Superannuation Review

Getting Super Right …

Getting employee superannuation right is important because the penalties for getting it wrong are costly for the business!

• The ATO charge 10% interest on the outstanding Super amount + Admin fees
• Penalties can include a fine of $10,500 or 12 months imprisonment for the employer
• Directors are personally liable for Super Guarantee Charge obligations

So, how do you get it right?

A thorough review will help to determine whether superannuation is being calculated and paid compliantly. We’ve broken the review process down into 5 steps.

Step 1 – Check Settings

Superannuation is paid on Ordinary Time Earnings. Have you checked what Ordinary Time Earnings are lately? It’s critical  that the settings in your payroll system recognise what is and isn’t Ordinary Time Earnings.

The ATO has a great resource for this.

https://www.ato.gov.au/business/super-for-employers/paying-super-contributions/how-much-super-to-pay/list-of-payments-that-are-ordinary-time-earnings/

When you have a clear understanding of Ordinary Time Earnings, check the superannuation settings in your payroll system to ensure that Superannuation Guarantee is accruing correctly.

Step 2 – Superannuation Expense Review

It’s a good idea to check the super accrued for each employee is accurate. We recommend that you do a year-to-date review during June to pick up errors in time to do adjustments before June 30. A thorough review would include:

• Reconciling the Superannuation Expense total from the Payroll report to the value in the superannuation expense account(s)
• Checking the balance of the Superannuation Payable account is the same as the amount owing for the current unpaid period
• Calculating 9.5% of Ordinary Time Earnings for each employee and comparing to the employee superannuation expense in the payroll report. This will be straightforward for simple payroll systems, and more time consuming for businesses with several casual staff who don’t always get paid more than the $450 threshold. If necessary, reduce the time frame to the current or last month to check the super calculated in the pay runs and the superannuation settings are correct

Step 3 – Fix any errors

Always fix any errors through the payroll system. Any changes to superannuation must go through Single Touch Reporting so don’t be tempted to enter journals!

If you need help to process corrections, speak to your software specialist. They’ll help you get it right and save you time.

Step 4 – Pay Super to Get the Tax Deduction

Did you know that your business will only get a tax deduction for the superannuation you have paid by June 30?

If you’re looking to increase expenses as part of tax planning, consider paying the June super by June 21st to get the tax deduction in the current financial year.

If the business is paying superannuation late, it’s a good idea to check with the accountant or BAS Agent before it’s paid. Generally, the ATO require late payments to go through the Superannuation Guarantee Charge process.

Step 5 – Update Super Settings for Next Year

Finally, check whether there are any changes to superannuation for the next payroll year.

Any wages paid from 1 July 2021 will attract 10% super instead of 9.5%

Once you have reconciled your payroll system & sent the final STP report you should update your superannuation accrual rate to 10%.

Good luck with your review, and if you need help, please get in touch at lisa@optimizeag.com.au.