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REIQ Journal : July 2008
Industry Practice Common misunderstandings when paying super By David Cameron, Fund Trustee, REI Super Some of the rules for superannuation are difficult to follow and others sometimes change. REI Super is witness to a variety of common misunderstandings across the country through its dealings with thousands of real estate businesses. SO WHAT ARE the top three mistakes? 1. Ignoring the maximum contribution limit Each year the ATO sets the maximum earnings base on which employers are required to pay superannuation guarantee. This is a quarterly figure – meaning that any earnings an employee makes above the maximum do not incur any superannuation guarantee liability. In 2007-2008 the maximum earnings base is $36,470 per financial quarter. We know that high earning sales people are often being paid 9 per cent on all earnings, which can exceed $200,000 per annum. This can result in employers unnecessarily paying tens of thousands of dollars in superannuation contributions. 2. Paying on car allowances and lump sum entitlements There are a number of exemptions when calculating ordinary times earnings (OTE) for superannuation purposes. Those that most commonly apply in the real estate industry are: Car and phone allowance – where the payment is based on a reasonable estimate of what will be fully expended in doing the job; Discretionary bonuses – that is, those that are not related to specific performance criteria; Maternity leave; Accrued annual leave, long service leave and sick leave paid as a lump sum on termination; and Payments in lieu of notice. Please note that the specific circumstances surrounding these payments are critical to whether they are considered as OTE. Therefore, we encourage you to seek clarification about your own circumstances before reducing superannuation payments. 3. Late payments leading to loss of tax deduction We can’t stress this enough! The deadlines for banking super funds with a complying superannuation fund are 28 days after the end of each financial quarter. For example, the next deadline – for April, May and June accruals – will be July 28. Disclaimer This information is a summary only and is based on information received from sources within the market which is believed to be reliable. However, no warranty or guarantee is provided as to its accuracy, reliability or completeness. No part of this transmission is to be constructed as a solicitation to buy or sell any security and investors are encouraged to seek professional assistance in order to avoid making decisions which are not appropriate to their needs, objectives and circumstances. REI Superannuation Fund Pty Ltd ABN 68 056 044 770 AFSL 240569. RSE L 0000314 REI Super ABN 76 641 658 449 RSE R1000412 For more information email Sue Johnson at firstname.lastname@example.org or call 1300 134 433. REIQ Journal July 2008 Every quarter REI Super has millions and millions of dollars paid in on the 29th, 30th and 31st days after the end of the quarter. These payments are no longer tax deductible and could incur additional charges. While REI Super does not monitor employer payments, sometimes payroll staff volunteer explanations for delays. These can be as simple as waiting for a cheque to be signed, illness, low priority being given to the job or delays in new staff providing super details. More often than not, the principal is not aware that they have lost a tax deduction. Late payment is avoidable. If you are running close to the deadline, consider using a bank transfer or other online payment method to ensure you meet your obligations to the ATO on time. 27