Payroll & Superannuation changes for employers

First of July 2022 is rapidly approaching and there are a number of important changes for businesses that employ people that commence on that date, along with some other payroll related things that have been in place in the background for a few months now.

Super guarantee increase to 10.5%

This financial year marked the first increase in minimum superannuation guarantee since 1 July 2014, when the rate went from 9.5% to 10% on 1st July 2021.  What is flying under the radar at the moment is that the rate is legislated to increase automatically to 10.5% on 1st July 2022.

Rate increases have been frozen in the past, so it could be implemented again on Budget night 2022 or at some stage before 30 June 2022.  But as things stand right now, the rate is due to increase to 10.5% on 1st July 2022.  

It is important to understand that 10.5% applies to superannuation on wages that are paid after 1 July 2022, even if the entitlement accrued before that date.  So if your payroll rolls over on Monday 20th of June and the next fortnight is paid on Monday 4th July (or any day after 30 June), then the super accrued against that pay run is at 10.5%.

The Superannuation guarantee (SG) is legislated to increase as follows:

YearSG Rate
1 July 2020 to 30 June 20219.5%
1 July 2021 to 30 June 202210%
1 July 2022 to 30 June 202310.5%
1 July 2023 to 30 June 202411%
1 July 2024 to 30 June 202511.5%
1 July 2025 to 30 June 2026 and onwards12%

Abolishing of the $450 per month threshold

The minimum threshold to pay superannuation right now is that the person needs to be earning more than $450 per month, so if earnings are less than that amount, no superannuation obligation arises.  

Significantly, this lower threshold is being removed from 1 July 2022, so superannuation is now payable on every dollar of employment income. The Government’s Retirement Income Review estimated that this would benefit 300,000 employees, with 63% of those being women.

It is worth noting that there is no obligation to pay superannuation guarantee to employees doing private and domestic work for less than 30 hours a week, as well as employees who are under the age of 18 and doing less than 30 hours work a week.  These exclusions will still be applicable.

Stapled superannuation

Stapled superannuation was introduced in November 2021.  It is intended to reduce the number of open superannuation accounts that employees have and make it easier for someone’s superannuation fund of choice to follow them around as their employment changes.

The rules are captured by new ‘choice of fund’ rules and carry penalties for failure to comply.  It is expected in the early stages of implementation that the ATO will take an education focussed enforcement approach, but it is important to understand the requirements and have the right systems in place now.

If a new employee (or contractor) does not nominate a superannuation fund to receive contributions, then employers now need to take extra steps to firstly go back to the employee and try to obtain the existing super fund details from them and if no details are obtained, then to contact the ATO and see if the employee has an existing fund ‘stapled’ to them which can receive contributions.  This is distinct from just setting up a new account in the employer’s default super fund.

Single Touch Payroll Phase 2

Single Touch Payroll Phase 2 is technically already in place, however the implementation is deferred depending on which software provider you are using to manage payroll.  

Importantly, most of the changes will occur at the software level, as the Government is seeking to collect more precise payroll data with Phase 2.  Our overview of Phase 2 and some planning points is here:

Employee v. contractor

The High Court of Australia has handed down two decisions this year that relate to the issue of employee vs. contractor.  Over time the need to weigh various factors, a ‘multifactorial approach’, had gained prominence and acceptance for trying to land on one or the other.  

The decisions handed down in Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd and Anor v Jamsek and Anor [2022] HCA 2 both put the contract between the parties at the centre of the decision, thus reinforcing the primacy of the contract.

It is not the intention here to dissect these decisions and the relevant factors.  The relevance here is that misclassification of employees as contractors can be financially catastrophic due to exposures to PAYG withholding, superannuation guarantee, entitlements and payroll tax.  

These two decisions and what will no doubt be a lot of downstream analysis, including the ATO reviewing its position, could be a timely reminder to review systems and in particular contracts used when engaging contractors and whether they should be regarded as employees or not.  Policies around engaging people or companies as contractors should also be considered.

Payroll management is an area that requires strong understanding and systems in place to ensure high levels of compliance and thus at the same time, reduced risk exposure to non-compliance.  If you have concerns then feel free to contact our Business Advisory or Audit team if you feel that a review is required.

About the Author
Daniel Arnephy
Daniel is our technical expert for all your taxation needs. His diverse network and client base allows him to continuously build his knowledge and analyse every situation he is faced with an experienced outlook.
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