Director Remuneration & Superannuation

Question – We have a small business set up as a company. My partner and I are the directors. We would both rather not pay super. The money could be far better spent in the business. Is there any way to get out of not paying?
Answer
TYPES OF PAYMENT TO A DIRECTOR: At the outset, it’s worth noting that there are a variety of ways that a director or stakeholder of a company can receive remuneration including via ‘Directors Fees’, Directors Salary, fringe benefits, dividends, even as a contract style payment (in very unusual circumstances) etc.

SUPERANNUATION: All fees paid to a company Director are earnings in respect of the Director’s ordinary hours of work. As such, they attract Superannuation Guarantee (SG). Director SG payments must, as with payments to employees, be made to the nominated superannuation fund or a Superannuation Clearing House as the case may be. It’s against the law to make them directly to the Director (irrespective of any written agreement in place between them and the company).

YOUR QUESTION As noted, drawing payments such as a salary from the company would attract SG and this cannot be avoided or contracted our of. To minimise the company’s SG obligations, you could discuss with Accountant the possibility of being remunerated solely by way of a dividend (such remuneration does not attract SG). Alternatively you could consider restructuring into a Partnership or Trust structure (in those cases, distributions of profit generally do not attract SG). To this end, we note the Government’s recently introduced Small Business restructure rollover which allows small business owners to change their operating structure without incurring CGT or income tax, subject to various conditions being met.