Payroll & Superannuation

New from Xero: reprocess failed or returned auto super payments

BAS Agent's Blog, Payroll & Superannuation, Xero / By / / , , , / 2 minutes of reading

Xero users who use the payroll function will be pleased to hear that an update has been released whereby failed or returned super payments can now be reprocessed.

Failed Auto Super Payment

If a super payment has failed, the payment authoriser will receive an email notification, outlining the reason for the failure. The status of the payment will change from “pending processing” to “failed”. When this happens, the payment can be reprocessed as the batch will become available for selection in the “Add Super Payment” screen again. Details of the steps required to reprocess failed payments can be found in the above link.

Returned Auto Super Payments

As for failed payments, the authoriser will receive an email if a super payment is returned with information about which employees are affected. Xero can’t tell you why the payment was returned so you will have to contact the super fund affected to obtain those details.

In Xero, the payment status will change to either “partially returned” or “returned”, depending on how many employees are affected.

To find out how to reprocess returned auto super payments, go to the link above.

My Thoughts?

I think this update is an improvement overall, however, the following details from the above link about the timing of the status change to “failed”, have me a bit concerned:

‘This can take up to five business days, with further delays during peak processing times, such as at the end of a quarter. While waiting for the failure message, you can’t update the status of the batch manually.’

Given that the ATO states that “contributions are considered ‘paid’ when they are received by the super fund not when they are paid to the commercial clearing house”, the delays as described by Xero could trigger a Super Guarantee Charge requirement depending on the payment dates involved. This will adversely affect the employer and his/her cash flow, given the SGC increases the super liability overall. This seems a little unfair especially if the employer did pay the SG in a timely manner (or thought he/she did!).

I guess, the only remedy here is to ensure that SG is paid as early in the month as possible so that if any payments are returned or fail, they can be rectified well before the super payment cut-off dates. This issue will become null and void of course, when Payday Super begins (I hope!).

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Casual Employment Rules have Changed!

BAS Agent's Blog, Payroll & Superannuation / By / / , , , , / 3 minutes of reading

On Monday 26th August 2024, changes to casual employment laws came into effect.

The changes include a new definition of a casual employee and a new pathway for employees to convert from casual to permanent employment.

Please note employees who are casual before the 26th of August, will remain casual under the current definition unless they choose to transition to full-time or part-time (permanent) employment.

New Casual Definition

A person will be a casual employee if:

  • there isn’t a firm promise of ongoing work and
  • he/she is entitled to a casual loading or casual pay rate under an award, registered agreement or employment contract.

Employees who begin as casuals will remain as casuals until their employment status changes either through a conversion process or by accepting alternative employment under a different status.

Casual Conversion – Employee Choice Pathway

There will be a new pathway for eligible employees to change to full or part-time employment. This will replace the current rules for changing to permanent employment and will be known as the  “Employee Choice Pathway”.

Under the new rules, eligible casual employees can notify their employers in writing of their intention to change to permanent employment. Employers can only refuse the notice for certain reasons (see below).

Casual employees can apply to move to permanent employment if:

  • they have been employed for at least 6 months (12 months if a small business) and
  • they believe they are no longer casual employees.

Employers must discuss this potential change to employment with the casual employee before committing to any change. The details of the changes must be worked through via this discussion. Then, employers must respond in writing within 21 days either accepting the change or not accepting it.

There are only a few reasons why a request to move to permanent employment can be rejected. These include:

  • the employee still meets the definition of a casual employee
  • there are fair and reasonable operational grounds that would negatively impact the business. Read more here about this here.
  • the employer is bound by a recruitment or selection process required by law and accepting the request would mean he/she is no longer compliant.

The current casual conversion rules will continue to apply to employers and casuals employed before 26th August 2024 for a transitional period. See those details here.

Reminder! Casual Employment Information Statement

There is a new statement to hand to all casual employees when they begin work. It must also be provided after 12 months of employment (small business employers) and for other employers, after 6 and 12 months, and then after every 12 months of employment. Download the statement here.

For further details about the changes to casual employment rules, go to the Fair Work website.

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Why has my PAYG Withholding Cycle Changed?

BAS Agent's Blog, Payroll & Superannuation / By / / , / 2 minutes of reading

If you’re an employer, your PAYG withholding (PAYGWH) cycle might change depending on how much you withheld in the prior financial year. The ATO will advise you about this change in April each year via a written letter. The cycle change will occur on 1 July of the next financial year.

As a small withholder (small employer) you pay PAYGWH with GST and other taxes in your quarterly BAS. But, the ATO can switch your PAYGWH to monthly if, in the last financial year,

you withheld $25,001 to $1,000,000 from employee wages

These employers are called “medium withholders”.

If that’s you, you must lodge and pay a monthly Instalment Activity Statement (IAS) by the 21st of each month. For example, PAYGWH for July is due by August 21st.

If you withheld over $1 million last financial year, you’re a “large withholder”. 

Large employers have specific dates to pay PAYGWH and get special payment reference numbers (PRN). The ATO will provide you with these details. Remember, large withholders don’t report PAYGWH on their activity statement, but they should still match up their reported STP and paid amounts.

If the ATO changes your PAYGWH cycle, update your payroll software to meet the new deadlines.

If you think your PAYGWH for the next financial year will be below the thresholds mentioned above, you can ask to stay on your current PAYGWH cycle. You must do this within 14 days after getting the ATO’s letter about the cycle change. Complete this form and send it to the ATO (or your tax agent can help).

For more info, check out the ATO Annual Review of PAYG Withholding Cycles on the ATO website.

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Wage Theft Legislation is Coming! Review your Payroll Now!

BAS Agent's Blog, Payroll & Superannuation / By / / , , / 2 minutes of reading

On 1 January 2025, Wage Theft Legislation will be enacted. This legislation is part of the Federal Government’s “Closing Loopholes” laws which effectively change the Fair Work Act.

Wage Theft Legislation will make it a criminal offence to underpay wages deliberately. Penalties could be $7.825 million or more for a company and $1.565 million or more for an individual and/or 10 years in prison. The Fair Work Ombudsman will be responsible for investigating possible wage theft cases.

These are very hefty penalties indeed. No one wants to be at the pointy end of these new laws therefore, in my opinion, reviewing your payroll set-up now and ensuring it is completely compliant, would be a good idea. To that end, conducting a payroll audit is necessary.

How to Audit Your Payroll Set-up

A payroll audit includes a review of payroll practices, systems and outcomes, all underpinned by complex regulations that vary at the federal, state and territory levels. It looks at employee classifications, pay rates, entitlements, and record-keeping.

The Fair Work Ombudsman has provided a step-by-step guide to auditing your payroll. You can download it here. The guide assists in reviewing payroll records, assessing the findings and finally, providing solutions for any issues raised.

Further to the above guide, the Australian Payroll Association recommends taking these 5 steps to assist with the audit process:

  1. Engage a Specialist – a payroll specialist can review your current set-up and identify any gaps or areas of risk that require addressing.
  2. Educate your Team – make sure your team is across the new Wage Theft Legislation. Provide training and education in any areas of payroll legislation in which your team are lacking.
  3. Leverage Technology – Modern payroll systems help avoid non-compliance issues. If your payroll technology is outdated or not up to par with Australian requirements, consider upgrading to a system that automates calculations and processes for better compliance.
  4. Document Everything – Ensure all payroll processes are well-documented and records are meticulously kept to prove compliance, aid transparency, and defend your organisation in disputes.
  5. Regular Reviews – Once your payroll is fully compliant, ensure regular payroll audits are conducted to catch and correct any discrepancies before they create significant issues.

With the introduction of Wage Theft Legislation, employers are encouraged to be proactive and conduct a thorough payroll audit to ensure compliance. Doing this now, and making it a regular process going forward, will ensure that employers are well-placed to avoid becoming embroiled in criminal proceedings and potential sanctions.

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    Which of the Three Fair Work Information Statements do you need to give to your employees? One or all three?

    BAS Agent's Blog, Payroll & Superannuation / By / / , , , / 3 minutes of reading

    Once upon a time, there was only one Fair Work Information Statement (FWIS). But now there are three of them! As an employer, you need to know which one to give to your employees. This could be only one depending on your employment situation, or all three. But before we look at the three statements, let’s quickly revisit the background of the FWIS for those who may not be across it.

    The FWIS provides information to new employees about the conditions of their employment, including details about the National Employment Standards. The FWIS must be given to new employees before or as soon as they begin working for you.

    3 Fair Work Statements

    As mentioned above, there are now three statements. Let’s look at each one separately.

    1. The Fair Work Information Statement. This is the most well-known statement as it has been around for some time now. The FWIS has information on:

    • the National Employment Standards
    • right to request flexible working arrangements
    • modern awards
    • making agreements under the Fair Work Act 2009
    • individual flexibility arrangements
    • freedom of association and workplace rights (general protections)
    • termination of employment
    • right of entry
    • the role of the Fair Work Ombudsman and the Fair Work Commission.

    2. The Casual Employment Information Statement. The CEIS has information about:

    • the definition of a casual employee
    • when an employer has to offer casual conversion
    • when an employer doesn’t have to offer casual conversion
    • when a casual employee can request casual conversion
    • casual conversion entitlements of casual employees employed by small business employers
    • the role of the Fair Work Commission is to deal with disputes about casual conversion.

    Employers aren’t required to give casual employees the CEIS more than once in any given 12-month period (for example, if an employer employs a casual employee temporarily at different stages in one 12-month period, they only need to give them the CEIS once. However, it should be noted that large employers (15 or more employees) must give the CEIS to employees every 6 months. Still, small employers (15 or fewer employees) must provide the CEIS every 12 months on the anniversary of each employee’s start date.

    3. The Fixed Term Contract Information Statement. The FTCIS has information about:

    • what a fixed-term contract is
    • limitations on the use of fixed-term contracts
    • exceptions to the limitations
    • how to resolve disputes about fixed-term contract limitations and exceptions.

    How to Give these Statements to your Employees

    Fair Work states that you may provide these statements in a variety of ways:

    • in person
    • by mail
    • by email
    • by emailing a link to this page of their website
    • by emailing a link to a copy of the FWIS available on the employer’s intranet

    Depending on the employment status of your employees, you may need to provide the FWIS only. However, if you employ a mix of employees i.e. full-time, part-time, casual, and/or fixed-term contract, it may be necessary to provide all three statements as described above. Remember, providing the FWISs is not optional – it is compulsory. Failure to do so may incur penalties – see here.

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    Think you can get away with not paying your employees’ super? Think again!

    BAS Agent's Blog, Payroll & Superannuation, Single Touch Payroll / By / / , , , , , / 3 minutes of reading

    Employers intentionally not paying their employees’ super has always been a bugbear of mine. If you follow my Twitter (X) account, you may have seen the hashtag I use: “#notyourmoney“. I use this hashtag because I believe that employee superannuation is not your money and never will be and I want to enforce this concept. These irresponsible employers anger me. It is completely wrong to hire people and then fail to fulfill the contract you agreed upon, which includes paying their super. In my opinion, not paying super is equivalent to stealing.

    In the past, employers were able to get away with this unacceptable behavior because the Australian Taxation Office (ATO) only found out about it when employees reported them. At that point, the ATO would investigate, audit, and penalise these employers. This reactive approach has resulted in an estimated $2.5 billion shortfall in unpaid super. This is a truly disgraceful situation.

    But things are about to change…

    In the 2023-24 Federal Budget, it was announced that the ATO will receive $40.2 million for super compliance measures. This funding includes $27 million for data matching capabilities to identify and take action on cases of Superannuation Guarantee (SG) underpayment, as well as $13.2 million for consultation and co-design.

    So what does this mean? Who/what will the ATO be data matching with?

    Firstly, it is now widely known that the ATO receives payroll data from employers through Single Touch Payroll events (STP). This data includes the superannuation amounts owed to employees’ super funds. The ATO also receives information about employees’ super from the Australian Prudential Regulation Authority (APRA) through the Member Account Transaction Service (MATS). MATS is a reporting service used for more frequent and detailed reporting of member super contributions and transactions. The ATO utilises the information from both sources to identify potential non-compliant behaviour by employers.

    With increased funding from the budget, the ATO will intensify data-matching activities between STP and MATS. This shift from a reactive to a proactive approach means that the ATO will be able to initiate audits themselves instead of relying on employees to report non-compliance after the fact.

    It is important to note that this data-matching activity is not new. It has been ongoing since 2019, with the ATO reporting a 24% increase in investigations of super non-compliance. What is new is the improved data matching capabilities enabled by better technology and more comprehensive STP data.

    The ATO is now more focused than ever on addressing super non-compliance. They have the necessary tools and resources to conduct investigations and audits on a large scale.

    This makes me feel more positive about this problem. I sincerely hope the ATO succeeds in its efforts. I have a strong aversion to employers who think they can evade paying super. It is essentially stealing, a white-collar crime. Thanks to the ATO’s real-time monitoring, the likelihood of getting away with non-payment of super is rapidly decreasing. And that is a very good thing!

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    Upcoming Changes to Workplace Laws

    BAS Agent's Blog, Payroll & Superannuation / By / / , , , / 3 minutes of reading

    Fair Work often updates the rules regarding payroll and right now is no different! Several aspects of payroll have or will change in the very near future. Read below for the details.

    1. Small Business Employers Must Offer Paid & Domestic Violence Leave from 1st August 2023

    All employees in the Fair Work system, including part-time and casual employees, will soon have the right to 10 days of paid family and domestic violence leave within a 12-month period.

    This new entitlement will be available to employees of small business employers (employers with less than 15 employees on February 1, 2023) starting from August 1, 2023. Employees of non-small business employers have already been able to access this leave since February 1, 2023.

    Employees will receive the full 10 days of leave upfront, without needing to accumulate it over time. To help you understand and manage your new responsibilities, access the Fair Work fact sheet here. You can also find a summary of the details in our blog.

    2. Paid Parental Leave Scheme Changes

    From July 1, 2023, there will be some changes to the paid parental leave scheme. One of these changes is that the current 18 weeks of paid parental leave pay will be combined with the current 2 weeks of Dad and Partner Pay. This means that partnered couples and single parents will now be able to claim up to 20 weeks of pay. For more details go to this Fair Work page.

    3. Right to Superannuation in the National Employment Standards (NES)

    Starting January 1, 2024, the National Employment Standards (NES) will have a new provision that guarantees superannuation contributions for employees. This means that employees, employee organisations, and the Fair Work Ombudsman can make sure that employers pay the correct amount of superannuation or address any unpaid amounts under the Fair Work Act. 

    Employers are already required to contribute to superannuation for eligible employees according to existing laws. As long as employers meet their obligations under these laws, they will not be in violation of the NES provision.

    The Australian Taxation Office (ATO) will continue to oversee employer compliance with superannuation guarantee laws.

    4. Changes to Unpaid Parental Leave

    Starting July 1, 2023, the Fair Work Act will bring in more flexibility for employees who take unpaid parental leave. This change is in line with updates to the Paid Parental Leave scheme. Now, employees can take up to 100 days of their 12-month leave entitlement flexibly within 24 months after their child is born or placed with them. This is a significant increase from the previous allowance of 30 days.

    Pregnant employees will also have the choice to access their flexible unpaid parental leave up to 6 weeks before their expected due date.

    Furthermore, employees will no longer be limited to taking a maximum of 8 weeks of unpaid parental leave at the same time as their spouse or de facto partner. Both parents can now take up to 12 months of unpaid parental leave within 24 months of their child’s birth or placement, and they can even apply for a 12-month extension beyond the initial leave period.

    5. Authorised Employee Deductions

    Starting on December 30, 2023, employees will be able to authorise recurring salary deductions from their employers, even if the deduction amounts change. Before, they had to provide a new written authorisation every time the deduction amount changed. With the new law, employees can give a single written authorisation that allows their employer to deduct varying amounts from their salary. The employee can still withdraw this authorisation in writing at any time. It’s worth noting that deductions for specific amounts can still be authorised if they mainly benefit the employee and are provided in writing.

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    ATO STP Filing Error Codes – what do they mean and how do you fix them?

    BAS Agent's Blog, Payroll & Superannuation, Single Touch Payroll / By / / , , , / 2 minutes of reading

    At the time of writing this blog, most employers are actively submitting payroll events via Single Touch Payroll (STP). STP has been around since July 2018 and has now evolved into STP Phase 2. Most software companies used by small businesses to file STP reports, are now STP 2-enabled, so many employers will be reporting payroll via this mode.

    While the process of filing or reporting payroll via STP is fairly straightforward, there can be occasions where things may go wrong. This is particularly true now, given the setup for STP Phase 2 is quite involved and onerous. Should the setup for STP 2 not be done correctly, this will most certainly lead to filing errors.

    If a pay event is returned after filing it, the ATO will provide an error code that describes the issue. While these codes are useful in terms of helping the lodger understand what is wrong, they do not assist in providing details about how to fix the error within the software you may be using.  Luckily, there is help available from each of the main software providers. 

    Here is a list of the software providers and the links to their help pages, should your filing return an ATO error code:

    MYOB

    QBO

    Xero

    Also, from Reckon, here is a list of the most common submission errors via the ATO. Each error code is explained and a reason behind the error is given. This can be a helpful starting point when trying to rectify any STP errors.

    I hope this blog has been helpful to you if you are an employer or bookkeeper. It would be a good idea to add the link for your chosen software to your favourites list for future access, should you encounter an STP filing error.

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    What NOT to include in payslips for paid Family & Domestic Violence Leave

    BAS Agent's Blog, Payroll & Superannuation / By / / , , , / 2 minutes of reading

    Here is a reminder that access to paid family and domestic violence leave for employees of non-small business employers (employers with 15 or more employees) began on 1st February 2023 (and 1st August 2023 for small business employers). The leave is for 10 days for any full, part-time or casual employees and is not pro-rated. Read more about this new leave type in our previous blog here.

    Something important to call out in relation to paying this leave is the information that is prohibited from being included on the employee’s payslip. 

    Employers must not include:

    • A statement that an amount paid to an employee is a payment in respect of the employee’s entitlement to paid family and domestic violence leave
    • A statement that a period of leave taken by the employee has been taken as a period of paid family and domestic violence leave
    • The balance of an employee’s entitlement to paid family and domestic violence leave

    The reason for not including this information is that if a perpetrator of violence gains access to the employee’s payslip and sees that this type of leave has been taken, this may pose a significant risk to the employee.

    When setting up this type of leave in the payroll system, it is important to give it a generic name that does not reference the words “Family and Domestic Violence Leave”. In fact, not calling it “leave” at all is best practice. Given the payment is for an employee’s full rate of pay for the hours he/she would have worked if they weren’t on leave, then simply producing a payslip that shows “gross” pay, is recommended. In the back end of the payroll setup, details can be added noting what the payments actually are, and leave entitlement balances can be recorded but not included on the payslip (simply uncheck that box in the employee’s payroll setup (software-dependent)). 

    Precluding statements about this type of leave on an affected employee’s payslip is now part of the Fair Work Legislation Amendment Regulations 2022. Employers must take note and ensure that their payroll systems are set up correctly to reflect these amendments. Failing to do so may/will put affected employees at significant risk. If you are an employer, make sure you action this now (or by August 2023 if you are a small employer).

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    A Better Employee Onboarding Experience is coming…

    BAS Agent's Blog, Payroll & Superannuation / By / / , , , , , , / 3 minutes of reading

    The way new employees are onboarded is changing. Currently, employers ask new employees to provide a Tax File Number Declaration form, a Super Choice form, and also other personal information required in order to set them up in their payroll systems.

    While this process is fairly straightforward, often employers find themselves chasing new employees for the data and at times, needing to confirm details that may or may not be correct (usually not correct in my experience!). This process can therefore be very time-consuming and tedious for employers, not to mention that the room for error is very high. It is also not a great deal of fun for new employees either!

    Enter the “New Employment Form”.

    This is an all-in-one onboarding form that new employees access from their myGov accounts. The form will provide both the ATO and the employer with all of the information required to set up new employees in one easy action.

    Importantly, this form will replace several forms. These include the Tax File Number Declaration, the Super Choice form, the Variation to Tax Withholding Declaration, the Variation to Medicare Levy Declaration, etc. Employees can also use it to update their tax circumstances, for example, if:

    • their residency status has changed
    • they no longer have a government study and training loan
    • they are claiming the tax-free threshold from a different employer.

    This change to employee onboarding will reduce the administrative burden for employers and increase process efficiencies. It will also reduce data recording errors which are very common when obtaining personal details from new staff members.

    How the new onboarding process works

    Firstly, the employer needs to provide his/her ABN to the new employees.

    To access the new form, employees will require a myGov account linked to the ATO. Once signed in they will:

    • access ATO online services
    • go to the ‘Employment’ menu
    • select ‘New employment’ and
    • complete the form then
    • submit the form

    After submitting the form, the details will be sent straight to the ATO removing the requirement for employers to send completed TFN Declarations separately. It’s important to note that the changes to Single Touch Payroll Phase 2 have also made this possible i.e. every time a pay run is reported via STP 2, employees’ tax information is sent to the ATO. Although this step can now be removed from the onboarding process, employers must continue to receive completed TFN Declarations from new employees and retain them as part of the employees’ records.

    Once the form is submitted, the employee will print the form and give it to the employer who will use the information to set up the employee in the payroll system.

    It’s important to note that the downloadable version of the TFN declaration form will be removed by the end of 2022.

     The ATO is therefore requiring new employees to be onboarded using the new above process going forward. This is a new process that both employers and employees need to understand and adopt. It has benefits in terms of efficiency and data security and in my opinion, is the way forward.

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