Master Builders provides general information on employers’ superannuation obligations. Since superannuation is complex, it is suggested that employers seek advice about their specific arrangements.
With the objective of increasing future retirement income for around 8.4 million Australian workers, superannuation guarantee contributions are set to increase.
Employers currently contribute a compulsory 9.5% of ordinary time earnings (OTE) to an employee’s complying super fund or retirement savings account, under the Superannuation Guarantee (Administration) Act 1992) with there no longer being an age limit on employees for whom employers have a superannuation obligation.
Current federal legislation for superannuation contribution provides for:
|Financial Year||Rate (%)|
|2025 and onwards||12.0|
What are ‘ordinary time earnings’?
Superannuation guarantee contributions are required to be made on OTE. OTE generally consist of what an employee is paid for their ordinary hours of work, including certain allowances, casual and shift loadings, commissions, lump sum payments and paid leave, but excluding others.
Who is an ‘employee’ for superannuation purposes?
While employers may understand their superannuation guarantee obligations to their employees, some confusion arises when it comes to a person’s obligation to their contractors.
Under the superannuation guarantee legislation, an employee includes a person engaged under a contract that is mainly or entirely for labour, including people who are paid for mental and artistic effort as well as physical work. A contract is mainly for labour if more than half of the value of the contract is for the person’s labour.
This means that a subcontractor (the party to the contract) could be considered to be an employee under the superannuation guarantee. Even if the subcontractor quotes an Australian Business Number (ABN), they may be considered an employee for the purpose of the superannuation guarantee.
Accordingly, employers should seek advice when engaging workers on, for example, an hourly rate contract of service.
Read more about the differences between employees and contractors.
Choice of superannuation fund
Many employees have the right to choose the superannuation fund into which their superannuation contributions are paid. There are exceptions, such as an enterprise agreement that specifies a particular superannuation fund into which employer contributions are to be paid.
Employers who are required to offer a choice of fund must provide the employee with the standard choice of fund form within 28 days of employment commencing. However, Master Builders strongly recommends, as ‘best practice’ in the industry, that construction workers are registered with a fund prior to commencement on site.
Employees do not have to make a choice, even if offered. Where they do not do so they should be advised of the default superannuation fund to which the employer contributions will be made. All employers must have a default fund.