Choosing the right superannuation fund for your employees can be a complex process regardless of the industry you are in or the size of your business. The number of superannuation fund options is vast and, even though you may already be an experienced employer, the laws and requirements concerning employers and super are not always easy to master. From 1st July 2018, new legislation regarding super will be coming into effect – adding further considerations to the existing rules. Therefore, it is crucial to have a clear strategy for selecting super for your employees.
This article will discuss different sizes and types of Australian small businesses, the common superannuation problems that employers in these businesses tend to encounter, and what superannuation strategies these businesses could employ to solve these common problems.
There is no universal definition for what constitutes an Australian small business. The Australian Securities and Investments Commission (ASIC) classifies a small business as a business that complies with two out of the three following conditions
- An annual revenue of less than $25 million
- Less than 50 employees at the end of the financial year
- Consolidated gross assets of less than $12.5 million at the end of the financial year.
The Australian Taxation Office defines a small business as a business with an annual revenue turnover (post-GST) of less than $12.5 million at the end of the financial year. Fair Work Australia says a small business is a business that employs less than 15 people, while the Australian Bureau of Statistics says that a business with fewer than 20 employees is a small one. For the purpose of this article, a ‘minor small business’ will be a business that been in existence less than 5 years, and employs fewer than 20 people. Businesses that employ between 20 -50 people and have been established for more than 5 years will fall under the category of ‘major small business’.
Minor Small Businesses
In this article, minor small businesses are those with less than 20 employees and fewer than five years’ experience. In Australia, many businesses in the foodservice industry, e-commerce market, and even small start-ups in the fitness sector (an emerging response to the Australia’s saturated ‘big gym’ market) fall under this category. Problems that minor businesses typically encounter are unpaid super, because of poor cash flow and inexperience, and failing to pay employees their superannuation on time due to lack of organisation. Both problems usually result in financial penalties, which only succeeds in hurting a struggling small business even more.
Major Small Businesses
In this discussion, major small businesses are those that employ between 20 – 50 people and have been established for at least 5 years. These are likely to be businesses based in the retail, hospitality, construction or accommodation industries. The superannuation problems faced are much the same as those that occur to smaller businesses. Employees that work in the construction or hospitality industries are also most likely to miss out on the super they are entitled to due to the continued existence of ‘cash-in-hand’ pay arrangements. Additionally, some major small businesses are not yet SuperStream compliant, despite SuperStream legislation being in place since 2015. Failing to meet obligations under the SuperStream legislation means that businesses leave themselves open to penalties imposed by the ATO. SuperStream was designed to make the contribution process more efficient and included rules around what information needed to be supplied with contributions, as well as making electronic contributions compulsory.
Finding a fund with solutions
When searching for a superannuation fund that has the best solutions and services for your business, there are a few key things to consider.
Firstly, you should consider a super fund that has a history of strong performance over the long-term, regarding investment returns. Whether this is your first business venture, or you are an experienced small business CEO, a well-established super fund puts you in capable hands from day one. Your super fund of choice should also have a variety of investment options on offer for your employees. Additionally, consider partnering with an experienced, multi-industry super fund. These types of super funds usually have lower fees than their retail counterparts, and a multi-industry super fund will have experience in supporting employers from a wide variety of disciplines. Doing some research about the level of tailored support and other services you can expect to receive to help meet your super obligations is also worthwhile, as finding a super fund that has the ability to treat you as an individual and not ‘just a number’ can give you peace of mind.
Employers with a business that has 19 or fewer employees, or an aggregated turnover of less than $10 million, can utilise the government’s small business superannuation clearing house (SBSCH) service. The SBSCH allows you to make a single electronic payment that will then be distributed to each employees’ super fund – saving you time and potential frustration
The Right Fund for Your Business
Choosing the best superannuation fund for your business and your employees can potentially cause a significant amount of stress, not least because of the time and effort required to consider the multitude of available options, when you’ve got other important things to do with the day to day running of your business. However, by developing a quick checklist of the services and support you want your super fund to provide, and spending some time researching your options online and via your business networks, you’ll end up with a super fund that takes the stress out of meeting your obligations and makes super simple.
NSF Nominees Pty Limited ABN 29 053 228 667 AFSL 253129
Trustee of Nationwide Superannuation Fund (Nationwide Super) ABN 15 201 768 813
This document contains general information only and has been prepared without taking into account your financial objectives, situation or needs. It may, therefore, not be right for you. Before you make any investment decision, we suggest you consult Nationwide Super’s Product Disclosure Statement available at nationwidesuper.com.au/PDS and/or seek licensed financial advice. As at the time of compilation, the information contained in this document is correct and any estimates, opinions, conclusions or recommendations are reasonably held or made. Subsequent events may mean that the information becomes out-of-date and so, to the maximum extent permitted by law, we disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this document. Past performance is not a reliable indicator of future performance.