New ATO payroll and superannuation reporting obligations came into effect from 1 July 2009 for all employers.
As an HR or finance professional looking after employee payroll, are you across the new ATO business reporting obligations in relation to superannuation? Can you advise your staff on the impacts of these changes on their taxable income?
Even if you think you are aware of the additional ATO requirements, are you aware there are processes you can implement to assist in streamlining compliance?
The Federal Government recently passed legislation relating to Reportable Employer Superannuation Contributions (RESC). With effect from 1 July 2009, amounts contributed by employers on behalf of employees are to be reported on their annual Payment Summaries.
Similarly, individuals that is, your employees, must include RESCs figures on their annual tax returns. This is because RESCs will be included in income tests for some welfare payments, tax benefits and tax obligations.
It is important to note that there is no change to the Payment Summaries for the current financial year (to be issued to employees before 14 August 2009). However, any staff departing the organisation from 1 July will require the new Payment Summaries containing the new RESC information.
This new format Payment Summary will need to be provided within 14 days of the employee's departure.
For HR managers who are often responsible for managing or overseeing payroll systems this means you will now need to know what super contributions employees are making, regardless of whether they are voluntary or compulsory so they can be recorded on payment summaries.
This is a new and additional compliance requirement for businesses that are already faced with high administrative burdens managing end of financial year responsibilities and other new FY10 obligations including revised tax tables.
With the HR role constantly expanding to include functions like supporting the overall growth of the organisation, productivity improvement, and employee relations, it is vital you prepare for the new reportable superannuation contribution changes so are compliant from 1 July 2009.
There are several steps you should implement to ensure compliance with RESC.
- Organisations using payroll software should ensure it is upgraded so all Payment Summaries automatically generated, for the period post 1 July, include super amounts and also new tax rates
- For those using manual Payment Summaries, ensure you contact the ATO for the new 'manual payment summaries' guidelines. Employers need to have these Payment Summaries on hand as departing employees can request Payment Summaries be provided within 14 days of departure. It is anticipated these Payment Summaries will be available from the ATO early in the next financial year
- With many businesses experiencing redundancies in the current economic climate, it's important you review restructure plans to ensure RESC compliance (especially providing Payment Summaries which includes RESC data)
- Ensure your systems are in place to record and calculate the Superannuation and Income Tax information required on an employee's Payment Summary. This refers to both software systems and manual payment summaries
- Ensure your HR and payroll team know what is defined as "reportable employer superannuation contributions" (so your Payment Summaries are compliant and you can advise employees accurately)
We recommend you seek advice from your accountant or the ATO website regarding definitions and requirements for compliance.
However, in summary, under the changes, a person's 'total income' for tax and superannuation purposes will need to include their 'reportable employer superannuation contributions'. This figure will also need to be detailed on their annual Payment Summary.
Reportable employer superannuation contributions will generally mean the amount of superannuation contributions made by an employer for an employee that exceeds what the employer is required to contribute under superannuation guarantee or industrial law.
For further information on your reporting obligations and how to manage them you should consult your accountant or visit the ATO website.
About the author
Craig Osborne is the managing director for Sage MicrOpay