Hiring Hot Topics: Superannuation
Whether you have one or one thousand employees, it’s compulsory to pay superannuation as an Australian employer. The scheme is an important way for workers to save for their retirement, so it’s critical employers stay up-to-date on any super changes to meet legal obligations.
Here’s what employers should know.
What is superannuation?
Superannuation is a compulsory saving system for retirement. It’s designed to make sure Australians have enough income for their retirement years, either supplementing or replacing the government aged pension. Employers are required to pay superannuation contributions for all employees, including part-time and casual workers – and even some contractors.
The amount is called the superannuation guarantee, says Lynda Cross, Head of Guidance at Aware Super. This is the minimum amount an employer must pay and is currently 12% of ordinary-time earnings, which typically includes the base wage, allowances, paid leave, commissions and bonuses, but not overtime or expense reimbursements.
What are super obligations for employers?
All employers must pay superannuation, no matter the size of the business. All employees over the age of 18 are eligible, as well as anyone under 18 who works more than 30 hours in a single week. You must give employees the option to choose their own fund. If they don’t, then you’ll need to make payments into a default fund.
Payments must be made electronically using SuperStream, which is available via payroll software, a clearing house or directly to the fund (check first if this option is available).
There are a number of risks if you don’t pay the right amount of superannuation, pay it late or pay it to the wrong fund. You’ll have to pay the superannuation guarantee charge, which includes extra penalties on top of the missing super amount.
Withholding super could also lead to potential legal claims, says Sam Nottle, Principal Lawyer at Jewell Hancock Employment Lawyers. In this case, it’s not just the business that’s liable but also the business owner.
“Essentially, if an individual knowingly failed to pay the super, they could be liable as an individual as well as a business,” he says. “That means they’d personally be on the hook to pay penalties that they’re responsible for.”
The Australian government recently enshrined the right to superannuation in the National Employment Standards of the Fair Work Act. This makes it easier for employees to seek to recover unpaid superannuation, says Nottle.
Upcoming changes to superannuation
The way businesses pay super will be changing from 1 July 2026. Payday Super will require employers to pay contributions into nominated funds at the same time as they pay regular salary or wages. This contribution must also reach the fund within seven days.
Currently, employers need to pay every three months, at minimum, so the change will mean accounting for the impact to cashflow.
There are no more changes to the superannuation guarantee this year, so the rate will remain at 12% in the 2025–2026 financial year. Other changes brought in last year, like the payment of superannuation on government-funded parental leave, also continue (although this doesn’t impact employers).
Most common mistakes and how to fix them
Some of the most common mistakes Cross sees are missing deadlines, making late payments or miscalculating what ordinary time earnings are. “They might have excluded allowances, which need to be included, or included overtime, which doesn’t,” she says.
Employers might also miss new starters or casual employees, either through payroll systems or not being up to date with record-keeping. “The other thing is that not keeping good records around payments and where they’ve sent them for employees can not only trigger extra charges or fees from the ATO, but also potentially an ATO audit,” says Cross.
If you do make a mistake, it’s important to act quickly. There are a few ways to take action:
Contact the ATO. Depending on what the error was, there are a few processes, such as the super guarantee charge statement for incorrect payments. These often come with minor penalties.
Communicate with the employee. Keep them updated with what has happened and what you’re doing to fix the issue.
Contact the super fund. In many cases, they can let you know how to resolve issues quickly, says Cross.
Update your processes. If there has been an error, make sure you set up internal checks or payroll audits to make sure it doesn’t happen again.
Ultimately, it’s setting up strong processes and safeguards that will make the entire process easier. It's really just about making sure you do pay, and you pay on time, because it’'s easy to miss,” says Cross.
“Personally, I have a friend who’s a small business owner and inadvertently missed paying for a few people for a long period of time and then it was a big problem,” she says. “Make sure you've got the systems and processes in place to do it, do it accurately, and do it on time.”
Where to go for more information
The ATO has a broad range of resources on superannuation, including checklists, calculators and online courses. For more specific advice relating to your business, contact your accountant, seek legal advice or speak with your default fund.