Superannuation is income that is put into a separate account while you’re employed. The concept behind superannuation is that you will have saved enough money throughout your working life to be able to have a form of regular pre-made ‘income’ to use when retired. Currently, the average Australian can expect around 20 years of retirement and needs to save accordingly.
When you’re working, your employer is legally required to pay a ‘superannuation contribution’ into your selected superannuation fund. 9.5% of your income – including any bonuses, loadings, or commissions – must be paid into your super fund. This is called a ‘Super Guarantee’ and employers are legally bound to pay this. Employees can choose to have a larger percentage of their income transferred to their super if they wish. To ensure you have enough money to live when you retire, the Government places restrictions on when you can access these bundled earnings.
Single Touch Payroll does not directly affect the amount of super paid, or how you pay it. What Single Touch Payroll reporting does do, however, is notify the ATO of how much super you contributed to the employee’s chosen fund each pay event.
This means that the ATO will have real-time access to the superannuation contributions made by your business.
One of the key reasons that Single Touch Payroll is being introduced is to stop employers from paying super non-compliantly. In late 2017, it was revealed by ATO research that Australian employers had underpaid more than $17billion in superannuation contributions over 8 years. As the 9.5% superannuation contributions are law, this figure prompted the ATO to take stronger actions against those businesses that are deliberately paying less than what is required.
Many businesses were getting away with superannuation underpayment using a loophole – when employees salary sacrificed more earnings into their super, the employer lowered their contributions to less than the required 9.5%. As of July 1st, 2018, this loophole will be closed as each superannuation contribution is visible to the ATO in real time.
Businesses that are found to not be contributing the full 9.5% superannuation contribution will be severely penalised. The Tax Commissioner will now be allowed to seek court-order penalties for those employers who intentionally, or repeatedly, do not pay the correct super. The latest Federal Budget also awarded the ATO an additional $20.9 million to more swiftly penalise any non-compliant employees.
The easiest way to ensure your superannuation payments are compliant is to implement a payroll software that is compliant with all the industry awards. These systems automatically calculate the amount owed to superannuation at each pay event, so you can have peace of mind that the ATO won’t see you make a dodgy payment. To find out more about compliant software, please get in contact with Roubler today.