Removing the $450 per month threshold for superannuation guarantee eligibility IS NOW Law

07 Mar

Employers Beware! The Australian Government has passed law to remove the $450 per month threshold to expand coverage of super guarantee to eligible employees regardless of their monthly pay, effective from 01 July 2022.

What has changed?

Prior to the change, generally, if you pay an employee less than $450 in a calendar month in wage or salary, you do not have to pay super guarantee for them.

From 01 July 2022, employers will be required to make super guarantee contributions to their eligible employee’s super fund regardless of how much the employee is paid.

How is this change affecting small businesses?

Unless prepared well ahead, small business could face the increase of administration burden and compliance costs.

For example, a café owner tries out a new employee and agrees to pay them $100 for a four-hour shift. After July the owner would need to pay $10.5 in superannuation. If they don’t get the super fund details right, the owner may need to spend hours requesting super fund information from the ATO. If they don’t make the superannuation payment on time, the owner may need to prepare a Super Guarantee Charges statement. It could end up costing the business additional hundreds of dollars.

Business owners should also consider Superannuation Guarantee will increase from 10% to 10.5% from 01 July 2022. This press further on the business’s cash flow and eats in the business profit.

Cloud8 Recommendations:

  1. Business owners need to evaluate their business plans and cash flow projections. Contact Cloud8 today for an obligation free appointment to discuss your business plan and cash flow or request a free copy of Cloud8 Cashflow Instant Assessment.
  2. File your final pay run of 2022 Financial Year before 30 June 2022 to use the old rules. And consider make superannuation payments before 30 June 2022 to claim the tax deduction. Further, if you are planning to give employees a bonus, also do it before 30 June 2022. These simple steps will save business thousands of dollars or more.
  3. Ensure your payroll systems have been updated for super payments made after 01 July 2022.

Using Xero as example, go to ‘employees’, then click on the name of an employee. This brings up employee’s details. Click on ‘Pay Template’ tab.

Click ‘Add Superannuation Line’ or edit an existing line, choose ‘Statutory Rate’ for Superannuation calculation, and enter ‘0’ in the box below ‘Minimum Monthly Earnings’.

This will update the Superannuation Guarantee rate, and remove the $450 per month threshold for superannuation guarantee eligibility in your Xero payroll.

Let’s tailor the right solution for your business