Payroll administration essentials – The Super Guarantee, Fair work & Payroll Tax
August 5, 2016
We continue our discussion on payroll administration by further examining the provisions of three other extremely important areas .These are namely Superannuation, the Fair work Act and Payroll tax. All of these areas have considerable impact for a business from an operational and legal perspective and therefore has to be administered with due care and diligence.
(1) The Superannuation Guarantee – All Australian employers are supposed to contribute a minimum amount towards superannuation for their workers. At the present point of time the minimum percentage of super guarantee contributions that need to be made by employers is 9.5%. Ordinary Time Earnings (OTE) must be used to calculate the minimum super guarantee contributions required for your eligible employees, thereby ensuring that all eligible employees are treated the same way for super guarantee purposes. Again the below ATO guidelines and tools will be a useful reference to determine what constitutes OTE.
One common option which many employees are looking to have with their employers with regards to Super is to have the option of Salary Sacrifice. This is an arrangement under which employees agree to sacrifice (forego) part of their total earnings in return for the employer providing benefits of a similar value to them. Then the expectation is that employees are taxed only on the reduced wages. Superannuation is one such type of benefit provided under a salary sacrifice agreement. Other benefits might include motor vehicles, expenses fringe benefits etc. The salary sacrificed component of the employee’s salary package is not assessable income for the employee in the eyes of the ATO. Salary Sacrificed super contributions are classified as employer super contributions. As such there are limits up to which an employer can make employer contributions to a super fund before the super fund taxes the excess at the employee’s highest marginal tax rate.
Finally the ATO prescribes that all employers must pay super guarantee contributions at least every quarter. Due dates for super guarantee contributions are as below as prescribed by the ATO:
1 July - 30 September - Due date of payment is before 28 October
1 October - 31 December - Due date of payment is before 28 January
1 January - 31 March - Due date of payment is before 28 April
1 April - 30 June - Due date of payment is before 28 July
(2) The National Industrial Relations System (Fair work) – The NES are 10 minimum employment entitlements that have to be provided to all employees. The national minimum wage and the NES make up the minimum entitlements for employees in Australia. Therefore, an employment contract, enterprise agreement etc. cannot provide for conditions that are less than the NES. The 10 minimum entitlements of the NES are :
Maximum weekly hours
Flexible working arrangement requests
Personal, carers and compassionate leave
Community Service leave (such as jury duty)
Long service leave
Notice of termination and redundancies
Fair work information statements
For example, as per the NES An employee's minimum pay rate can come from an award, enterprise agreement or other registered agreement or the national minimum wage. Employees have to be paid the right pay rate for all hours they work, including time spent on training, meetings etc. The term “reasonable” is often seen to be used throughout the NES. For example, as far as maximum weekly working hours are concerned, the NES mentions that an employee cannot be required or requested to work more than 38 hours per week plus “reasonable” additional hours in a week. In determining what is “reasonable” the following factors may be taken into account:
Any risk to employee’s health and stately from working such additional hours
Employee’s personal circumstances including family responsibilities
The needs of the workplace in which the employee is employed
Any notice given by the employer to work such additional hours
Whether the employee is entitled to receive overtime payments, penalty rates of pay for such additional hours
All in all, this term “reasonable” seems to indicate the application of fairness for both parties i.e. the employer and the employee in any given situation.
More information on these National Employment Standards are included in the below link:
It is of critical importance that any HR or Payroll administrator has referred to these sections in correctly applying the pay rates, working hours, leave and other conditions for employees. It is also important for Senior management to be familiar with such provisions as they are often involved in setting such standards and employment contracts for their employees from time to time.
(3) Payroll Tax - Payroll tax is a self-assessed, general purpose state and territory tax assessed on wages paid or payable by an employer to its employees, when the total wage bill of an employer (or group of employers) exceeds a threshold amount. The payroll tax rates and thresholds vary between states and territories. Currently (2016/14) for Western Australia the rate for payroll tax is 5.5% and the threshold is $850,000 annually or $70,833 monthly.
Payroll tax returns need to be lodged on a basis which is pre-agreed frequency (monthly, annually etc.) with the state authorities where the wage payment is usually made. For WA usually the due date for lodgement and payment of payroll tax is on or before the 7th of each month. Their on-line Payroll tax Portal which is called “Revenue on-line” is the easiest way to perform this task. A link to this website & portal is given below:
Additionally, the next link below is for a common Payroll tax website which the State Revenue commissioners of each state have jointly launched and provides all users with easy access to various information, legislation, forms, contacts and details of educational seminars on payroll tax.
The Department of State Revenue WA conducts various seminar sessions to explain the finer points covering many areas of payroll tax law throughout the year. These topics cover the below main areas:
Payroll Tax Overview
Payroll Tax and Wages
Payroll Tax and Contractors
Revenue On-line usage and administration
Payroll Tax and rules for Labour Hire Agencies
As these trainings are free of charge, it provides a great opportunity for any organization to send in their key payroll admin staff to participate in these sessions. This also enables them to establish a point of reference with the Department of State Revenue for clarifying any questions related to payroll tax. Referring to the monthly Payroll tax electronic newsletter is also a good way to keep up with the legislative changes taking place from time to time. All members receive this newsletter by e-mail once they register for payroll tax and its on-line services.
Execom Personnel as the Authors and facilitators of the contents published on this information blog are not responsible for the results of any actions on the basis of information contained there, nor for any errors or omissions. Furthermore, Execom Personnel expressly disclaims all and any liability to any person or entity in respect of anything done or omitted to be done by such person or entity in reliance in whole or part of the contents of this publication. Further as laws change frequently, all readers, users and viewers are advised to undertake their own research or to seek expert professional advice to keep abreast of any developments in the topics discussed, especially the ones covering the areas of law and taxation.