Talking Cents

Superannuation Reminder

Superannuation for small businesses can be somewhat of a minefield for a number of reasons. There’s the compulsory 9.% SGC payable on staff wages as well as the personal implications of investing in superannuation. Today I thought it timely to remind the small business owners of our nation about some key changes that were legally enacted from 1 July but may have passed you by.

Before 30 June 2014 it was not compulsory to pay the SGC rate of superannuation on wages for employees 70 years of age and older. From 1 July this concession was scrapped. If you have any employees over 70 you must be paying the 9.5% SGC into a regulated superannuation fund for them, whether they like it or not. Whilst this ensures the employees are treated equally like their younger co-workers, the anomaly here is that because they are over 70 they can then draw the money form their super fund as tax free income. From the employees perspective, the only downside is the admin fees charged by super funds, so it pays for them to shop around for the best deal.

Employees under 74 can also make additional contributions, provided they satisfy the ATO work test. This may be an opportunity for older workers to sacrifice wages into super and draw it back out tax-free, of course this largely depends on personal circumstances and tailored advice should always be sought. To satisfy the work test, an employee must have been gainfully employed on a full or part-time basis for at least 40 hours in 30 consecutive days in the financial year.

For those over 75 no contributions can be made to a super fund other than the compulsory SGC rate of 9.% on any wages earned.

Superannuation can be a complex minefield and the ramifications of getting it wrong can be significant, so always seek advice from a trusted professional before acting.

For more information on saving for your retirement, contact mas accountants, the original accountants for small business, based in Sydney and Melbourne.