Solutions

Chapter 7:

Superannuation Guarantee Levy

1. The Superannuation Guarantee Scheme was introduced by the Federal Government on 1st July 1992, requiring all employers to make minimum contributions (a set percentage of payroll) to a complying superannuation fund for each employee. The Scheme was legislated with the introduction of the Superannuation Guarantee (Administration) Act 1992 and the Superannuation Guarantee Charge Act 1992. The purpose of the levy is to create forced savings and in the long term reduce the welfare payments made by the Federal Government in the form of old age pension. The median age of the Australian population has been increasing over the last decade. The Superannuation Guarantee Scheme is seen as a way of coping with the shortfall of social welfare that the Federal Government predicts for the future. 2. Have some control over your employees; Are responsible for the payment of wages or salary; or Have the power to dismiss or hire employees.

3.

There are a number of ways to determine an employees earnings base, depending on whether the employees superannuation is based on: An industrial award An employee agreement The superannuation funds trust deed Employees aged 70 and over Non-residential employees paid for work outside Australia Employees earning less than $450 per month People who work less than 30 hours per week and the work is of a private/domestic nature Employees who are under the age of 18, working 30 hours or less per week. Non-residential executives who are temporarily in Australia and hold a Class 2 entry permit Resident employees paid by non-resident employers for work outside Australia

4.

5.

The maximum contribution base is the maximum salary on which employers must pay superannuation guarantee for each employee. The current maximum earnings base is $47,170 per quarter, i.e. $160,680 per year. The maximum contribution into an employees superannuation fund is 160,680 x 9% = $14,461.20

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6.

Under the new rules, some employees will be eligible to choose the fund for their future superannuation guarantee contributions except where: super is paid under a state award or industrial agreement super is paid under a certified agreement or an Australian Workplace Agreement they are a federal or state public sector employee excluded from choice by law or regulations they are in a particular type of 'defined benefit fund or have already reached a certain level of benefit in that fund. See text for additional information.

7.

A Choice Fund is one where certain employers are required to offer their employees the option of choosing the superannuation fund into which their superannuation contributions must be paid. The employee can choose a fund different to what the employer prefers. There are no reporting requirements for employers unless they are covered under Australian workplace legislation and award agreements that require employers to report superannuation contributions on payslips. Under these circumstances they are also obligated to report to employees the name of the fund and the amount of contribution. (a) (c) 10. ( b ) 11. ( d ) 12 ( a ) 13.

8.

9.

14.

The General Interest Charge ( GIC ), is a charge imposed if employers do not pay the superannuation guarantee charge by the due date. The rate for the quarter Jan Mar (time of publication) is 10.95%. When an employer makes a contribution for an employee that does not comply with the choice of fund rules, the employers quarterly shortfall may be increased by 25% of the shortfall that would apply if the contribution not been paid. Employees choice liability = 25% x (notional quarterly shortfall employees SG shortfall )

15.

16.

Superannuation Guarantee Penalties Superannuation Guarantee Charge General Interest Charge Shortfall penalties Administrative penalties

No tax deduction Tax deductible No tax deduction No tax deduction

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17.

(a)

An employer who fails to comply with the rules, must pay a superannuation guarantee charge comprising: the shortfall of contributions that should have been made an administration fee ($20 employee affected) interest charged on the shortfall of 10%pa. There is no specific record-keeping system prescribed but adequate records must be maintained and retained for at least five years. The records must indicate: The annual base national payroll for one year The total contributions made for each employee Calculations if a superannuation guarantee charge was, or must be, paid.

(b)

Employers should keep detailed records of how the amounts were calculated, which funds it was paid into and the date of payments in case the employees or ATO has any queries. 18. (a) (b) (c) ( a ) Shortfall Component ( b ) Interest Component 3,000 x *149 days x 10% 365 days st th * 1 April 28 August = 149 days ( c ) Administration Component ( d ) Part 7 Penalty 200% x $3,142.46 = 122.46 = $3,000 Total superannuation liability = $620,000 x 9% Employees entitlement = $39,000 x 9% = $55,800 = $ 3,510

20 3,142.46 6,284.92 $9,427.38

Superannuation Guarantee Charge = ( a ) + ( b ) + ( c ) + (d)

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19.

Super Match is a new initiative offered to superannuation funds and organisations by the ATO to locate lost member superannuation. There are currently about $6.4M accounts on the Lost Member Register ( LMR ) with an approximate value of $12.9B. The benefits of Super Match are: Reuniting members with lost, inactive and member protected accounts. Simplifying the process of locating monies. Promoting member loyalty by providing a new service.

20.

A complying fund is one that has elected to be regulated under the Superannuation Industry ( Supervision ) Act 1993. These funds qualify for concessional tax rates. Search for SIS Act. e.g. AMP Superannuation Fund, ING Masterfund, First State Superannuation Fund.

21. 22.

Activity. ATO website downloadable form NAT13080. 1 (c) ) 2 (e) 3 (a) 4 (d) 5 (b) 6 (f

23. TRUE a. b. c. d. e. f. g. h. i. j. Average weekly ordinary time earnings (AWOTE) is used for an employee with no earnings base. The superannuation guarantee charge uses actual earnings to calculate the charge. Superannuation does not have to be provided for an employee who earns less than $450 per month. Super match is used to locate lost funds for its members. The superannuation guarantee scheme is compulsory for all employers. Superannuation funds receive concessional tax treatment. An employees earnings base is used to calculate the contributions. The current rate on contributions is 10%. The superannuation guarantee charge consists of a shortfall component and an interest component only. As a result of new rules most employees are not able to choose their own fund. FALSE F T T T T T T F F F

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24.

Total Annual Earnings Base = $361,000 less (28,000 + 14,000 +10,000 +12,000) = $297,000 Minimum Superannuation Contribution = 297,000 x 9.0% = $26,730 Amount Payable = 26,730 22,950 = $3,780 Shortfall Tony Robert Marcel Joe Anne Marnie Karen Chiara 450 180 100 580 240 40 660 1,530 $3,780

25. ( a ) SG contribution made ( $3,360/56,000 ) x 100/1 = 6% 6% x 56,000 = 3,360 ( b ) Shortfall percentage and shortfall 9% - 6% = 3% Shortfall ( $84,000 x 3% ) ( c ) Nominal Interest Component

2,520.00

2,520 x 150 days x 10% = 103.56 365 days * Interest is calculated from 1st October to 28th February less 1 day. ( d ) Administration Component Employee fee 3 x 20.00 = 60.00 ( e ) Superannuation Guarantee Charge = ( b ) + ( c ) + ( d ) = 2,683.56

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26. ( a ) SG contribution made 3% x 85,000 = 2,550 ( b ) Shortfall percentage and shortfall 9% - 3% = 6% Shortfall ( $110,000 x 6% ) ( c ) Nominal Interest Component

6,600.00

6,600 x 147 days x 10% = 265.80 365 days * Interest is calculated from 1st January to 28th May less 1 day. ( d ) Administration Component Employee fee 5 x 20.00 (e) Superannuation Guarantee Charge = ( b ) + ( c ) + ( d ) = = 100.00

$6,965.80

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27. 25,000 30,000 1,550 450 6.2% 1.8%

7.2%

30,000

2,160

2.8%

30,000 1,320

840 330

840

330

1,170

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28.

Superannuation Guarantee Offset for Late Payment

1170 1,000 149

1170

149

47.76

1170

47.76

1217.76

1217.76

1,000

1000

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