Hi guys, this is Michelle from Little Miss Bookkeeping.
I want to run through the super increases from 9.5% to 10% occurring from the 1st of July 2021. This is going to be affecting all my clients who have employees and their employees. So I thought I’d put together a quick video just explaining the changes and how this is going to be affecting them from a business owner point of view. Let’s quickly run through it, and what it means, what we need to do, and then the next steps that you as a business owner should be undertaking.
We know that the at ATO has been this discussing increasing the super for a while now. And from the most recent change that’s happening from the 1st of July. So we’re going from 9.5% percent to 10% – a 0.5% increase. I’ll insert a little table here, but basically, there are some planned increases in the future, which I won’t be talking about right now, we’re just talking about the 10% increase which will be implemented very, very soon. I’m filming this video in mid June 2021. So if you’re watching this, just make sure that it’s up to date and relevant, because we know that tax legislation likes to change all the time.
So the first question I’ll quickly go through is
1) When does the payment or the 10% increase start?
Any wages paid on or after the 1st of July will be subject to increased SGC irrespective of when the amounts were accrued. It’s going to be based on the payment date of the wages, not specifically when the wages were accrued. Sometimes we have pay periods that cut off between two months. It’s going to depend on their payment date. This morning, I saw information online that just clarified that for us, business owners, accountants, bookkeepers, that that was the case.
If wages were paid on the 30th of June, that’s going to be that 9.5%. Anything from the 1st of July onwards, that’s going to be subject to the 10% SGC, even if that pay period was say from the 15th of June to the 30th of June.
As a business owner, I want you to check the arrangements with your current employees.
Are they on salary? Are they on wages? Specifically for employees that are on salary packages, does this include or exclude super? I’m not an HR professional. This is totally out of my scope of expertise. And I highly recommend if you’ve got questions around this, go speak to someone in the HR industry.
Basically, as a business owner, I highly encourage you guys to check your employment contracts for salary package employees. Does it say including or excluding super? If, for example, you are paying someone $60,000 a year, does it say $60,000 + super? Then you as an employee are going to have to find that extra 0.5% top up. If an employee contract says including super, potentially there’s going to be an issue around the employee having to have less take home pay because they have to absorb that 0.5%.
Again, if there’re questions around this, go speak to an HR professional.
You might have seen some of the articles flying around on the news around employees being worse off because of this change. I encourage you to have a review of all those employee contracts. And even if people aren’t on salary packages, maybe it’s a good time now to review that you’re paying the right reward, that your agreements are all correct, up to date, whatever that might be. Because the reality is, there might be some issues with payroll.
For example, If I’m processing payroll in July and an employee notices that they’re getting this slightly, I’m talking very slightly, smaller amount in the hand, just in line with this legislation – they’re going to start asking questions. You as a business owner should be on the front foot, checking your compliance obligations around your employee contracts. And if need be, having discussions with your employee.
So the next question I have is
2) How do I process the 10% Super?
From the correspondence I’ve seen from an accounting software like Xero, they’re in the process of updating their back end system to make sure that it will be able to calculate super correctly. Let’s leave it at that, they’re saying that they should be able to handle the change. We haven’t had any confirmation yet as to when they would update on that process exactly. I assume that we’re going to run smoothly into July and payroll systems will be able to handle it.
We’ll stay tuned and see if there’s anything we need to do as business owners, bookkeepers, accountants. Let’s hope that it’s going to be a smooth transition into your financial year.
To wrap up,
I’ve written three quick dot points for business owners with employees to show what you should be doing:
1) Review your employee contract agreement and seek HR advice if required.
2) Have a discussion with your employees about the changes and if required, update your payroll. If for example, you’re reviewing employee contracts and something needs to be changed regarding how it’s imputed in the payroll system, talk to your employee about it and talk to whoever is looking after payroll to make sure that it’s being captured correctly in the system.
3) Process wages as normal from the 1st of July checking that your accounting software accurately reflects the 0.5% increase.
Unfortunately, I can’t see any specific guidance from the ATO or Xero yet or other accounting software regarding the change. If you’re a client of mine, reach out if you’ve got any questions. Hopefully it’s going be a smooth transition when we start doing pay runs in July. As always, if you have any specific questions, do speak to your trusted tax agent professional.
Hope you enjoyed this video, and please do share it with any other business owners who might be in the same boat.
Have a great day and I’ll see you in the next video. Bye guys!