Superannuation for Domestic Workers and Nannies

We Need to Talk About Super

When you’re young, free and single, your pension may not be one of the first things that springs to mind when you start a new job as a nanny. Fortunately perhaps, in Australia, the government does the thinking for you.

Superannuation, or super, is the name we use for retirement pension benefit funds. It comes as part of the package for almost all employees. That means, as an employer, you need to understand that paying superannuation for nannies is a legal requirement.

Find out how it all works as we delve into the world of super and how to pay it.

Important Changes to Rules Around Super

Rules around super can be complex. They also change from time to time. That’s why we would always recommend that you use a nanny payroll service to sort your super obligations out for you.

This is a good way of passing the buck on to someone else. By delegating superannuation for nannies and your nanny payroll commitments to a third party, you’ll know everything’s always going to be above board and done by the book.

Bear in mind that if you do all the paperwork yourself, ignorance is never likely to be a defence if you make a mistake.

As a rule of thumb, an employer, that’s you, has to pay super guarantee for their employee, that’s your nanny, when paying them $450 or more in a calendar month. That’s a pre-tax figure. Your nanny would normally have to work for you more than 30 hours a week.

But, hold the front page. From 1 July 2022, you'll have to pay super guarantee contributions to your nanny’s super fund regardless of how much you pay them.

Who Is Eligible for Super and How Much Do I Have to Pay?

All employees are eligible for super, generally speaking. It doesn’t matter if they’re a temporary resident, like a backpacker who picks fruit or are a company director.

The rules cover domestic care superannuation and therefore apply to workers like nannies. The same applies even in the unlikely event that your nanny is a contractor and you pay them mainly for their labour.

The minimum super or super guarantee (SG) you’ll have to pay for your nanny is 10 percent of their ordinary time earnings, known as OTE.

But, hold the front page again. This is set to rise incrementally to 12 percent by 2025. And, you could increase the rate even further according to any arrangement you might have with your nanny.

You’ll need to pay the required SG amount by the quarterly due date. If you don’t or if you pay the super into the wrong fund, you’ll have to pay the super guarantee charge. It’s a bit like a fine and includes added interest, an admin fee and a few other extras.

Superannuation for Nannies and Domestic Workers

At Pay The Nanny, we encourage employers to pay superannuation to employees, regardless of their earnings or hours worked.

However, the rules for domestic or private workers (which includes nannies) are different to normal employees.

Domestic or private workers are people who:

• relating personally to you (not to a business of yours)
• relating to your home, household affairs or family – such as a nanny, housekeeper or carer.

You must pay super on payment for work of a domestic or private nature if:

• they work for you more than 30 hours per week
• you pay them $450 or more (before tax) in wages or salary in a calendar month.

In short, there’s no liability to make superannuation payments to employees if their a domestic worker, and working less than 30 hours a week. We've still outlined super in general in the rest of this article and for those who are employing a nanny for more than 30 hours per week.

How Do I Work Out How and When to Pay Super?

This is where it starts to get a bit tricky. It’s definitely not as simple as Do-Re-Mi, but let’s start at the very beginning anyway.

First, the good news. Ta-dah! The Australian government has come up with its very own, “Super guarantee (SG) contributions calculator tool.” Click here for the link that’ll take you to it.

(There’s another tool designed especially for employees, like nannies. Click here for the link for that tool).

Provided you have all the information you need to hand, the SG contributions calculator for employers should take from 1 to 5 minutes to complete.

Before you start, you’re going to need:

• The personal details of your nanny (eg: their name and super fund details)
• The amount of super payable for your nanny employee for the given period

The design of the tool, therefore, only lets you work out SG contributions weekly, fortnightly, monthly or quarterly. You’ll need your own calculator to work out a total figure before you begin.

Ordinary Time Earnings (OTE) Explained

Grab your calculator and a strong cup of coffee.

To figure out how much super to pay in a quarter, multiply your nanny's OTE (based on the wages you paid them in the quarter) by the current SG rate or if you want to pay super at a higher rate, use that rate. Easy!

Ordinary time earnings (OTE) is the amount your nanny earns for their ordinary hours of work. Your nanny’s ordinary hours are the normal hours they work as specified under the Miscellaneous Award. They include:

• Any over-award payments
• Shift or annual leave loading
• Any allowances or bonuses you are paying your nanny

Overtime payments are not OTE. You also wouldn’t have to pay SG for your nanny's earnings over a certain limit. You can find out more about these caps here.

You would need to pay super on back pay of amounts that are OTE, even if your nanny isn’t working for you anymore. If you don't, it’s likely you'll have to pay the super guarantee charge.

The Choice of Super Fund

Most people decide which fund they want their super contributions paid into.

If your nanny doesn't choose their own super fund, you should check with the ATO to see if your nanny has an existing super fund. We refer to this as a “stapled super fund.”

If they don't have an existing fund eg: if it's their first job, you can choose a 'default' super product on their behalf and pay the contributions there. The important thing is to make sure you pay the contributions correctly and into the right fund.

Leave Nanny Payroll and Super Contributions to the Experts

When you’re a working parent who employs a nanny, the chances are that you have more than enough to fill your time. You don’t need the extra stress and hassle of working out things like OTE and super.

This is when Pay the Nanny can help. Nanny payroll is what we do so we’re right across all the latest rules around super and how to calculate it. Let us take care of all your nanny payroll needs so that you can relax and get on with living life to the full.