Employers on Alert for Modern Award and Payroll Changes
There are several key changes coming to 22 modern awards and other payroll-related legislation that will take effect from 1 March 2020. It is important employers take note of these upcoming changes.
Superannuation and salary sacrifice arrangements
Employers will be required to calculate and pay superannuation based on employees’ gross pay – including on any salary sacrificing. Referring to a media release from the Australian Payroll Association, “It will no longer be possible for an employer to pay super only on the reduced salary of an employee with a salary sacrifice agreement.
This is one of two superannuation guarantee (SG) changes that will affect employees who employ on a salary sacrifice arrangement from 1 January 2020 onwards.” The other change referred to will be the end of being able to use salary sacrificing to make up part, or all of compulsory super contributions.
Record keeping and overtime requirements
From 1 March 2020, employers will need to:
- Notify employees in writing of the annualised salary payable to them, the clauses of the modern award satisfied by the annualised salary, and how the annualised salary has been calculated.
- Specify the outer limit of ordinary hours that would attract a penalty rate or overtime hours the employee may be required to work in a pay period or roster cycle without being entitled to wages in addition to the annualised salary.
- Record all employee start, finish and break times, as well as have employees sign-off on these times. These may prompt a requirement to change current timesheet formats.
- Ensure any hours worked beyond each roster or pay period attracts overtime rates if the employees’ annualised salary does not meet the minimum wage for total hours worked.
Superannuation Guarantee Amnesty
The House of Representatives passed a Super Guarantee Amnesty bill last November (2019). The bill has moved to the Senate and is expected to pass. This will provide employers the opportunity to self-correct any unpaid super contributions in the period from 1 July 1992 to 31 March 2018 and make the Australian Taxation Office aware. The amnesty period will last for six months dated from the royal assent. Harsher penalties, at up to 200 per cent of the amount owed, will apply once the amnesty expires.
Removing tax deductibility of non-compliant payments
You can only claim deductions for payments you make to your workers (employees or contractors) from 1 July 2019 where you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.
If the PAYG withholding rules require you to withhold an amount from a payment you make to a worker, you must:
- withhold the amount from the payment before you pay it to them
- report the amount to the ATO.
Any payments you make to a worker where you haven’t withheld or reported the PAYG amounts are called non-compliant payments, therefore rendering the payment non-deductible.
In summary, these are important changes, most requiring actioning by 1 March 2020 to stay current and compliant with payroll association guideline expectations and the updated modern awards. Failure to comply may amount to a breach of a modern award and attract civil penalties under the Fair Work Act 2009.
The following is a list of the 22 Modern Awards that will be affected by the new legislation.
- Banking, Finance and Insurance Award 2010
- Broadcasting and Recorded Entertainment Award 2010
- Clerks – Private Sector Award 2010
- Contract Call Centres Award 2010
- Health Professionals Award 2010
- Hydrocarbons Industry (Upstream) Award 2010
- Horticulture Award
- Hospitality Industry (General) Award 2010
- Legal Services Award 2010
- Local Government Industry Award 2010
- Marine Towage Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
- Mining Industry Award 2010
- Oil Refining and Manufacturing Award 2010
- Pastoral Award 2010
- Pharmacy Industry Award 2010
- Rail Industry Award 2010
- Restaurant Industry Award 2010
- Salt Industry Award 2010
- Telecommunications Services Award 2010
- Water Industry Award 2010
- Wool Storage, Sampling and Testing Award 2010
Should you need any clarification or assistance actioning these changes, do not hesitate to contact us.
Advisor, Business & Personal Advisory
Bookkeeper, Business & Personal Advisory