Super guarantee amnesty

Now is the time to get payroll right

payrollA series of high-profile examples of businesses underpaying their employees has brought the need to get payroll right into sharp focus.

Complex award and enterprise agreements can complicate payroll obligations, in terms of both regular salary and wages and the ongoing need to pay employee superannuation. On top of that, from 1 March 2020, changes commence for annualised wage arrangements that will increase the compliance burden on some businesses.

The new rules impact on full time employees paid an annual wage under one of 16 Awards (see the full list here). Under the rules, an employee's annual wage can't be less than what they would've been paid over the year if they were paid all of their award entitlements for their work. If you pay your team above the award entitlements, then you can continue to pay an annualised salary without using the annual wage arrangements. If you have team members on a minimum wage however, there are additional obligations.

 Fair Work states that employers need to record the annual wage arrangement in writing and give their employees a copy. This has to include:
  • The annual wage that will be paid
  • Which award entitlements are included in the annual wage
  • How the annual wage has been calculated, including any assumptions used in the calculation
  • The maximum (or 'outer limit') number of penalty hours and overtime hours the employee can work in a pay period or roster cycle without extra payment.

The employer must also record the employee's:

  • Starting and finishing times
  • Unpaid breaks taken
  • Employees have to acknowledge the record of hours they've worked is correct by signing in writing or electronically at the end of every pay period or roster cycle. This record is used for annual reconciliations.

The introduction of single touch payroll (STP), has standardised the payroll process. Virtually all businesses will be on STP by July this year with closely held businesses moving to STP (closely held payees receive payments that are not at arm's length, generally family members of a family business, directors or shareholders of a company, or beneficiaries of a trust).

For businesses that employ backpackers, there is a separate registration scheme that needs to be followed.

There are two key components to getting payroll right:

  1. Get the award right and ensure you are paying your team the correct rates including any overtime, penalties and allowances (you can use Fair Work's pay calculator – save the results and keep on file as evidence).
  2. Ensure you are calculating super guarantee correctly particularly for team members with salary sacrifice arrangements in place. The rules for calculating SG change on 1 July 2020 to ensure that an employee's salary sacrifice contributions cannot be used to reduce the amount of SG paid by the employer. 

Super guarantee amnesty: Now is the time to get payroll right
The superannuation guarantee (SG) amnesty provides employers with a one-off opportunity to "self-correct." Now is the time to ensure that your payroll is correct and there are no hidden SG issues looming.

The amnesty applies from 24 May 2018 (the date of the original announcement) until 6 months after the legislation receives Royal Assent. Employers will have this period to voluntarily disclose underpaid or unpaid SG payment to the Commissioner of Taxation.

The amnesty applies to historical underpaid or unpaid SG for any period up to the March 2018 quarter.

To qualify for the amnesty, employers must disclose the outstanding SG to the Tax Commissioner. You either pay the full amount owing, or if the business cannot pay the full amount, enter into a payment plan with the ATO. If you agree to a payment plan and do not meet the payments, the amnesty will no longer apply. The amnesty only applies to "voluntary" disclosures.

Collins Hume partners with you to achieve greater business and lifestyle success as your trusted advisers. Call us in Ballina or Byron Bay on 02 6686 3000.