Recent changes affecting employers

1 January 2020 seems to be an important day to note for employers as there are 2 changes that employers need to be aware of, in relation to the way superannuation guarantee charges are calculated and payroll tax threshold changes.

Salary sacrificed super contributions and SGC obligations

Prior to 1 January 2020, if an employee decides to salary sacrifice their wages into their super fund accounts, the employer can choose to exclude those amounts in their superannuation guarantee contribution calculation.

This is no longer allowed as the ATO now requires any salary sacrificed super contributions to be included as the employee’s ordinary time earnings (OTE) base. This OTE based is used to work out the 9.5% super guarantee charge that an employer needs to pay at the end of each quarter.

What difference does it make?

For employees who receives a gross wage of $2,000 per fortnight, and decides to salary sacrifice $300 into her super fund as salary sacrificed super contributions, here are the different employee SG obligations before and after 1 January 2020:

Before:

Gross wages $2,000
Less Salary Sacrifice (Sal Sac) $300
Wages less Sal Sac $1,700
Employer’s 9.5% SG $161.50

 

After:

Gross wages $2,000
Salary Sacrifice (Sal Sac) $300
Ordinary time earnings (OTE) $2,000
Employer’s 9.5% SG $190

 

Employer’s 9.5% SG is increased from $161.50 to $190.

What do employers need to do?

Employers need to review their accounting/payroll systems to ensure their super guarantee obligations are calculated correctly. This affects any pay events paid after 1 January 2020.

Instructions for Xero Payroll Users

You can’t post a pay run with a payment date after 1 January 2020, if it includes employees who you’ve reduced SGC for. You’ll need to update your employee’s pay template or payslip.

Step 1 – Update the pay template

Update the pay template if it includes SGC superannuation line.

  1. In the Payroll menu, select Employees.
  2. Click the relevant employee.
  3. Select the Pay Template tab.
  4. Click the salary sacrifice superannuation line.
  5. Clear the Reduces SGC checkbox.
  6. Click Save.

Repeat these steps for other employees affected.

Step 2 – Update pay slips

Update the payslip if the employee includes SGC reduction in their superannuation line.

  1. In the Payroll menu, select Pay Employees.
  2. Click the required pay run.
  3. Click the relevant employee.
  4. Click the salary sacrifice superannuation line.
  5. Clear the Reduces SGC checkbox.
  6. Click Save.

Repeat these steps for other employees affected.

Payroll tax threshold increase

Currently payroll tax affects businesses that pays $850,000 or more in taxable wages in WA.

From 1 January 2020, the payroll tax threshold is lifted to $900,000 (from $850,000), and it will be lifted up again on 1 January 2021 to $1 million. This means employers with taxable wages under $900,000 will be exempt from payroll tax.

This threshold increase will provide much needed tax relief to WA employers which will hopefully encourage small and medium businesses to expand and create more jobs.