Taking on your first employee, or adding to your team, means taking on a new set of legal duties, and superannuation sits near the top of that list. Superannuation is not something you can decide to pay or skip. If your worker is an employee, the Superannuation Guarantee (Administration) Act 1992 (Cth) (the Act) requires you to pay a minimum percentage of their earnings into a complying super fund, on time, or face a charge from the Australian Taxation Office (the ATO) that costs more than the super itself.
Many small business owners first learn this obligation exists only after a payment deadline has already passed. This article sets out when the obligation is triggered, what the current rate is, when you must pay, the choice of fund rules, how contractors fit in, and what happens if you miss a payment. The rules have changed meaningfully in recent years and again from 1 July 2026, so it is worth checking your setup against the position below.
When the obligation applies
The key question is whether your new worker is an employee for superannuation purposes. The Act gives the words employee and employer their ordinary meaning, then deliberately expands them to capture workers you might not expect. Reading s 12 of the Act, an employee includes:
- anyone who works under a contract that is wholly or principally for their own labour, even if they hold an ABN;
- a director of a company who is paid for performing their duties;
- paid performers, sportspeople and people involved in film, television and broadcast work;
- people doing domestic or private work for you for more than 30 hours a week.
The broad test matters because it catches many people a business would loosely call a "contractor" or "freelancer". You cannot remove the obligation simply by labelling someone an independent contractor or by paying them through their Australian Business Number. If the reality of the arrangement is that the person works wholly or mainly for your business's benefit and their own labour, the Act treats them as an employee for super purposes.
How much and how old the worker is
Two common misconceptions appear in older advice and can cost you. The first is the old $450 a month threshold. Before 1 July 2022 an employee had to earn more than $450 in a month before you had to pay their super, and many business owners still quote this figure. That threshold was removed, so from 1 July 2022 you must pay super for an eligible employee no matter how little they earn in a month. A casual who works a single shift is now entitled to super on that shift.
The second is age. There is still an age-based rule, but it is narrower than you might assume:
- an employee aged 18 or over is entitled to super however many hours they work;
- an employee under 18 is entitled to super if they work more than 30 hours in a week;
- a domestic or private worker is entitled to super if they work more than 30 hours in a week.
Full-time, part-time and casual employees are all covered. There is no minimum headcount or turnover that excuses a business from the obligation, so a first-time employer with one employee is caught just the same as a large business.
The rate you must pay
The super guarantee rate is 12% of the employee's relevant earnings, and this has applied since 1 July 2025. The rate has climbed steadily from 9.5% a few years ago, through 10% in 2021, 10.5% in 2022, 11% in 2023, 11.5% in 2024 and to 12% in 2025. Under the ATO's published table it is now steady at 12%.
The percentage is applied to what the ATO calls ordinary time earnings up to a maximum contribution base each quarter. Ordinary time earnings are broadly the earnings an employee receives for their normal hours of work, including most allowances and commissions, but generally not overtime. This matters if you are calculating super by hand: you do not pay 12% of everything an employee earns. You pay 12% of their ordinary time earnings, capped at the maximum contribution base (for the 2025-26 financial year, $62,500 per quarter), and you owe nothing on earnings above that cap.
Because the figure shifts every year, the safest approach is to have payroll software calculate the amount for you rather than relying on a remembered percentage. If you do not pay the full 12%, the shortfall becomes part of the charge described below.
Paying on time
When you must pay has changed recently. For pay periods up to 30 June 2026, employers paid super at least quarterly, with contributions having to reach the employee's fund by the 28th day after the end of the quarter (for example, 28 October for the quarter ending 30 September).
From 1 July 2026 a new regime called Payday Super applies. Under this regime you must pay super for each payday rather than waiting until the end of the quarter, and the contribution must reach the employee's chosen or stapled fund within seven business days of that payday. This is a tightening of the old timetable, and it removes the cashflow buffer that quarterly payment once gave employers. Super is now a fixed, recurring cost tied to every payslip you issue.
Two practical points follow. First, a payment only counts as being made on the day it is received by the super fund, not on the day you send it. If you use a clearing house, you need to allow for its processing time; money stuck in a clearing house past the deadline is still a late payment. Second, the seven-day window makes it essential to set up a reliable, automatic payment process rather than relying on remembering each cycle.
Choice of fund and the stapled fund rule
When an employee starts, you must offer them a choice of super fund. In practical terms this means giving them a standard choice form within 28 days of them starting and telling them which fund is your default, in case they do not choose one of their own.
There is also a stapled super fund rule to be aware of. When you hire someone new, you must check whether the ATO holds a stapled fund for them, which is an existing super account already flagged against their tax file number. If they have a stapled fund and do not make a fresh choice, you generally pay into that stapled fund rather than setting up a new account in your default fund. This stops the proliferation of small, unintended super accounts. If the employee has no existing fund and makes no choice, you pay into your default fund.
You also need to handle the employee's tax file number correctly, keep records of the contributions you make, and retain evidence that you offered the choice of fund. The records and the evidence are your protection if the ATO later questions whether you met the obligation, so they are worth treating as part of the job rather than an afterthought.
Contractors
The single most expensive classification error a small business makes is treating an employee as a contractor to avoid super. If a person works under a contract that is wholly or principally for their own labour, s 12 of the Act treats them as an employee and you must pay super for them, regardless of whether they have an ABN or issue you an invoice.
Not everyone who invoices you is a contractor in this sense. The distinction turns on the real character of the arrangement: whether the person is genuinely running their own business, bearing their own risk, providing their own tools and free to work for others, or whether in substance they work for you on an ongoing basis. Getting this wrong can leave you liable for unpaid super, the charge, and related tax and payroll consequences going back over time. If you are unsure whether a worker is an employee or a contractor for super purposes, it is a decision worth having checked before a relationship settles into an ongoing one.
Foreign workers
A worker's visa status does not generally remove your super obligation. An employee who is a temporary resident of Australia is still entitled to the super guarantee while they work here, and you must keep paying super for them on the same basis as any other employee. If instead you have an employee working overseas temporarily, the position can depend on whether a bilateral superannuation agreement between Australia and the country concerned applies, and on the exact terms of the arrangement. Because the cross-border rules carry exceptions, an employer taking on a foreign national, or sending staff offshore, should confirm the position for their specific facts rather than assume.
What happens if you miss a payment
The cost of missing a payment is deliberately set higher than the super you owed. If you do not pay an employee's super in full, or it does not reach the fund by the due date, you must lodge a super guarantee charge statement with the ATO and pay the super guarantee charge. The charge is made up of the unpaid super shortfall, a nominal interest component, and an administration component, and it is not tax-deductible, so it costs you more than simply paying the super on time would have.
The ATO has access to Single Touch Payroll and super fund data, and it combines this with employee referrals to identify employers who have not met their obligations. It can pursue outstanding amounts, including through legal proceedings, and a financial penalty can apply on top for serious or repeated non-compliance. For an employee who does not receive their super, there are also recovery routes outside the ATO's collection, which is why getting the payment right the first time is far cheaper than defending it later.
A practical checklist
To stay on top of the obligation for a new worker, work through this list:
- Confirm whether the worker is an employee, including contractors whose contract is wholly or principally for labour, before they start.
- Check for a stapled super fund and give the employee a standard choice form within 28 days of their start date.
- Pay 12% of ordinary time earnings, capped at the maximum contribution base, for every eligible employee, including under-18s working more than 30 hours a week.
- From 1 July 2026, pay super for each payday so it reaches the fund within seven business days.
- Allow for clearing house processing time so the contribution lands on time.
- Keep records of contributions and evidence that you offered choice of fund.
When a lawyer should be involved
Much of this is straightforward to set up with good payroll software, but there are three situations where a lawyer is worth engaging. The first is classification: if you are unsure whether a worker is an employee or a contractor, having the arrangement reviewed before it becomes entrenched avoids a costly correction later. The second is a miss or a dispute: if the ATO has raised a super guarantee charge, or an employee is arguing about unpaid super, the charge, offset and recovery rules are technical and a mistake in how you respond can increase your liability. The third is cross-border work, where the effect of bilateral agreements on an overseas arrangement needs a fact-specific answer rather than a general rule. A lawyer can review your setup, confirm who is entitled to super and at what rate, and help you remedy a shortfall in the way that limits the damage.
The deadline that catches new employers
If you take one thing from this article, make it the shift that took effect on 1 July 2026. Super is no longer a quarterly bill you square away four times a year. Under Payday Super, the contribution must be sitting in the employee's fund within seven business days of each payday, and a payment is only counted when the fund receives it, not when you authorise it. For a business that has always paid super quarterly, this is the change most likely to slip through, and it is the one that turns a routine obligation into an accidental charge. The cheapest way to comply is to set the payment to run automatically on every pay cycle from an employee's first shift, so there is never a deadline to remember at all.