Super payments for employees made easier

For many SMEs, paying their employees’ compulsory 9% superannuation under the superannuation guarantee scheme can be an administrative nightmare.

And paying the extra 0.25% from July 1 this year, taking the payment to 9.25%, won’t make it any easier.

The government has established what is called a Small Business Superannuation Clearing House to help ease the burden of that.

It is a free online service designed to assist small businesses with paying superannuation contributions for their employees. It was established in 2010 and enables eligible employers (to be eligible to use the service, you must have 19 or fewer employees) to make one single secure electronic payment to the Clearing House for all employees.

Employers simply register their employees’ superannuation fund details and the Clearing House distributes the contributions to their various superannuation funds.

Only one payment needs to be made to the Clearing House for all employees, and once the payment is accepted, the Clearing House forwards the contributions to the appropriate superannuation funds.

Registration for using the Clearing House can be done online at the Department of Human Services website. This site explains how it all works and how to register, as well as providing reference guides and information about the service.

On the other side of the coin, the Clearing House allows superannuation funds to access detailed payment reports, provide and update information such as bank account details and insert rules for employers to follow when selecting a fund on behalf of their employees.

The intention is to minimise the time and paperwork involved for SMEs in paying these contributions into many different super funds. Once a payment is accepted by the Clearing House, the employer has met their obligation to pay the superannuation guarantee ie their compulsory super payments for their employees, so there can be some peace of mind there.

The system seems to be working because the ATO says that, as at the end of January 2013, more than 37,000 small businesses were registered to use the service that makes payments on behalf of over 271,000 employees. In excess of 1.9 million employee payments totalling more than $700 million have been made to over 6000 superannuation funds.

An issue that has arisen with the system is the 19 employee limit on using it. Some consider this is too low. While employees can be full-time, part-time or casual, some businesses consider that limit is a constraint for businesses with a high volume of part-time or casual workers.

It has been suggested that more businesses would make use of the service if this limit was increased, notwithstanding that 50% of the already registered small businesses have less than five employees. It is understood the Australian Retailers Association has approached Superannuation Minister Bill Shorten to have the limit of employees increased to 100, although the outcome of that approach is not known.

Another concern is that some small businesses may be reluctant to register for the service for fear of inadvertently exceeding the limit of employees.

In this regard, it is understood the Department of Human Services conducts quarterly checks to identify instances where more than 19 employees are registered and contacts those employers about whether they have a reasonable explanation for this, (an employer may have a seasonal workforce, for example).

Where an employer is no longer eligible to use the service, the Department of Human Services will advise them that their account will be deactivated. This makes a reconsideration of the 19 employee limit desirable.

The scheme is a very useful one for SMEs and can certainly help them reduce costs (e.g. paperwork and time) in complying with their superannuation obligations. Nonetheless, the areas of concern noted above deserve attention and it is to be hoped the government will respond favourably.

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Terry Hayes is the Editor-in-Chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.