Is Your Business Prepared for Superannuation Changes Starting in July 2022?

Prepare Your Business for Changes to Super Rules with On The Money Bookkeepers in Melbourne

There are several recent changes to superannuation obligations that employers need to be aware of. Start planning now for changes that could significantly affect your payroll costs and make sure your payroll software is up to the job.

Super Guarantee Rate Rises to 10.5% from July 2022

The statutory rate increases to 10.5% from July 2022, continuing the planned gradual increase to 12% in 2025.

If you’ve got a large payroll, be sure to calculate the cost of superannuation so you can plan for the increase in payroll expenses. If you’re already using Xero bookkeeping and accounting software, the rate will automatically update on 1 July 2022.

Removal of $450 Monthly Threshold

From July 2022, employers will have to pay superannuation guarantee on all ordinary earnings.

For some employers, the change will significantly impact payroll costs. For example, some industries rely on a large pool of casual workers who work only a few shifts each month and earn less than $450 per month. These businesses will notice the extra cost when paying super on all ordinary earnings.

The removal of the super-free threshold applies to most employees, but there are some exceptions:

• Employees under 18 need to work more than 30 hours per week and earn more than $450 per month.
• Domestic or private workers must work more than 30 hours per week and earn more than $450 per month.
• Contractors deemed employees for super purposes must earn more than $450 per month.
• Some international and temporary workers.

Super Funds ‘Stapled’ to Employees

Another important change is that super funds are now linked to employees within the ATO systems, making it easier to find existing funds that have been opened in the employee’s name. Many young or casual workers can unintentionally end up with multiple super funds without knowing.

If new employees don’t choose a super fund, employers must check if there is an existing fund they can pay into before automatically paying into the default super fund.

Employers are still required to pay into the default super fund for employees who do not already have a fund and do not choose a fund.

STP Reporting

Remember, all your payroll data, including superannuation entitlements, are reported to the ATO through Single Touch Payroll (STP). Phase 2 reporting started on 1 January 2022, with an extension until 31 December 2022 for software companies that have been granted a deferral. It’s critical to use excellent payroll software to meet the ATO STP Phase 2 reporting requirements. We use Xero for all payroll processing and, when needed, Employment Hero as our expert advisors. If you’re not already using Xero, check with your software provider if you’re not sure whether STP Phase 2 is active or talk to us about getting set up on Xero.

Superannuation guarantee contribution (SGC) late lodgement and payment penalties are costly. If you miss making payments for multiple employees over several quarters, the time and administrative costs are significant. Not only do you pay an admin fee per employee per quarter, plus outstanding interest, but you also pay superannuation on all earnings such as overtime, which is usually exempt from SGC.

Plan Now for the Changes and Increased Costs

It’s a good idea to let your employees know about the changes to their superannuation calculations and your obligations, so they are aware of their entitlements.

If you’d like a review of your payroll systems to prepare for STP Phase 2 and the new super rules, talk to On The Money Bookkeeping Melbourne today. Australian payroll law is notoriously complex. We’d love to help you understand your obligations as an employer and make payroll processing as easy and efficient as possible for your business.