How do I compare super funds for small businesses?
Through the Government’s MySuper legislation, employers are required to have a default super fund which is a MySuper fund in place to offer their employees. But what do you need to know about your super obligations as a small business, and how do you go about choosing a super fund to offer?
Superannuation or ‘super’ is money set aside during your working life for when you retire. For most people it starts with their first job and their employer paying a portion of their salary into a super fund.
These payments are known as Super Guarantee contributions or concessional (pre-tax) contributions. The super funds that look after these contributions invest the money in assets such as shares, property, cash and managed funds. The risk associated with these assets is one of the ways to compare super funds. More of that later.
If you find yourself in the position to take on staff, you’ll have a number of things to consider such as health and safety and managing their pay, leave and entitlements. If you are paying a full-time, part-time or casual employee $450 or more in a calendar month (before tax), you are generally required to pay them super in addition to their wages.
There are exceptions to this rule, and more detailed information is available on the Working out if you have to pay super page of the Australian Taxation Office (ATO) website. You may also wish to complete our Business Super Profile to check if you are on track with your super obligations.
The current minimum rate for Super Guarantee is 10% of earnings, which include commissions, allowances and bonuses.
Yes, and this is why it could be a good idea to start comparing super funds. Your workers can nominate their own fund, but you are required to provide them with the option of a default fund that you’ll need to nominate. Super funds established by employers are called default or employer nominated funds.
MySuper products – which include our own BT Super fund – are available from a variety of authorised providers and are intended to be simple, low cost, and easy to compare.
Within 28 days of a new employee starting work, you must provide them with a Superannuation standard choice form, which they can complete and return to you with details of the fund they wish contributions to go in to. If they do not nominate their own super fund, you will need to pay Super Guarantee contributions into your default fund.
When comparing employer nominated super funds and choosing one for your employees, much depends on how much investment choice you wish to offer your workers, and how much insurance is included.
You may wish to offer a super fund with these two investment approaches:
Additional options that may be offered include investment preferences based on:
BT Super, for example, offers over 30 investment options.
All MySuper funds are required to offer ‘death’ and ‘total and permanent disablement’ (TPD) cover, employees who receive this cover can choose to opt out of this insurance if they wish to.
Some employees won’t receive this cover straight away, these are employees who are under the age of 25 or who have a super balance under $6,000. These employees can opt-in earlier if they wish. Opt-out cover will otherwise be provided once they turn 25, and/or their account balance increases above $6,000.
Where funds vary – and therefore can be compared with each other – is in the level of cover provided and associated costs, plus any exclusions as to who can be covered (such as casuals, non-Australians and some occupation types).
So, it may be worth doing some research into these factors to make sure you choose the super fund that suits both your own needs and those of your employees.
Generally, you may claim a 100% tax deduction for super contributions made on behalf of your workers.
Yes, you can - you should seek professional advice about the best way to handle your super contributions.
Superannuation and the super obligations of employers can be a complicated business, so you may wish to take professional advice. For an informal chat about MySuper and BT Super from Westpac, you can call BT Super Concierge on 1300 365 668 during office hours Sydney time.
The article is prepared by BT Funds Management Limited ABN 63 002 916 458, AFSL Number 233724, RSE Licence No. L0001090 (BTFM) and BT Portfolio Services Ltd ABN 73
095 055 208 AFSL 233715 (BTPS).
This article does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs before acting on it.
BTFM and BTPS are subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (Westpac). An investment in, or acquired via, a BTFM or BTPS product is not an investment in, deposit with or any other liability of Westpac, any Division of Westpac or any other company in the Westpac Group. It is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. Westpac and its related entities do not stand behind or otherwise guarantee the capital value or investment performance of the products.
©Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.