“All this change is a little confusing, so I recommend you start paying super with wages as soon as possible.” Chartered accountant GAIL FREEMAN has some advice about upcoming changes to superannuation contributions.

Payday super is coming from July 1 and I highly recommend employers find out about it now because it is not as straightforward as I thought it might be.

Most payroll programs I’ve looked at allow you to start paying super now, so you get in the habit of it by the time it’s due.

I am emphasising that super needs to be paid on time. The system requires that employee super is paid when you pay wages. From a cash flow perspective your payroll will increase by 12 per cent each pay period from July 1.

As usual with new legislation, there are new terms that need to be understood.

The first new concept is “qualifying earnings” (QE), which consists of ordinary time earnings plus salary sacrifice amounts, plus directors’ fees plus superannuable payments made to consultants.

These payments are made on a day defined in the legislation as QE day. Lump sum payments on termination are not included in the definition of QE.

Your payments must be received in the fund within seven business days of QE day. If they are received late, then a superannuation guarantee charge assessment can be issued by the ATO.

The next new concept is that super paid late will be tax deductible. This is a huge change and is most welcome by employers. General interest charge and late payment penalties are not tax deductible. 

The next new change affects higher income earners who take advantage of the maximum contribution base. The maximum contribution base is calculated on a salary of $250,000. It will be calculated annually going forward. You will have 30 days to apply for a shortfall exemption certificate prior to the start of the period.

The ATO can issue a shortfall exemption certificate with a retrospective start date. This new process could make life easier for high-income earners.

Contributions not received by the fund within seven business days but paid within 28 days and before a superannuation guarantee charge assessment issues, will reduce the SG shortfall.

Notional earnings are applied to the shortfall, an administrative uplift factor calculated at 60 per cent of the superannuation guarantee shortfall plus notional earnings. A choice loading can

also be applied. The notional earnings, the administrative uplift and

the choice loading will all be tax deductible. 

If you have a new employee, you have two-weeks to make their first contribution. This could be tricky as I notice when preparing payrolls that many new employees do not provide their tax file number and superannuation details in a timely manner.

The ATO will receive details of your super payments through single touch payroll so they will be aware of missing super promptly.

The small business superannuation clearing house is being phased out from July 1. Various funds have their own method of receiving payments and as we get closer to the starting date it will be clearer how you can facilitate your super payments.

All this change is a little confusing, so I recommend you start paying super with your wages as soon as possible so there is not an impost on cash flow and business administration.

If you need any information on payday super, wages, superannuation or taxation contact the expert team at Gail Freeman & Co Pty Ltd on 02 6295 2844, email [email protected] or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.

News all day, every day at CityNews.com.au.