve the quality of data in the system, allow the use of tax file numbers (TFNs) as the primary account identifier, encourage the use of technology to improve processing efficiency, and improve the way fund-to-fund rollovers are processed and the way contributions are made.
SuperStream offers a wide range of benefits:
- Increased efficiency - Contributions and rollovers can be processed faster, more efficiently and with fewer errors (i.e improved cost and time efficiencies for employers and super funds). Approved clearing house solutions allow you to pay all your employees' super through one channel – regardless of who their super is with.
- Saving time - You'll spend less time dealing with employee data issues and fund queries.
- Rapid transactions - The efficiency and transparency of electronic contributions will allow for timely allocation and confirmation of money to member account. People can be more reliably linked to their super, reducing lost accounts and unclaimed monies.
Under SuperStream, super contributions will need to be made by submitting data and payments electronically in a consistent and simplified manner format so it can be transmitted consistently across the super system – between employers, funds, service providers and the ATO. The data is linked to the payment by a unique payment reference number and will involve:
- paying all contributions electronically (no more cheque contributions)
- sending contribution data electronically in a new standard message format
- ensuring data related to contributions is sent on the day of payment
- sending new member registrations and existing member amendments in a new standard message format; and
- responding to super fund requests for information within 10 business days.
To contribute to SMSFs, employers must now make payments electronically and provide the following information when doing so:
- SMSF name;
- SMSF Australian Business Number (ABN);
- SMSF bank account number and BSB for receipt of electronic payments; and
- SMSF electronic service address (ESA) for receipt of an electronic contribution data messages.
Activpayroll has worked closely with our partners to do everything we can to minimise the impact of the changes to our customers, while ensuring all payroll solutions remain compliant with the new standard. Our dedicated Insight Guide includes more information on tax and payroll administration in Australia, to find out more, click here.
To access further information from the Australian Taxation Office, please visit this link
Should you need further clarification or assistance, please contact Steven Naarden Steven.Naarden@activpayroll.com