By Peter Stulcbauer
For the first time in over 10 years, the Australian Government has increased the superannuation guarantee contribution (SGC) rate to 9.25{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} from 1 July 2013. The rate will rise incrementally each year until it reaches 12{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09}.
To support this change, SAP has introduced a number of changes to allow companies to perform the required payroll calculations.
What calculations should occur when employee superable salary changes cross between the old and new rates?
When an employee has had an increase for June that took effect after 1 July, the increased delta amount must be brought forward into the current period and calculated at the rate applicable in the current period.
Take an employee whose superable salary increased in June but was not addressed until after 1 July, the increased amount must be brought forward to July and calculated at 9.25{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09}, rather than the original rate of 9.00{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} that was applicable in June when the increased salary was earned.
Retrospective increase could occur when there is a backdated salary increase, a bonus payment, originally unpaid leave is removed or changed to paid leave, or there is a termination with additional payments.
When the employee’s salary has decreased in June but it was not recognised until after 1 July, the decreased delta amount must remain in the period of adjustment and the superannuation rate of the impacted period applied. For example, an employee whose portion of salary subject to superannuation decreased in June but was not addressed until after 1 July will require the decreased amount to remain in the original period and the decrease to be calculated at 9.00{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} and not the new rate of 9.25{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} in the period the payroll is being run. Possible examples of retrospective decreases are an allowance that has been paid in error, late processing of unpaid leave, or a termination mid-June causing the salary to be decreased.
The above scenarios are based on information provided by the Australian Tax Office (ATO) and payroll industry specialists.
The SAP note 1852639 (Legal changes 2013 Super guarantee Code Corrections) user manual suggests that any increases or decrease deltas in a retro period will have the delta bought forward to the current period. Retrospective increases or decreases pre-1 July will therefore be brought forward to post-1 July and the current SGC rate of 9.25{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} applied. For retrospective terminations, the delta remains in the retrospective period and thus the original rate is applied.
Bringing forward negative deltas, i.e. decrease in the superable salary, isn’t in the employee’s interest. The employee will find that their superannuation has been reduced not at 9{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} but at 9.25{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09}. It is easier to demonstrate with an example.
From the simple example above, it can be seen that the employee stands to lose $22.50 of their superannuation.
What do you need to do now?
If your organisation has applied the superannuation note changes issued, you should discuss the note changes with your tax and superannuation advisors. Based on their advice you should review any employees who have been terminated or have had their superable salary decreased in June.
Businesses need to be aware of any adjustments being made to their employees’ superannuation and ensure that it is in line with the Federal Government’s intentions with regard to the superannuation calculations for retrospective adjustments. Failing to pay the correct superannuation for the employees can result in the business being subjected to the Superannuation Guarantee Charge.
Organisations have until 28 October to make any necessary adjustments to their employees’ superannuation to avoid the Superannuation Guarantee Charge.
Peter Stulcbauer is an experienced payroll consultant who has been
assisting clients in SAP for over 15 years, providing consulting and
advisory services from blueprint through to go live and beyond,
specialising in all aspects of configuration on Payroll, Time Management
and HR modules. His company, Martarna, provides freelance services at
client
sites around Australia. He can be contacted at peter@martarna.com.au or
by phone on: Perth: 08 9467 4997 / Brisbane: 07 3503 6733 / Sydney: 02 8022 8411 / Melbourne: 03 9948 4033.
