While it may be lacking the fireworks and champagne of New Year’s Eve, come 1 July the new financial year ushers in fresh opportunities for Australia’s small businesses. Along with the new calendar, there are often regulatory changes for you to manage or implement. And this year is no different, with updates coming to payroll in FY23.
Starting from 1 July 2022, there are a number of government requirements that will impact how you manage payroll (including superannuation) for employees. So, what do you need to know to ensure compliance? Let’s take a closer look.
This article is courtesy of our friends at Xero.
What changes are coming?
This new financial year, the ATO is rolling out updates to superannuation and the annual indexation of Study or Training Loan support – think HECS or HELP debts. Here are the three key changes you should be across:
Removal of the $450 superannuation contributions cap
Currently, you don’t have to pay superannuation for most employees who make less than $450 per month. From financial year 2022/23, however, this cap is being removed by the federal government – meaning you’ll need to pay super for all employees over the age of 18, no matter how much they worked in a month.
It’s important to note too that from 1 July 2022, super will be payable to employees under 18 if they work more than 30 hours per week regardless of how much they earn.
Increase of the Superannuation Guarantee to 10.5%
From 1 July 2022, the Superannuation Guarantee – the amount of super you have to pay an employee – increases from 10 to 10.5% of their eligible earnings (ordinary time earnings).
The Superannuation Guarantee is legislated to increase by 0.5% each year until it reaches 12% in 2025.
Update to the indexation of Study or Training Loan Supports (STSL)
Each year, the indexation rate applied to these loans changes based on the consumer price index (CPI). Indexation maintains the real value of the loan by adjusting it in line with shifts in the cost of living and affects the part of an accumulated study and training loan that has remained unpaid for more than 11 months.
This year’s indexation is set at 3.9%.
The most common loans this impacts include:
- Higher Education Loan Program (HELP – formerly known as HECS)
- VET Student Loan (VSL)
- Student Financial Supplement Scheme (SFSS)
- Student Start-up Loan (SSL)
- ABSTUDY Student Start-up Loan (ABSTUDY SSL)
- Trade Support Loan (TSL)
So, what do these payroll changes mean for my business?
How much these changes affect you will depend on the unique nature of your business and employees. However, the updates to superannuation likely mean you’ll need to set aside a little more each quarter, accounting for an extra 0.5% on ordinary earnings for those employees who regularly receive super and to start paying 10.5% superannuation for those who were previously under the $450 threshold.
You’ll also need to confirm you have the correct super information on file for all employees so payments are made to the correct fund and don’t bounce back. You need to offer all eligible employees a choice of a super fund, via a choice form.Remember, last year’s Your Future Your Super (YFYS) reforms mean you may have to check for an employee’s ‘stapled’ super account if they haven’t provide these details, rather than setting them up in your default fund. Here is a handy reference guide for more information on stapled super funds.
While the indexation of loans likely won’t have any direct impact on you, it will for your employees who may ask questions about their compulsory repayments.
Will I need to do anything in Xero?
The good news is that other than making sure all your employees’ super details are up to date, there’s nothing else you need to do in Xero. From 1 July, the removal of the $450 threshold will be automatically applied to the total super liability on selecting pay-runs to facilitate payments.
If you have selected the statutory rate as your calculation option for super payments, Xero will automatically apply 10.5% for pay periods from July 1. It’s a good idea to make sure your employee details and super information is up to date in Xero before the end of the financial year.
Is there anything else I should be aware of for payroll this EOFY?
The end of the financial year sees a lot of people process super based on advice from advisors. If your tax advisor has advised you to pay accrued Superannuation Guarantee before June 30, it is recommended you make this payment by Tuesday 14th June 2022, 2pm AEST to ensure that payments are fully processed by the receiving fund, before 30 June.
For more information on closing out payroll at year end, please speak to your Accountant or Bookkeeper.
What about Single Touch Payroll (STP) – last year there were changes announced, is there anything for FY 2022/23?
Whilst we’re hard at work preparing for the rollout of STP Phase 2, there are no changes to the standard STP finalisation process in Xero this year.
We are rolling out the STP Phase 2 changes in three stages to help you make the transition ahead of our deferral deadline later this year.
There’s plenty more to come, so keep an eye out for further updates from us throughout the year.
Where can I find more information?
For more details on your super obligations as an employer, visit the ATO and be sure to speak to your accountant or bookkeeper for specific advice.
Shared with gratitude from Xero.