As part of our monthly blog post for Shoestring, we write about the superannuation requirements that employers need to meet for their team members.
The key superannuation requirements that employers have to meet are as follows:
1. Relevant employees
(a) Full-time, part-time and casual employees
When it comes to superannuation contributions, you are required to pay contributions for employees if they are aged 18 years + and if they earn at least $450 or more in gross wages in a month.
A common mistake we see startups make is that they assume that they are not required to make superannuation guarantee contribution payments for contractors. If an individual is paid mainly for their labour for hours worked under a contract, then you will have to pay contributions for them, irrespective of whether they are a contractor or an employee.
2. How much superannuation do you need to pay?
The current rate of superannuation is 9.25% and is scheduled to change to 9.5% from 1 July 2014.
This rate of superannuation must be applied to the Ordinary Time earnings of your employees. This includes payment for your employees’ ordinary hours and whilst it includes commissions and performance based bonuses, allowances and shift-loadings; it does not include overtime payments.
3. When is superannuation due?
Superannuation guarantee contribution payments for your team need to be paid by the 28th day of the month following end-of-quarter. i.e. for the June quarter, payment of superannuation payments is due 28th July.
4. What else is changing?
Apart from the proposed change in superannuation rates, the Government has confirmed that superannuation contributions must be paid electronically by employers into the future. The new system will be compulsory from 1 July 2015 for businesses with less than 20 employees.
Under the new ruling, superannuation payments must be made using a single Electronic Funds Transfer (EFT) to a registered superannuation clearing house. Many accounting software providers offer this function (such as Xero and QuickBooks Online). Alternatively, if you have less than 20 employees you can register to use the ATO’s Superannuation Clearing House.
You can read more in the article on Shoestring here
Writing in my monthly contribution to Shoestring, I put myself in the position of a startup founder and asked the question, “How can I pay myself from my business?”. There are different ways that a startup founder can pay themselves but it all depends on the type of business structure that they have:
1. Sole traders – the business money is your money
A sole trader is where an individual operates a business and there is no distinction between them and the business. And this means that all money made from your sole trader business is yours. You just need to be careful as this means that all money you make in your sole trader business is taxed in your personal tax return. And personal tax rates can get quite high. Up to 45% + the medicare levy of 1.5%.
2. Partnership – you take a share of the partnership profits
A partnership is similar in many respects to a sole trader. Except that you are working with others, called the Partners, and you share the profits with them based on your share of the Partnership. Although a Partner may want to pay themselves a salary, this is effectively the same as them receiving a share of the profits and that is how the ATO views it.
3. Company – how do I pay myself?
There are different ways you can pay yourself from your company. As the company is a separate entity to you, you need to ensure that you don’t draw down money from the company as if it is your personal bank account. Ways you can pay yourself include: Continue reading “Startup Founders – How can I pay myself from my business?”
“Is my business lunch a tax deduction” was our article last month for leading Start-Up publication, Shoe String Why? Because it is one area which causes a lot of confusion and start-ups and small businesses want to understand whether meals (and coffees) can be claimed as a tax deduction.
It’s not a black and white area so we thought that some simple tips can help go a long way in working out whether you can claim a tax deduction. So what are the questions that you should ask (and that the ATO wants you to consider):
- Why is the food or drink being provided – i.e. what is its purpose of the event. If it is provided in a social setting, then the chances are that is is entertainment
- What food or drink is being provided – is it a light meal provided at work or is it a set menu with matching wines. As the meal starts to become more elaborate, it starts to take the character of entertainment
- When is the food or drink being provided – meals provided during work hours are less likely to be entertainment, however with this point it’s especially important to consider the purpose and whether it is social.
- Where is the food or drink being provided – meals consumed on your business premises are less likely to be entertainment. At a restaurant, it is difficult to say it isn’t.
It’s important to consider these initial steps to help you work out whether you can claim a tax deduction on meals (and coffees).
And for more information on this, and the next steps we take at Nudge, you can read my article here.