From the start of the financial year obligations on employers will change regarding the superannuation guarantee obligations. So it is critical that your payroll and HR system is current because the current penalty regime for missed (and late) super guarantee payments is severe.
Further, the mere catch-up payment of late superannuation obligations is not enough. Super guarantee charge assessment forms need to be lodged with the ATO to stop interest on late super accruing.
Increase the super guarantee percentage
From 1 July the SGL will increase to 10.5%. This is an increase from the prior rate of 10.0%. The newly applied rate applies to when you pay superannuation. So if you pay your staff monthly in arrears, and you pay them on 1 July 2022, the new superannuation rate of 10.5% will apply to the entire payment – even though the wages related to work done in June 2022.
The 10.5% rate will apply to the employees ordinary times earnings. So if you are paying staff for overtime and the like you are not obligated to pay superannuation on that payment (although the employee contract or award might override this obligation).
Further, the SGL rate will increase each year by half a percentage point. So from 1 July 2023 the SGL rate will become 11%, from 1 July 2024 the SGL rate will become 11.5% and form 1 July 2025 the SGL rate will become 12%. So if you are looking at long term contracts with clients take into account the future wages cost through the increased SGL rate.
Scrapping the $450 threshold
Currently if an employee earns less than $450 in a month there is no obligation to pay that employee superannuation. And that is a legacy provision for employers (from 1993) to alleviate red-tape on micro payments.
From 1 July 2022 the minimum threshold of $450 per month will be removed. And with the onset of Single Touch Payroll the payment and tracking of these micro payments is not significant.
Importantly some families in business are currently paying a family member a wage of $450 a month ($5,400 a year). This was often done to access part of the tax free threshold without the need to engage formal payroll software – however with the removal of this threshold these payments to family members will now need to be accompanied by quarterly super payments.
Further, if your business is affected by the removal of the lower threshold and some staff will now start receiving super contributions – you should check that the employee complete the “Superannuation Standard Choice Form” (NAT 13080).
Good HR starts with good software
If your HR system is a cloud-based system (like Key-Pay, Xero, Tanda or MYOB) the software changes will update automatically and should process simply. However it is important to check that the software programs actually do update. Sometimes we have seen a range of payroll systems set up with manual over-rides and hard-keyed payments that are not fully using the simplicity of the system on offer.
Given that the penalties for missing superannuation on time are now 200% of the late superannuation payment and you miss out on the tax deduction the penalties are severe. And simply letting the ATO now that “it is the computer’s fault” will not be enough to get the penalty remitted.
Further – talk to your staff before the first pay run. Let them now of the new payroll changes and how this will look on their next pay. Engaging and communicating with your staff is a great step forward in building a positive culture.
With the complexity of running payroll and HR compliance it is important to invest in systems and stay on top of the process. And for middle-sized and smaller employers it is often cheaper, and more reliable, to outsource your payroll and HR to Westcourt to manage rather than employ additional staff members in a tight labour market. So if you want to talk to somebody about managing your payroll – or even giving it a health check – call Westcourt today!
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