Superannuation contributions

Selecting a super fund
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Select from corporate fund, industry fund, retail fund or self managed super fund (SMSF)

Super fund investment strategy
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Super fund performance comparison
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SMSF advisor

If you have employees, you are required to pay superannuation contributions regularly. Currently the contribution amount is 9.5% of the employee's salary, though this will gradually rise to 12% over the coming years. The only employees who are not entitled to superannuation are those earning less than $450/month before tax, and employees under 18 who work 30 hours a week or less. You are responsible for selecting a super fund, making regular contributions and keeping records for 7 years.

Selecting a super fund

The first step in selecting a super fund for your employees is to check if there is a default fund for your industry listed under the industrial awards. Fairwork provides a comprehensive list and a search feature to help you determine which industrial awards apply to you, which can be accessed here: http://www.fairwork.gov.au/awards-and-agreements/awards/list-of-awards

If there is no default fund, then you will have to select one yourself. There are a number of considerations you should keep in mind:

  • Fees: the priority is obviously to find a super fund with low fees, though it is wise to consider what each fund offers in return. A fund with particularly low fees may offer significantly less value than a comparable fund with higher fees. You will need to assess the cost and benefit of each potential fund when making your decision.
  • Investment strategy: every fund allocates its assets differently according to its investment strategy. Some funds allocate their assets more aggressively, which allows them to achieve higher returns but with higher risk. Other funds are more conservative, offering a less volatile and more consistent return, but typically with less potential upside. If your employees are younger, they may benefit from a more aggressive fund as poor performance years can be recouped. Older employees will benefit more from a conservative fund that doesn’t risk their nest egg.
  • Performance: you will need to assess the financial performance of each potential superannuation fund to determine which one has achieved the most consistent returns. It is wise to look at a period of at least 5 years, rather than simply the highest performing fund of the previous year. Funds with consistently higher returns typically have higher fees, but often justify the expense.
  • Insurance: most super funds offer insurance on an ‘opt-out’ basis, with cheaper funds typically having more exclusions. This may result in certain types of workers not being adequately covered. With that said, more expensive funds will lower your employees super balance and therefore it is vital to weigh the costs and benefits of each option.
  • Extra benefits: some super funds offer additional value through education and advice. It is also wise to find a super fund with strong customer service and an easy-to-use website.

Which services will help you with superannuation?

Your bookkeeper will play an important role in calculating and keeping records of your superannuation contributions for each employee, but ultimately the responsibility falls on you to ensure that payments are made regularly and on time. If your business is large enough, you may have HR staff playing an active role in dispensing compulsory contributions and administrating voluntary employee contributions.