Australian superannuation for you and your employees
Superannuation is beneficial for both you and your employees
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Employers have been given even more responsibilities as far as their employees are concerned, ever since superannuation has been made compulsory. It's not simply that you must make sure that all your employees are covered under a superannuation fund, you also have to make certain contributions into the fund based on a percentage of their before tax earnings.
From time to time the Federal Government determines what this percentage will be, as it is often the result of an agreement with unions that the employer superannuation contribution will be increased instead of having to pay a salary increase. This way, the government manages to keep a lid on inflation while at the same time increases the employee's benefit when they retire.
AustralianSuper is an industry super fund and Australia's largest super fund. Its Balanced option is one of the top-performing funds for 10-year returns.
This fund invests in renewable energy, innovative technology and sustainable products while avoiding coal, oil, tobacco and live animal exports.
Aware Super's default MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.
Requirements of employers in regard to employee superannuation
Besides having to make a contribution into each of their employees superannuation funds an employer will also have to ensure that all new employees complete a superannuation Standard Choice form including a Taxation File Declaration form.
Employees are allowed by law to choose their own superannuation fund. It might be a fund they have been a member of for many years or it might be a fund they feel offers them a better deal. Whatever their reason, their right to choose has to be honoured by their employer.
If an employee doesn't have any particular favourite the employer has to sign the new employee up into a default fund organised by the employer for that very purpose.
Further requirements employers have to adhere to as far as superannuation for their employees are concerned, is that of paying their employee's contributions into their fund on their behalf, at least quarterly. The contribution amount will have previously been withheld from the employee's pay. Employers are also duty bound to keep proper records of all transactions, as well as all notices concerning the fund that they have forwarded on to their staff members.
The ATO can assist with up-to-date information on their website
Due to immense paperwork involved,many small business owners are cautious about hiring new staff especially when the business itself is new and you are not certain of its long term future. Recruiting adequately-qualified people to work for you is a task in itself but it is a task that must be done as having the right person in the right job is a major ingredient in your business success.
To make things easier for business owners, the Australian Taxation Office (ATO) has set up an online assistance website that explains exactly who you have to pay the superannuation guarantee for. The website also includes a superannuation guarantee eligibility tool that will show you the difference between an employee and a contractor.
Its a good practice to include yourself in your employees superannuation fund
As a small business owner you will be regarded as being self employed and as such you won't have to include yourself in any compulsory superannuation fund. However, because it’s not compulsory doesn't mean you can't include yourself as you can. In fact, you should – by including yourself in a superannuation fund you will be building up a retirement fund for yourself in your latter years.
At the same time it’s a good place to put your life, trauma and income protection cover because all payments into the fund are made before tax is calculated on your earnings therefore lowering your taxable income by that amount.
How an allocated pension works
When your superannuation fund matures you can have the savings from the fund paid to you as a lump sum or you can reinvest the money so that it gives you an allocated pension. An allocated pension is an investment account that will give you either a flexible, or regular income. Most allocated pension schemes offer a variety of options but behind them all is the principal of growing your investment while generating a taxation advantaged income for your retirement years.
With such a scheme you will have the final say on the regularity and size of the income payments you want to receive as long as they remain inside government-prescribed limits. If you later find the income level is unsuitable you can change it to something more suitable as long as you keep within the prescribed limits. It will be up to yourself to allocate where you want your money invested and you will be able to make as many cash withdrawals as you wish on top of the regular payments you have previously organised.
The payments you receive from your allocated pension plan can be kept free of you having to pay any tax and you can still qualify for the Centrelink pension if your keep the payments within certain limits.
The get the best benefit from an allocated pension plan it is advisable to get first hand advice from a financial advisor. He or she will know what the withdrawal limits are that will determine whether you have to pay taxation or be eligible for a Centrelink pension.
Choosing a super fund
*Past performance data is for the period ending December 2020.
Disclaimer: Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. This article is general advice. You should consider your own personal circumstances before deciding if a superannuation product is right for you. Superannuation is a long term investment and past performance is not indicative of future performance.
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