Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 1 Superannuation Guarantee Scheme Chapter 7

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 2 OVERVIEW OF SUPERANNUATION GUARANTEE The scheme is administered by the Australian Taxation Office. It is a separate tax to income tax and is paid by employers. The contributions are in addition to the wages employers pay their employees. The purpose of the scheme is to ensure that employees have funds available for retirement.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 3 The eligible employees to provide minimum levels of superannuation support for are essentially the same as those defined for PAYG purposes. Under the ‘control test', a worker is an employee if the payer controls how, when, where and who is to do the work. Minimum Superannuation Support Eligible employees

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 4 Employer’s Superannuation Obligations Were enough superannuation contributions paid for each eligible employee? Were the superannuation contributions paid into an approved fund? Employer must pay Superannuation Guarantee Charge. Employer must pay Superannuation Guarantee Charge. Employer must pay Superannuation Guarantee Charge. Have superannuation contributions been provided for all eligible employees? Yes No

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 5 Employees paid less than $450 gross in a month (by each month). Employees aged under 18 who work part time (i.e. 30 hours or less per week). Employees aged 70 and over. Employees doing work of a domestic or private nature for 30 hours per week or less (e.g. part-time housekeepers or gardeners). Exempt Employees

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 6 Prescribed Rate ($) x Employee Earnings Base Minimum Contributions Required Minimum amount of superannuation contribution $ =

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 7 Employer superannuation contributions can be paid annually. Contributions are calculated for each quarterly period of the income year. Payment of Contributions

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 8 8 per cent for 2001/ per cent for 2002/2003 and onwards. PRESCRIBED RATES

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 9 An employee's earnings base is not necessarily the same as the actual earnings of the employee for the income year. Employee Earnings Base An employee's earnings base may be defined in the: Relevant superannuation fund trust deed. In the relevant industrial award. In any existing agreement made with the employee. If an employee's earnings base is not defined, it is ordinary time earnings that are relevant.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 10 The prescribed percentage multiplied by the employee's earnings base. Minimum Superannuation Contributions

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 11 A complying superannuation fund, or A retirement savings account. Paying Contributions CONTRIBUTIONS FOR AN EMPLOYEE MUST BE PAID INTO: For each income year, employers must pay the minimum amount of required superannuation by 28 July after the end of the relevant income year.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 12 Deductibility of Contributions Employers can claim any superannuation contributions paid for employees as an allowable deduction for income tax purposes. The deductibility of contributions paid for each employee, however, is subject to age-based upper limits.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 13 Superannuation Guarantee Charge (SGC) Employers who do not provide the minimum amount of superannuation support for each employee in an income year must pay an annual superannuation guarantee charge. The charge is paid to the ATO with lodgment of a Superannuation Guarantee Statement.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 14 Disadvantages for an Employer who Pays the Charge The charge paid is greater than the minimum amount otherwise payable children's school fees. The charge paid is not tax deductible. The charge is based on actual wages paid, whereas the minimum superannuation support may be based on a lower earnings base.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 15 Shortfall component. Nominal interest component. Administration fee component. CALCULATION OF CHARGE Any SGC payable comprises three components

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 16 Paying the Charge Employers are required to self-assess any SGC payable. This is done by completing a Superannuation Guarantee Statement, which is available from the ATO. A completed statement must be lodged at the ATO by 14 August after the end of the income year with payment of the calculated charge. A payment remittance advice is included with the statement.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 17 RECORDS REQUIRED Annual payroll amount. Superannuation contributions paid for each employee. If employers pay the SGC, they must also keep records which explain how they calculated the charge paid. The records must be retained for five years.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Tax Procedures for your Business by Ian Birt, Slides prepared by Peter Miller 18 Discusses Other Collection Schemes CHAPTER 8