Tax Tip: Pay Employee Super Early

If you hire employees and pay super for them, or even yourself – you might even have yourself paying wages to yourself, and therefore superannuation on that – then you’ve got to pay super. 

Superannuation is accrued every three months, so let’s take the March quarter (January, February, March) and you’ve got to pay that superannuation bill by the 28th of the following month – so in this example, that’s the 28th of April, and the June quarter payment is payable on the 28th of July. Superannuation is deductible from a tax perspective when it’s paid, not when it’s accrued, so you’ve got the decision to make for the June quarter. Do you;

Wait until you have to pay it? We usually encourage a few days before the due date, so the 28th of July – is that going to be your payment date, and you claim it next financial year? 

OR, 

Do you pay it 29 or 30 days beforehand, late June in this current financial year, therefore you get a deduction this financial year? 

So that’s the choice you’ve got to make. 

Now, if it’s a substantial amount of superannuation, it might be $10,000 or $20,000 or $30,000, then times that by your equivalent tax rate (or your effective tax rate) to work out how much tax you’re actually going to defer until the next financial year. So let’s say tax rate is 39% and you’re paying $10,000 in super early, then that’s $3,900, almost 4 grand in tax that you won’t have to pay this current financial year. So thats pretty cool!

And because you have to pay that expense already, it’s just a matter of cash flow and timing that correctly. So, yeah, we just encourage you to consider paying employees super early.