Payroll – End of Financial Year checklist and hot topics
As you navigate the end of financial year STP payroll processing requirements, we have prepared some HR finalisation essentials for year end. We have also detailed some hot topics as we head into the 2022/2023 year, including the Superannuation Guarantee changes, minimum wage increase, and STP end of year finalisation.
Superannuation Guarantee Changes
From the first full pay after 1 July 2022 the minimum Superannuation Guarantee amount increases to 10.5% (up from 10%). This amount will continue to rise by 0.5% each year until 12% is reached in 2025. In addition, Superannuation Guarantee will apply from the first dollar ($1) that an employee earns with the abolishment of the minimum monthly income threshold of $450 on 1 July 2022.
Businesses who pay their staff a wage PLUS superannuation will need to ensure these changes are picked up during payroll processing. Those who set up salaries as an all–inclusive package will need to determine if the increase is either added or absorbed.
To ADD – To add the 0.5% to an employee package, divide their current salary package by 1.10 and then multiply it by 1.105.
To ABSORB – To absorb the increase within existing salary packages you should firstly check that the employee is paid above minimum pay rates and that the resulting salary (package less 10.5% does not dip below minimum award rates).
If you decide to absorb the increase and not change the salary package level, your staff will notice a 0.5% reduction in their take home salary. This should be discussed with staff in advance considering the potential impact on their salary (which most will see as a pay cut) and also on morale and workplace culture.
Remember to document any change and check the set up within your payroll system. It’s also a good idea to run a test pay to confirm superannuation it is being picked up correctly on the appropriate payroll codes.
Minimum Wage Increase
The Annual Wage Review has just been completed by the Fair Work Commission. It has been announced that the national minimum wage will increase by 5.2%.
In addition, modern award minimum wages will rise by 4.6% or $40 per week. This increase will come into effect to the majority of modern awards on the first full pay period after 1 July 2022. Awards in the aviation, tourism and hospitality sectors will implement the change from 1 October 2022.
- The National Minimum wage for Award/Agreement free employees is $812.60 per week or $21.38 per hour.
- Award employees earning more than $869.60 per week will get a 4.6% increase.
- Award employees earning less than 869.60 per week will get a $40 increase.
The above amounts are based on the rates for employees for ordinary working hours up to 38 hours per week.
Remember that some Awards contain penalties and allowances that are based on a percentage of an Award Classification Level. These penalties and allowances will also increase.
Reminder – even if you have set your salary and wage structure to pay employees above the Award rates – they may be still deemed to be Award Employees. Your contracts must clearly state what components of the Award the salary provided to them covers.
The FairWork Website provides some great online tools for this, alternatively please contact our office to discuss how we can assist.
Single Touch Payroll (STP) End of Year Finalisation
Since 1 July 2021, all employers have been reporting payroll obligations electronically (unless they have an exemption). This means that you are no longer required to provide employees with PAYG payment summaries (pink forms).
The ATO requires STP data to be finalised by 14 July 2022, however employers can apply for an extended due date to make their finalisation declaration. Once completed, employees are able to view their “Tax ready” income statements via their myGov account and commence preparing their personal 2022 income tax returns.
STP Phase 2
From 1 January 2022, STP moved into Phase 2 reporting which expanded on the employee information required to be reported by employers to the ATO.
Businesses using software Xero, MYOB or Reckon have a deferral until 1 January 2023 while their software is being updated to be STP Phase 2 ready.
Key changes include:
- The most up to date employment and taxation information (including employment basis and reason for an employee’s termination) will now be submitted in STP reports, meaning:
- Tax file number declaration forms completed by employees will no longer need to be sent to the ATO
- Employee separation certifications will no longer need to be produced
- Reporting of different payment types previously aggregated in “Gross payments” (such as salary sacrifice amounts and most allowances)
The start of the 2023 payroll year provides the opportunity to familiarise with the new features of your payroll software and start changing your onboarding process to take these changes into account.
While there will be no change to STP reports until Phase 2 is turned on, keeping your payroll records complete with the information requirements will help to minimise issues in 2023 end of year finalisation.
Unsure how to progress? Use our handy Single Touch Payroll Checklist
We have prepared a handy STP checklist to assist with this process. Please contact us for your copy.