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Important Payroll & Superannuation Updates
As we wave goodbye to another Financial Year, it is important that you are aware of the important updates to payroll and superannuation that took effect from 1 July 2022. In this article, we’ll look at the changes and what you may need to be prepared for now that they are in force.
One of the most significant changes updates to payroll and superannuation that came in on 1 July is an increase to the super guarantee. Under the new rules, all payroll payments from 1 July 2022 to 30 June 2023 will need to be made with the new super guarantee rate of 10.5% (up from 10%). It is also important to note that an employee over 18 years of age will no longer have to earn $450 or more within the month to be eligible for superannuation guarantee. For employees under 18 years of age, super will need to be paid if they work more than 30 hours in a weekly period.
Both MYOB and Xero have advised that these changes will take effect within their programs automatically, however we strongly recommend that you to check this carefully yourself, just to be sure that they have indeed been implemented.
As Fairwork Australia has recently announced a minimum wage increase of 5.2%, most Awards were updated from 1 July 2022. If you are paying wages based on a Fairwork Award, then it is recommended you check if there are any applicable wages rate changes that commenced from this date. For more information on current awards, you can check the Fairwork Awards Information Page, and for registered employment agreements click here.
If you engage a HR Resource (either internal or external to your organisation) it is recommended that you have them review your current employment agreements to ensure they meet the minimum standards.
Single Touch Payroll (STP) – Phase 2
The next phase of the STP rollout has arrived! Where Phase 1 was a way of reporting employees’ tax and superannuation to the Australian Taxation Office (ATO), Phase 2 expands the program to capture more information such as a further breakdown of gross amounts and income types, required to be reported to the ATO each payday.
STP Phase 2 puts a sharper focus on the breakdown of wages with more payroll data becoming available to more parts of government, notably Services Australia. In turn, we will see a removal of some other reporting requirements such as confirmation of income and Employment Separation Certificates. STP Phase 2 is the digitalisation, automation and streamlining of a compliant payroll system, and is all about extra data being made available to the Government. Most employers are doing these things already, but now there will be a requirement to report them at each pay event.
STP Phase 2 Preparation, Implementation, Transition & In Practice
Phase 2 started on 1 January 2022, with all employers granted an implementation date until 1 March 2022. However, if you are using an external Payroll provider or cloud-based software there will likely be an extended commencement date which will fall due sometime through 2022. This is to allow for software providers to deliver their software with the required updates to be compliant with STP Phase 2 and then convert their clients progressively over the year.
If you are unsure if you have been granted this extension date, we recommend that you contact your software/payroll provider and confirm the expected due date for the reporting changes to commence. We do know that both Xero and MYOB have had extension dates issued by the ATO and will be contacting their users directly to notify them of the applicable deadline.
Key Changes to the STP Report
As part of the payroll and superannuation updates coming in, there have been some changes to the STP report. Key changes to note are listed below, broken down into Employment Conditions – Employment Basis, Tax Treatment and Cessation Type.
Employment Conditions – the work pattern.
- F (Full time) – a person who is engaged for the full ordinary hours of work as agreed between the payer and the payee and/or set by an award, registered agreement, or other engagement arrangement. A full-time payee has an expectation of continuity of the employment or engagement on either an ongoing or fixed term basis.
- P (Part time) – a person who is engaged for less than the full ordinary hours of work, as agreed between the payer and the payee and/or set by an award, registered agreement, or other engagement arrangement. A part time payee has an expectation of continuity of the employment or engagement on either an ongoing or fixed term basis.
- C (Casual) – a person who does not have a firm commitment in advance from a payer about how long they will be employed or engaged, or for the days or hours they will work. A casual payee also does not commit to all work a payer may offer. A casual payee has no expectation of continuity of the employment or engagement.
- L (Labour Hire) – a contractor who has been engaged by a payer to work for their client. The hours of work and duration of engagement are not factors for consideration.
- V (Voluntary Agreement) – a contractor with their own ABN and is an individual person. The hours of work and duration of engagement are not factors for consideration.
- D (Death Beneficiary) – the recipient of an ETP death beneficiary payment who is either a dependant, non-dependant, or trustee of the estate of the deceased payee.
- N (Non-Employee) – a payee who is not in scope of STP for payments but may be included in STP for voluntary reporting of superannuation liabilities only.
Tax Treatment Code – to check on how the pay as you go withholding has been calculated and ensuring the payroll has captured the correct tax information for the employee.
- R – Regular
- A – Actors
- C – Horticulturists and Shearers
- S – Seniors and Pensioners
- H – Working Holiday Makers
- W – Seasonal Worker Programme
- F – Foreign Resident
- N – No TFN
- D – ATO-Defined
- V – Voluntary Agreement
Income Type and Country Code – to identify payments made to employees with specific tax consequences. Will also help to identify closely held employees and working holiday makers.
- SAW (Salary and Wages)
- CHP (Closely Held Payees)
- IAA (Inbound Assignees to Australia)
- WHM (Working Holiday Makers)
- SWP (Seasonal Worker Programme)
- FEI (Foreign Employment)
- JPD (Joint Petroleum Development Area)
- VOL (Voluntary Agreement)
- LAB (Labour Hire)
- OSP (Other Specified Payments)
Country Codes must be provided for:
- Foreign Employment
- Inbound Assignees
- Working Holiday Maker
Cessation Type – to identify when an employee ceases employment. The inclusion of this function means employers will no longer need to provide separation certificates.
- V (Voluntary Cessation) – an employee resignation, retirement, domestic or pressing necessity or abandonment of employment.
- I (Ill Health) – an employee resignation due to medical condition that prevents the continuation of employment, such as for illness, ill-health, medical unfitness, or total permanent disability.
- D (Deceased) – the death of an employee.
- R (Redundancy) – an employer-initiated termination of employment due to a genuine bona-fide redundancy or approved early retirement scheme.
- F (Dismissal) – an employer-initiated termination of employment due to dismissal, inability to perform the required work, misconduct, or inefficiency.
- C (Contract Cessation) – the natural conclusion of a limited employment relationship due to contract/engagement duration or task completion, seasonal work completion, or to cease casuals that are no longer required.
- T (Transfer) – the administrative arrangements performed to transfer employees across payroll systems, move them temporarily to another employer (machinery of government for public servants), transfer of business, move them to outsourcing arrangements or other such technical activities.
Note: A Tax File Number (TFN) Declaration information will be included in each pay run as part of the software.
Disaggregation of Gross – the report will itemise the components that make up the gross amount using the following breakdown:
- Bonuses and commissions
- Directors’ fees
- Paid leave
If you need any assistance with STP Settings in your online cloud file, we will be assisting clients between August and November with these.
How MP+ Can Help
As a business owner, it can be tricky to navigate existing legislative and compliance obligations, let alone make sense of payroll and superannuation updates when they come in. McKinley Plowman CFO2GO clients enjoy the benefit of having a team of experienced SME Business Specialists and bookkeepers looking after them and ensuring they remain compliant. If you are already a client, you’ll be enjoying these benefits already. If you’re yet to come on board, give us a call today on 08 9301 2200 or contact us via our website. You can also find out more about how we help clients here.
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