Understanding Your Superannuation Obligations Setting up Super in MYOB Paying Superannuation... 9

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1 Managing Employee Superannuation using MYOB software... 2 Understanding Your Superannuation Obligations... 4 How does it all work?... 4 What about the increase in super from 1st July 2013? Do I need to double-check what super is due under my employees award or agreement?... 5 Can my employees choose their own fund?... 5 A colleague mentioned I need to pay super by June 30. Isn t the deadline July 28?... 6 What s the Superannuation Guarantee Charge?... 6 Setting up Super in MYOB... 6 How do I set up the basic calculation for super?... 7 How do I set up a list of employee funds?... 8 Which wages categories attract super and which ones don t? Are any employees not entitled to super?... 9 Paying Superannuation How can I see how much super is due? How do I record my superannuation payment? How can I see if I ve missed paying superannuation for an employee? How do I record super payments using M-Powered services? How do I record payments for business owners who pay super in lump sums? What if I don t have my own employer fund? What s the Clearing House service all about? How do I get super to print on employee pay slips? What s the story with the new data and e-commerce standard? Troubleshooting Superannuation Why isn t super coming up on this paycheque? Why is super showing as more than 9.25 per cent? How do I record superannuation adjustments? What is M-Powered Super all about? Reportable Super Contributions (RESC) How do I set up MYOB to deal with RESC? How do I set up salary sacrifice super? We pay all employees more than 9.25 per cent. What s the deal with this? What s the difference between salary sacrifice and when an employee chooses to pay additional super? How does salary sacrifice affect the SGC charge of 9.25 per cent? How do I show salary sacrifice super on payment summaries? An employee wants to pay additional super. How do I set this up? What about government co-contributions for low-income earners? Quirky Situations How do I calculate superannuation on subcontractor payments? The award specifies a minimum amount of super per pay. What next? How do I deal with tiered superannuation rates? What if an employee exceeds the contribution limits for the quarter? Getting Super to Balance How do I check that super balances every time? What if my Superannuation Payable account doesn t balance? I ve found out why Superannuation Payable doesn t balance. Now how do I fix it? Can I reconcile super in the same way as I reconcile my bank account? Other Publications MYOB Software for Dummies -the Simple MYOB Guide for Everyone Making the Most of MYOB Software -- The Comprehensive MYOB Guide Bookkeeping For Dummies the Comprehensive Guide Small Business For Dummies and Business Plans For Dummies Veechi Curtis Managing Employee Superannuation with MYOB Software 1

2 Managing Employee Superannuation using MYOB software by Veechi Curtis 2 Managing Employee Superannuation with MYOB Software Veechi Curtis

3 Managing Employee Super using MYOB Understanding super and how it works Paying employee super who to pay, when and how much Troubleshooting super Setting up Reportable Super Contributions (RESC) Working with M-Powered super Understanding salary sacrifice super Catering for quirky situations Making sure your super account balances This e-book explains how to use MYOB software to manage your super obligations as an employer. If you re new to the game of managing payroll, you may well think to yourself Super s easy to manage. Just calculate 9.25 per cent of gross pay, and send that to the government every couple of months. Think again. This is Australia, after all. Super is 9.25 per cent, but you don t pay it on all kinds of wages and nor you do you pay it to all employees. There are thresholds, exclusions, upper limits and much more. Similarly, different employees have different arrangements. Some may want to pay extra super each week, some may negotiate salary sacrifice arrangements with super, and most employees will probably want to choose their own fund. Your job is to cater for all these needs, and stay within the law at the same time. Oh yes, and just when you thought you had the whole deal down cold, along comes the government with a new category of super called Reportable Super Contributions (RESC). This document explains everything you need to know about RESC and how, sadly, this new phenomenon isn t set to change your life, just yet. Veechi Curtis Managing Employee Superannuation with MYOB Software 3

4 Understanding Your Superannuation Obligations There are a few tricks to getting super right. Not only do you have to figure out how much you have to pay, you have to remember when to pay and where to send the money. The next few questions cover these basics, and a bit more besides. How does it all work? The superannuation guarantee charge is a flat 9.25 per cent that applies to the wages of almost all employees and almost all kinds of wages paid. So for example, if you pay an employee $500 per week in gross wages, you have to pay an additional $46.25 per week (that s $500 multiplied by 9.25 per cent) into a superannuation fund on the employee s behalf. If you re new to being an employer, here s a quick summary of what you need to do to get started: 1. Figure out whether you need to pay superannuation at all. If you have any employees aged 18 and over who earn more than $450 per month (before tax), even if they only go over this threshold a couple of months a year, then you have to pay super. You may also have to pay superannuation for employees under the age of 18 if they work more than 30 hours per week. 2. Double-check your award for any differences in super calculation methods. A handful of awards have weird differences when it comes to super, such as having to pay five per cent if an employee earns between $350 and $450 per month, going up to 9.25 per cent once you hit the $450 threshold. 3. Figure out whether Super Choice legislation applies to your workplace, or not. With Super Choice legislation, most employees are entitled to choose their own superannuation fund. As an employer, you need to provide eligible employees with a Standard choice form within 28 days of them starting work. (For more info regarding Super Choice, see Can my employees choose their own fund? later in this document.) 4. Decide whether you need to join an employer fund and if you do, then sign up. If you have an employee who doesn t belong to a fund already, or if an employee doesn t complete their Super Choice form, then you need to send their superannuation to your default employer fund. Joining a super fund as an employer is usually fairly straightforward, but you may want to ask your industry association or accountant to recommend a reliable and efficient fund. 5. Pay superannuation by the 28th day after the end of each quarter. Unless a particular industrial award or superannuation fund stipulates that you must pay every month, the deadlines for paying super are the October 28, January 28, April 28 and July 28. However, you can send off superannuation payments more frequently if preferred. For more details regarding superannuation, call the Tax Office Superannuation Helpline on or download a copy of Super - what employers need to know (NAT 71038) from the ATO website. 4 Managing Employee Superannuation with MYOB Software Veechi Curtis

5 What about the increase in super from 1st July 2013? Good question. The minimum rate for super goes up from 9% to 9.25% from 1/7/13 (and increases to 9.5% on 1/7/14). If you haven t done so already, here s the procedure for changing the rate: 1. Finish processing your pays for 30 June 2013, and finalise your payroll reports, including payment summaries. 2. When you re ready, start a new payroll year in MYOB. (If you re unsure about this process, download our ebook called Starting a New Year Using MYOB.) 3. Go to Payroll Categories, click the Superannuation tab, and double-click your Superannuation Guarantee category. (If you re using MYOB Premier, you ll need to get everybody else to log out first, before you can do this.) 4. Change 9.00% to 9.25% as the Calculation Basis and click OK. 5. Still in Payroll Categories, check all other superannuation categories which have Superannuation Guarantee (expense) listed as the type. (You may not have any other categories of this type, but it s always worth checking.) Any super category that has Superannuation Guarantee (expense) as the type needs the rate changing to 9.25%. If it s mid-july by the time you re reading this, and you ve only just realised the rate has changed, don t worry. Change the percentage in your superannuation payroll categories now. Then, when you go to process your next pay (so long as you still have at least one more pay period in July) MYOB will automatically recalculate super, and adjust the calculation so that you pay 9.25% for the whole month. Or has July been and gone? Skip ahead to How do I record superannuation adjustments, later in this chapter, to find out how to adjust super when you ve underpaid. Do I need to double-check what super is due under my employees award or agreement? Yes. The 9.25 per cent super guarantee charge is a minimum obligation. This rate applies from 1/7/13 to 30/6/14, and increases to 9.5% from 1/7/14. Although the majority of awards just go along with the legal minimum, a few awards and some employee agreements have higher requirements. For example, a few awards specify a lower threshold so that, for example, you have to pay super once your employees earn over $350 a month, rather than $450 a month. Or some employee agreements specify a rate of super that s more than the minimum rate. In other words, don t be complacent and just pay your employees the minimum rate, but double-check your award or employee agreements carefully. Can my employees choose their own fund? Superannuation choice legislation gives most employees in Australia the right to choose their own super fund. The only exceptions are employees still working under state awards, or under Workplace or Certified Agreements. If your employees have the right to choose their own fund, you must supply them with a Standard choice form within 28 days of starting employment so that they can tell you the name of their chosen fund. If an employee doesn t return this form to you, you still have to pay super for this employee, but you pay this super into your employer default fund. Veechi Curtis Managing Employee Superannuation with MYOB Software 5

6 Naturally, many employees choose to take advantage of super choice legislation and you may well end up paying super into almost as many funds as you have employees. If you have more than a handful of employees, you ll probably find that the government s Small Business Superannuation Clearing House or MYOB s M-Powered Superannuation will streamline the whole process. See later in this ebook for more information about both these facilities. By the way, don t be tempted just to ignore the fine print and not provide employees with a choice of fund. If you get audited and the ATO find that you ve paid super into a fund other than the one your employee chose, or that you failed to provide employees with Standard choice forms, they you may well get walloped with a choice liability fine. You can download a Standard choice form for your employees from the ATO website, or by phoning and quoting NAT number A colleague mentioned I need to pay super by June 30. Isn t the deadline July 28? According to the superannuation guarantee legislation, the last deadline for paying super for April, May and June is July 28. However, some accountants recommend that you try to make your last superannuation payment by June 30. If you report for income tax on a cash basis this makes sense, because you can only claim things as tax deductions if you ve actually paid for them. However, even if you don t report for tax on a cash basis meaning that you should be able to claim amounts owing to creditors as tax deductions you won t be able to claim a tax deduction for superannuation unless you make the payment before the financial year ends. You may not be too fussed about which tax year you get the deduction (if you pay super in July, you can claim the tax deduction in the next financial year), but if you do want to claim super as a tax deduction in the current financial year, then yes, you must pay super by June 30. What s the Superannuation Guarantee Charge? Your super payments are due on the 28th day after the end of each quarter (namely July 28, Oct 28, Jan 28 and Apr 28). When a cut-off date for payment falls on a Saturday, Sunday or public holiday, payment may be made on the next working day after the cut-off date. If you miss a deadline, you re not meant to send your contributions to the employees super funds. Instead, you have to lodge a Super Guarantee Charge Statement and pay something called the Superannuation Guarantee Charge. The Super Guarantee Charge is made up of the super you missed, plus interest, plus an administration fee of $20 per quarter for each employee with a shortfall. The worst thing about this charge is that the entire payment, including the super component, isn t tax deductible Setting up Super in MYOB Although MYOB software makes calculating your super obligations very easy (in fact, you don t have to do anything except print the report), you do need to make sure that you set up superannuation correctly to begin with, and that you understand how super is calculated. Read through the next few questions and make sure that you have all the basics covered. 6 Managing Employee Superannuation with MYOB Software Veechi Curtis

7 How do I set up the basic calculation for super? To set up superannuation, click Payroll Categories and go to the Superannuation tab. Click the arrow to the left of the Superannuation Guarantee category and check the points listed below: The Linked Expense Account should be an expense account called Superannuation Expense. The Linked Payable Account should be a liability account called Superannuation Payable. The Contribution Type should be Superannuation Guarantee (expense). Also tick the box to show super on employee pay advices, as you have to report this info to employees. The Calculation Basis should be 9.25 per cent of Gross Wages. This rate increases to 9.5% from 1/7/14. The Limit should always be set to No Limit unless the employee earns over $48,040 in any given quarter (this figure is current for the 2013/14 tax year). Unless you re working in building and construction and have specific exclusions, then leave this at $0.00. Under most awards, the monthly threshold for superannuation is $450. Click the Exempt button to specify which wages categories are exempt from super. See Which wages categories attract super and which ones don t? for more info. Figure 1: Setting up superannuation Veechi Curtis Managing Employee Superannuation with MYOB Software 7

8 Don t forget that many wages categories are exempt from super, such as overtime, reimbursements, and payments of leave on termination. How do I set up a list of employee funds? To see a list of all employee funds already in your system, go to your Lists menu and select Superannuation Funds. To add a new fund, just click New. Enter the Superannuation Fund Name and, if you have it to hand, your Employer Membership Number. Click Pay using MYOB M-Powered superannuation if that s what you plan to do. (Note that M-Powered Superannuation isn t available in the newer versions of AccountRight released from 2011 onwards.) Which wages categories attract super and which ones don t? At first glance, superannuation seems to be as simple as multiplying your wages by 9.25 per cent. However, look a little closer and you find that you only have to pay super on an employee s ordinary time earnings (OTE). Ordinary time earnings include: Allowances (other than reimbursement of expenses) Bonuses (when linked to performance) and commissions Casual loadings and shift loadings Director s fees Holiday pay, sick pay or long service leave. Payments in lieu of termination Ordinary time earnings don t include: Annual holiday leave loading Benefits subject to fringe benefits tax Expense allowances that employees are likely to fully spend in the course of producing income (for example, motor vehicle allowances for salespeople). Overtime payments (because these are paid for work performed outside ordinary hours of work) Payments for accrued annual leave, accrued long service leave or accrued sick leave on termination Payments when on maternity or paternity leave Redundancy payments Reimbursement of expenses such as travel costs Workers compensation payments For more information about what is included or excluded from ordinary time earnings, see the Checklist for salary or wages and ordinary time earnings at the ATO s website. 8 Managing Employee Superannuation with MYOB Software Veechi Curtis

9 Are any employees not entitled to super? Yes. Apart from the superannuation exemptions on earnings that aren t ordinary (see the previous question for more details), there are also a few categories of employees for whom you don t have to pay super, the most common of which include: Employees who are paid less than $450 in a calendar month Employees under 18 who work 30 hours a week, or less Employees doing work of a domestic nature, such as nannies or housekeepers, so long are they work less than 30 hours a week. Note that from 1/7/13 the ruling regarding super for employees aged 70 years or over has changed. There is now no upper age limit for paying superannuation to employees. If you pay superannuation for an employee who is over 75 years of age, you may wish to talk to your accountant to double-check the tax deductibility of this payment, as special rules may apply. Paying Superannuation The deadlines for paying employee super roll by every three months, with payment due 28 days after the end of each quarter. If you miss the deadline, you end up having to pay something called the super guarantee charge, a charge made up of the employees super, interest of 10 per cent and an admin fee of $20 per quarter for each employee with a shortfall. Sounds draconian enough, but the worst of it is that there s no tax deduction available for any component of the superannuation guarantee charge, not even the superannuation itself. Because of the penalties and tax implications, you ll find that superannuation is one of the most important bills to pay on time. In fact, if you re struggling for cash, you re better to delay your Business Activity Statement payment by a couple of weeks (just ring and ask for an extension), rather than delay paying your superannuation. Always pay super by the 28th day after the end of each quarter. How can I see how much super is due? The best report to see how much super you owe is the Superannuation Accrual by Fund Summary report, found under the Payroll tab of your Reports menu. Simply pick your date range and click Print. If you want to print a separate page for each fund and you re using AccountRight v19 or earlier, go to the Finishing tab on the report customisation window and click Separate Pages. Alternatively, if you re using AccountRight 2011 or later, first display the report and then click the Refinements icon. You can see how this report looks in Figure 2. Alternatively, to produce a superannuation report that lists the amount you have to pay for each employee, complete with their fund membership number, simply go to your Reports menu, select payroll, and print up a Superannuation Employee Advice Summary report. If your employees belong to several different funds, then you ll probably find that the information you need to send to the super funds is a hybrid of the two reports discussed above (the Superannuation Accrual by Fund Summary would be perfect, but it doesn t include the employee s fund number). Veechi Curtis Managing Employee Superannuation with MYOB Software 9

10 Figure 2: Reporting for super. To print your Employer Membership number on superannuation reports, go to your Lists menu, select Superannuation Funds, edit the fund in question and enter your number. How do I record my superannuation payment? If you re not using MYOB M-Powered Superannuation (see How do I record super payments using M-Powered services? if you are), then here s how you record your superannuation payment or payments: 1. Go to the Payroll command centre and click Pay Liabilities. Yep, it s weird. You really are going to click Pay Liabilities, not Pay Superannuation (the Pay Superannuation feature is only relevant if you subscribe to M-Powered Superannuation). 2. Enter the cheque details in the same way you do for a regular Spend Money transaction. Complete the Cheque No., Payment Date, Supplier (the name of the superannuation fund) and Memo fields. Alternatively, if you re making this payment electronically, simply click Group with Electronic Payments and ignore the Cheque No. 3. Select Superannuation as your Liability Type. 4. Ask to Sort by Superannuation Fund and select the date range. Pick your date range carefully. For example, if you re in October 2013 and you re paying superannuation for the first quarter of the financial year, the date range needs to be 01/07/13 to 30/09/13. You should be able to see all superannuation amounts that were due for that date range, grouped by fund. 5. Ask to sort by Superannuation Fund. You want to record a separate transaction for each fund, so sorting by super fund makes sense. 10 Managing Employee Superannuation with MYOB Software Veechi Curtis

11 6. Select all employees you re going to pay. You want to record a separate transaction for each fund, so only click against employee names for one fund at a time. Your transaction should look something like Figure Click Record and then repeat this process for each fund. When you click Record, the employees who have been paid disappear from the Pay Liabilities window. You can then repeat the process for each fund until no more names appear. (If an employee s name still shows, this almost certainly means you forgot to pay their super or you ve missed recording a payment.) How can I see if I ve missed paying superannuation for an employee? The easiest way to check that you haven t accidentally missed paying superannuation for someone is to go to Pay Liabilities in the Payroll command centre and select Superannuation as the Liability Type. Pick a wide date range (usually going right back to the first day of your current payroll year makes sense and as your To date, go as far as the date up to which you think you ve paid super for all your employees). If you ve missed paying super for anyone, you ll see the employee s name, their super fund and the amount you ve short paid. If you like, you can then narrow down the date range to work out when this shortfall occurred. You can make sure you don t accidentally miss paying super by entering the first day of your current payroll year in the Dated From field and the date that you re up to in the Dated To field. This will display any employee superannuation amounts for previous months or quarters that remain unpaid. You can then investigate these amounts and, if appropriate, add them into your current payment. Veechi Curtis Managing Employee Superannuation with MYOB Software 11

12 Figure 3: Recording your superannuation payment using the Pay Liabilities window. How do I record super payments using M-Powered services? Assuming you ve already got M-Powered Superannuation up and running, here s how to process your superannuation payments at the end of each month or quarter: 1. Go to your Reports menu and print a Superannuation Accrual by Category report. This report gives totals for all super categories, including salary sacrifice and superannuation guarantee. Add up the category totals to see how much you owe in total. 2. Go to the Payroll command centre and click Pay Superannuation. 3. Select the account you want to pay the super from and enter the date range. Remember that the bank account you choose has to the one that you authorised for M-Powered Superannuation. Also, be precise with your dates: Make sure you enter the first and last dates of the month or quarter for which you re paying super in the Dated From and Dated To fields, but stick the current date in the Date field. 4. Confirm which payments you want to process by clicking in the far right-hand column next to each Amount. Unless you have a good reason otherwise, click against every name and amount that shows up. 5. Check that the total payment you re about to process matches the total of your Superannuation Accrual by Category report that you printed in Step 1. Be careful: If you haven t selected a fund name for every employee, your totals won t match. If an employee doesn t have a super fund specified in their card, their name simply doesn t appear in the Pay Superannuation window. Scary stuff. 6. Click Process, come up with your password when prompted and authorise the payment. 12 Managing Employee Superannuation with MYOB Software Veechi Curtis

13 How do I record payments for business owners who pay super in lump sums? Many business owners or directors choose not to pay the minimum amount of superannuation every month or quarter, but prefer to pay super in lump sums throughout the year, depending on business profits and cash flow. If a business has a sole trader or partnership structure (meaning that the owner doesn t draw a salary on which they have to pay super, because they take drawings instead), you simply record the owner s super payments using a regular spend money transaction. Allocate the payment to an expense account called Superannuation Associated Persons (you may need to create a new expense account by this name if you don t already have one). If the business has a company structure and the director receives wages, things are a little trickier. Every time you pay super for a director, look at the Employees Register Summary report for the month or quarter and see how much the director should pay (this is the minimum 9.25 per cent). Allocate this portion of the payment to Superannuation Payable. Then, allocate the balance of the payment either to Superannuation Expense or to Superannuation Associated Persons. To show superannuation for directors separately in your Profit & Loss (your accountant will love you for it!), create a new Superannuation Guarantee category especially for directors. Set this category up so that it s identical to your existing Superannuation Guarantee category but, as the Linked Expense Account, select an expense account called Superannuation Associated Persons, rather than your regular Superannuation Expense account. What if I don t have my own employer fund? If an employee doesn t nominate their own fund on their Standard Choice form (see Can my employees choose their own fund? for more details), then you re meant to send their super to your own default employer fund. At this point, if you haven t already signed up as an employer with a super fund, you have to find a fund that you re happy to join. If you re unsure what super fund is going to work best for your business, ask your accountant for advice. What s the Clearing House service all about? If you have fewer than 20 employees, you may want to subscribe to the government s Superannuation Clearing House service, a free service that allows you to make a single contribution once a month. The Clearing House then distributes your contribution to each employee s fund. The upside of using the Clearing House service is that it s more efficient for your bookkeeper, as your bookkeeper only has to make a single payment to one organisation, rather than several individual payments to separate funds. The downside is that the Clearing House is a government service, and if you miss a deadline for a payment date, nobody is going to turn a blind eye, and you re more likely to incur fines and penalties. Visit to find out more about the Superannuation Clearing House. Veechi Curtis Managing Employee Superannuation with MYOB Software 13

14 How do I get super to print on employee pay slips? If super doesn t print on employee pay slips, it s easy as pie to fix. First, go to the Superannuation tab in your payroll categories list. For all superannuation categories (double-click each one in turn), make sure that the box Print on Pay Advice is ticked. Next, go to Setup, Preferences, Reports & Forms and make sure that the preference Include all Payroll Categories with YTD Amounts is selected. By the way, when an employee looks at the amount of super on their pay slip, MYOB shows the amount of pay slip the employee is meant to receive. This isn t necessarily the amount that you have actually paid. You may have heard of pending legislation which requires employers to print how much super they have actually paid employees, not just how much super is due. This legislation is still at draft stage, and at the time of writing (June 2013) has not taken effect. It is unlikely there will be any further changes in this regards before July What s the story with the new data and e-commerce standard? From 1 July 2014, if you are an employer with 20 or more employees you must use the new data and e-commerce standard when making super contributions on behalf of your employees. (If you are a small business with fewer than 20 employees you will need to use the new standard for contributions from 1 July This may change as it is still subject to further consultation with business and industry.) The new data and e-commerce standard will mean you will be required to send super contributions to all funds using one standard electronic format, removing the need to submit this information to separate funds in different formats. It is likely that MYOB will introduce this standard format as part of their compliance update sometime in However at the time of writing (June 2013) there are no changes, and you can continue submitting payments in the same way as you have always done. Troubleshooting Superannuation Even though calculating super using MYOB software is relatively straightforward, there are still a few traps for the unwary. The next couple of pages of this document suggest possible reasons why super might not calculate correctly, and explain how to adjust an employee s super in the event that you need to fix their records. Why isn t super coming up on this paycheque? What do you do when superannuation doesn t appear on an employee s pay? Put your detective hat on and explore the following possibilities: Has the employee earned less than $450 so far this month? If so, super won t appear on their pay yet. (Don t worry, when this employee does hit the threshold, MYOB automatically adjusts the monthly total so that it s correct.) Has someone accidentally put a limit on superannuation? Go to the Superannuation Guarantee category and check the Limit settings. Unless you have employees earning more than $48,040 per quarter (valid for 2012/13 year), this should always be set to No Limit. 14 Managing Employee Superannuation with MYOB Software Veechi Curtis

15 Have you forgotten to mark this employee as eligible for superannuation when you set up their payroll details? Go to the employee s card and click Edit. Then click the Payroll Details tab, followed by the Superannuation side menu and make sure that the Superannuation Guarantee category is selected. Is the calculation basis set correctly? Go to the Superannuation Guarantee category and check the Calculation Basis. It should be set to 9.25% of Gross Wages. Why is super showing as more than 9.25 per cent? The cause of this problem is usually simple. MYOB software knows that, under most awards, you don t need to pay super for an employee if they earn less than $450 in any one month. Therefore, if an employee takes two pays before they go over the threshold, MYOB software ignores super on the first pay but automatically goes back and recalculates super for the whole month on the second pay. For example, if you pay an employee $250 in the first week of the month, then no super will show on their pay. However, if in the second week the same employee earns another $250, this knocks them over the $450 threshold for the month. MYOB software realises this and calculates super not only for the current pay, but for the previous pay as well, so that the second pay shows up with $46.25 worth of super. The good news is that you don t have to understand the intricacies of all this you can trust that everything will come out in the wash. If the $450 threshold phenomenon doesn t answer your question and MYOB software is still calculating super at more than 9.25 per cent, the cause could be that you haven t set up your exemptions properly and that super is calculating on overtime or reimbursements. See Which wages categories attract super? for more about super exemptions. How do I record superannuation adjustments? Occasionally, you ll find that MYOB software has been set up incorrectly and has either calculated too much or too little superannuation for an employee. How can you fix this up? If MYOB software has calculated too much super for an employee one month: 1. Go to Process Payroll and click Process individual employee. 2. As the Payment date, enter the last day of the month for which you need to make an adjustment. 3. In the Select & Edit Employee s Pay window, zoom in on the employee s pay. 4. Set all amounts and entitlements on the pay to zero. 5. Click in the Amount column next to your Superannuation Expense account and enter the amount you want to reduce superannuation by as a minus figure. The same amount will automatically pop up as a positive figure next to your Superannuation Payable account. You can see how this might look in Figure Click Record. When asked if you want to void this transaction, click OK to confirm. Veechi Curtis Managing Employee Superannuation with MYOB Software 15

16 Figure 4: Adjusting super when things have gone wrong If MYOB software hasn t calculated enough super for an employee one month If you still have pays to process for this employee for the current month, then don t worry. When you next record a pay for this employee, MYOB software knows that super is out of whack and automatically adjusts the superannuation calculations. However, if you don t have any more pays to process for the current month, here s what to do: 1. Go to Process Payroll and click Process individual employee. 2. As the Payment date, enter the last day of the month for which you need to make an adjustment. 3. In the Select & Edit Employee s Pay window, zoom in on the employee s pay. 4. Set all amounts and entitlements on the pay to zero. 5. Click in the Amount column next to your Superannuation Expense account and enter the amount you want to increase superannuation by as a positive figure. The same amount will automatically pop up as a minus figure next to your Superannuation Payable account. 6. Click Record. When asked if you want to void this transaction, click OK to confirm your selection. 16 Managing Employee Superannuation with MYOB Software Veechi Curtis

17 What is M-Powered Super all about? MYOB M-Powered Superannuation is part of what MYOB software calls its M-Powered Services range. The common thread running through all M-Powered Services is that they enable you to make online transactions directly from your MYOB software. Whether or not M-Powered Superannuation is the way to go for your business depends partly on how many employees you have and how many different funds you have to make payments to. M-Powered Superannuation enables you to make your super payments and complete super fund remittance advices directly from MYOB software, without having to write a cheque or complete a single form. You simply click a button to review a list of employees and how much super you owe them, enter an authorisation password and click Send. MYOB software then manages the process that electronically transfers funds from your bank account to your employees superannuation funds, complete with the required payment details. The cost of M-Powered Superannuation is $1 per employee per month (this cost is the same monthly cost whether you pay monthly or quarterly). If you have many employees and lots of different super funds, you may find that this fee works out cheaper than paying wages to a bookkeeper to report for and pay superannuation every month or quarter. However, if you have fewer than 20 employees, you may find that using the goverernment s superannuation clearing house is a better option. See the next question in this ebook for more details Reportable Super Contributions (RESC) A few years ago now, the Australian Taxation Office announced changes to the way employers report employee superannuation, defining a new category of super called Reportable Super Contributions (RESC). Any super that an employer is obliged to report on an employee s payment summary is defined as RESC. So what does RESC include? Put very simply, RESC includes: Super that you deduct from an employee s pay under a salary sacrifice arrangement. Any super over the minimum that you pay to the employee as part of their employment offer. (If a business or organisation offers all employees more than the legal minimum, and the employee isn t able to influence this decision, then the amount over the legal minimum doesn t count as part of RESC.) The good news? If, like 98 per cent of employers, you simply pay your employees 9.25 per cent super (in other words, the legal minimum), then you don t have to do anything. You don t need to report employee super on your payment summaries. Alternatively, if any employees have a salary sacrifice arrangement, or you pay any employees at a rate that s higher than 9.25 per cent, then you may have to report the additional amount of this payment separately. Veechi Curtis Managing Employee Superannuation with MYOB Software 17

18 How do I set up MYOB to deal with RESC? Here s a couple of pointers to make sure you re doing things right: If any employee has a super salary sacrifice arrangement, make sure you select Salary Sacrifice as the type of superannuation in your Payroll Categories for this employee. If you pay additional super over and above the legal minimum for any employee, ask your accountant whether this counts as reportable super, or not. (Reportable super is super that you have to show on payment summaries.) With any additional super, separate the non-reportable and reportable amounts using different payroll categories. For example, if you pay an employee 11 per cent super, use the Super Guarantee category for the first 9.25 per cent, and create a separate super category under Employer Additional Super for the remaining 1.75 per cent. For more info about showing RESC super on your employee payment summaries, refer to the document Starting a New Payroll Year. How do I set up salary sacrifice super? The idea of superannuation salary sacrifice is that the employee sacrifices some of their wages in exchange for additional superannuation and less PAYG tax. For example, an employee is offered a $52,000 salary package, which includes $47,000 gross wages and $5,000 superannuation (this super is in addition to the minimum 9.25 per cent that the employer pays). Here s how to set up salary sacrifice superannuation: 1. Go to your Payroll Categories list and click the Superannuation tab. 2. Double-click the default Salary Sacrifice category and check the settings: The Linked Payable account should be Superannuation Payable; the Contribution Type should be Salary Sacrifice (deduction); and the Calculation Basis should be User-Entered Amount per Pay Period. 3. Still in the Salary Sacrifice category, click Employee and select all employees entitled to salary sacrifice super. Click OK. 4. Go to the Wages part of each employee s card and make sure that their annual salary or hourly rate is the grossed up total of their wages, including the salary sacrifice super. For example, if an employee receives $47,000 gross wages plus $5,000 superannuation, enter $52,000 as the annual salary. 5. Go to the Standard Pay for each employee receiving salary sacrifice and enter the amount of salary sacrifice per pay period (always enter this figure as a minus amount). 6. Now go to Process Payroll and check how the employee pays appear. You can see how such a pay might look in Figure 5, where Mary Jones receives a $52,000 salary package that includes $5,000 superannuation. 18 Managing Employee Superannuation with MYOB Software Veechi Curtis

19 Figure 5: Recording a pay with salary sacrifice superannuation You must report salary sacrifice super on your employee payment summaries. We pay all employees more than 9.25 per cent. What s the deal with this? The main thing to bear in mind is that any super you pay over and above the 9.25 per cent, unless it s part of a workplace agreement negotiated for all employees, is usually reportable on your employees payment summaries. (For the fine print of whether this super is reportable or not, do check with your accountant.) If the super is reportable on payment summaries, you need to set up the component that s over 9.25 per cent as a separate super category. For example, if you pay employees 11 per cent super, then you d set up two payroll categories for each employee: One for the regular 9.25 per cent, and another for the additional 1.75 per cent. With the additional 1.75 per cent, make sure you select Employer Additional (Expense) as the Contribution Type, and also make sure you select this category when you print your payment summaries at the end of the year. Veechi Curtis Managing Employee Superannuation with MYOB Software 19

20 In most situations, if you pay employees more than 9.25 per cent super, then the amount that s additional to 9.25 per cent needs to be reported on your employee s payment summaries. What s the difference between salary sacrifice and when an employee chooses to pay additional super? The concept with salary sacrifice super is that the employee trades off either a pay rise or an above award component of their salary package in exchange for additional super. For example, an employee may elect to take salary sacrifice instead of a pay rise, so long as their base wage rate is already equal to or above the award. Most employers prefer salary sacrifice agreements to be in writing. By contrast, an employee can choose to have additional super deducted from their pay whenever they like, even if they are only receiving award wages. An employee can vary how much gets deducted, asking for $20 to be deducted one month, changing it to $30 the next month, cancelling deductions altogether when they re feeling broke, and so on. In other words, paying additional super is at the discretion of the employee and is very flexible. Each scenario has different implications. An employee pays less PAYG withholding tax on a package that includes salary sacrifice, because they don t pay PAYG on the additional superannuation paid by the employer. On the other hand, if an employee pays additional super and they re on a low income, they re likely to be eligible for a co-contribution of super from the government. In summary, the consequences of any superannuation arrangement depend on the employee s individual circumstances. For this reason, you shouldn t enter into a salary sacrifice superannuation agreement with an employee without both parties asking their accountant for advice. How does salary sacrifice affect the SGC charge of 9.25 per cent? Strictly speaking, an employer doesn t have to pay the Super Guarantee Charge on the salary sacrifice component of an employee s pay. So, for example, if you employ someone on a gross salary of $52,000 but they choose to sacrifice $5,000 in super, then theoretically, you only have to pay super on $47,000. In practice, however, the fine print of many employment agreeements specify that the 9.25 per cent super guarantee should be paid on the grossed up figure. For the person doing the payroll, the main responsibility is to find out what you re paying the superannuation. If you re paying 9.25 per cent on the grossed up figure (that s $52,000 in our example) then you don t have to do a thing (MYOB software calculates everything correctly). On the other hand, if you re only meant to pay super on the net figure ($47,000 in our example), then you re going to have to create a new superannuation expense category for each employee to which this applies: 1. Go to Payroll Categories and click the Superannuation tab. 2. Click New and as the Superannuation Name, type SGC on Sal Sac plus the employee s name. 20 Managing Employee Superannuation with MYOB Software Veechi Curtis

21 3. Make sure that the Linked Expense Account is Superannuation Expense and the Linked Payable Account is Superannuation Payable. The Contribution Type should be Superannuation Guarantee (expense). 4. Set the Calculation Basis to Equals 9.25% Per cent of Gross Wages. 5. Calculate the value of salary sacrifice deductions per pay period. If an employee sacrifices $5,000 per year, for example, and they are paid weekly, then the value of salary sacrifice deductions per pay period is $100. Enter this figure in the Exclusions field. 6. Set the Threshold to the minimum monthly wages before superannuation (usually $450 unless the award specifies otherwise). 7. Click the Employee button and select the relevant employee. 8. Click Exempt button and select any wage categories that are exempt from super (see Which wages categories attract super? for more details). Click OK to return to your Payroll Categories list. 9. Go to your default Superannuation Guarantee category and, if necessary, deselect this employee. 10. Do a test pay transaction and check that everything calculates correctly! How do I show salary sacrifice super on payment summaries? When it comes to payment summaries and super salary sacrifice, you report the gross wage after salary sacrifice is taken out. For example, if an employee receives a $52,000 package of which $5,000 is salary sacrifice super, then you show $47,000 as gross wages on their payment summary. For payment summaries to print correctly, all you have to do is click the Salary Sacrifice payroll category when selecting the payroll categories that make up your Gross Payments. (The companion ebook in this series, Starting a New Payroll Year, explains the payment summary process in much more detail.) An employee wants to pay additional super. How do I set this up? If an employee wants to have additional super deducted from their pay, first check that the additional super category is set up correctly. To do this, go to your Payroll Categories list, click the Superannuation tab and double-click the category called Employee Additional (deduction). Make sure the following settings apply: The Linked Payable Account should be Superannuation Payable. The Contribution Type should be Employee Additional (deduction). The Calculation Basis should be User-Entered Amount per Pay Period. With your setup complete, go to the Standard Pay for each employee who wants to pay additional superannuation and enter the amount that they want to contribute per pay period. (Remember to enter this amount as a minus figure, or it won t come out as a deduction!) By the way, if an employee chooses to pay additional super, this should make no difference to the amount of PAYG tax you deduct from their pay. The only time that employee super contributions affect PAYG tax is if you agree to set up a salary sacrifice arrangement. Veechi Curtis Managing Employee Superannuation with MYOB Software 21

22 By the way, you don t need to show additional super on payment summaries. An employee who receives $25,000 gross per year and contributes no additional super receives an identical payment summary to an employee who receives $25,000 gross per year and chooses to contributes additional super. What about government co-contributions for lowincome earners? If an employee earns less than $46,920 a year (threshold valid for the 2012/13 year) and elects to make additional super contributions out of their own pocket (and not via a salary sacrifice arrangement), the government rewards this saintly behaviour with a co-contribution. In the 2012/13 year, this contribution can be as much as $0.50 for every extra dollar the employee contributes into super, up to a maximum co-contribution of $500 a year. (For more info about the exact value of co-contributions, visit the ATO website.) Employees often get anxious about how they will receive their super co-contribution, asking if their additional contributions will show up on their payment summary. In actual fact, you don t need to provide employees with any special documentation regarding their additional superannuation contributions. Instead, the government calculates the co-contribution after they receive information from the employee s superannuation fund and the employee has lodged their tax return. Quirky Situations You may not need to read the next few questions, as they deal with quirky situations that not every business encounters, such as paying super on subcontractor payments or calculating minimum dollar amounts as specified under certain awards. How do I calculate superannuation on subcontractor payments? The answer to this question doesn t attempt to address whether or not you should pay superannuation on payments to subcontractors if you re not sure whether you should, or not, then you re best to ask your accountant. Instead, the answer to this question assumes that you ve already sought advice on this issue. Alternatively, to help decide whether your contractors are considered employees for super guarantee purposes, you can check the Employee/Contractor decision tool on the ATO website. Visit go to Calculators, rates and forms and then select Employee/contractor decision tool. In order for MYOB software to calculate superannuation for subcontractors, you need to set them up as employees in your card file. However, there s one important difference between subbies and employees: when you go to the Payroll Details tab in the subcontractor s card, you select Labour Hire as the Employment Basis, rather than Individual. (If you select Labour Hire, MYOB software knows not to print a payment summary at the end of the year for this subcontractor.) 22 Managing Employee Superannuation with MYOB Software Veechi Curtis