A new, free superannuation clearing house for small businesses with fewer than 20 employees is to be set up through Medicare. The service will be available from July 2010.

This new clearing house facility means that small businesses will be able to make a single payment to Medicare, which will then make payments to members’ individual funds. This effectively means Medicare will manage small businesses’ choice of fund obligations; until now a process that was typically a complex and time-consuming task for small business owners.

Medicare, rather than another government body, has been chosen to administer this system because of its existing capacity in payment processing, which can be easily adapted for super contributions. The Medicare system will also be able to ensure employee’s super records are kept private and secure.

Key features of the superannuation clearing house for participating small businesses include:

• Superannuation contributions made to numerous funds will be electronically paid to a single location (the clearing house) which will process the transactions;
• Small businesses that choose to use the clearing house service will have their legal obligation to make superannuation contributions discharged when payment of the correct amount is made to the clearing house;
• The clearing house facility will be offered free of charge to small businesses with less than 20 employees; and
• The clearing house will manage employers' choice of fund obligations.

Under these arrangements, the clearing house will not be available to larger businesses. This is in line with the Government's focus on assisting small business while also seeking to minimise the impacts of the measure on competition in the existing clearing house market.

Small businesses can register online for the service through the Medicare website, from May 2010.