Economy

Super rule change to lift wages bill

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Businesses that use bonuses or commissions to reward employees could be forced to pay more in compulsory superannuation contributions under rule changes that came into effect this week.

Businesses that use bonuses or commissions to reward employees could be forced to pay more in compulsory superannuation contributions under rule changes that came into effect this week.

As of 1 July, employers must include bonuses, commissions and allowances in a worker’s income for the purpose of calculating the 9% superannuation contribution to make on their behalf.

For employers with a large bonus or commission based wage component that means either a big change to the way employees are paid or a higher superannuation bill.

Businesses in the retail, resources and manufacturing sectors that are heavy users of overtime or commission payments are likely to be hit particularly hard by the change.

Many employers have already adapted to the new rules, which have been in the pipeline for several years. For those that haven’t, now is the time to work out a strategy, according to Institute of Chartered Accountants in Australia superannuation policy manger Hugh Elvy.

Elvy says that whether an employer plans to absorb the extra costs or change employee remuneration structures to diminish any impact, clear communication with staff is vital.

“If employees are going to receive a boost to their superannuation contribution that is a benefit they should be aware of, or if not you may need to sit down and talk about the change and how it will affect their pay packet,” Elvy says.

But, he says, employers should receive advice to ensure any changes are workable and comply with both superannuation and employment laws.

“What you can do may depend on the relevant award or contract employees work under. If the contract sets out that the super contribution will always be on top of the cash component, the employer may have to revisit that contract with the employee,” Elvy says.

Checklist for salary or wages and ordinary time earnings

Payment type

Salary or wages

Ordinary time earnings

Expense allowance that is paid with the expectation that it will be fully expended in producing income (for example, car allowance paid to real estate agents)

No

No

Allowances paid (other than a reimbursement of expenses or expense allowance)

Yes

Yes

Reimbursement of expenses (for example travel costs)

No

No

Bonuses that don’t relate to specific performance criteria (for example Christmas bonuses)

Yes

No

Other bonuses

Yes

Yes

Commission

Yes

Yes

Over-award payments

Yes

Yes

Shift loading

Yes

Yes

Overtime

Yes

No

Casual loading

Yes

Yes

Benefits subject to fringe benefits tax (FBT)

No

No

Workers compensation payments, including top-up payments where no work is performed

No

No

Workers compensation payments, including top-up payments, paid by the employer, where work is performed

Yes

Yes

Top-up payments (for example when serving on jury duty or with reserve forces)

Yes

No

Payments when on maternity or paternity leave

Yes

No

Pay for annual holiday leave taken

Yes

Yes

Government wage subsidies (for example Wage Subsidy Scheme allowance)

Yes

Yes

Annual leave loading

Yes

No

Pay for sick leave taken

Yes

Yes

Pay for long service leave taken

Yes

Yes

Accrued annual leave, long service leave and sick leave paid as a lump sum on termination

Yes

No

Payments in lieu of notice

Yes

No

Redundancy payments

Yes

No

Other payments paid by an employer on termination of employment

Yes

No

Director’s fees

Yes

Yes

Payments for performance in, or provision of services relating to entertainment, sport, promotions, films, discs, tapes, TV, or radio

Yes

Yes

The labour portion of payments to contractors who are employees for super guarantee purposes

Yes

Yes

Dividends

No

No

Partnership and trust distributions

No

No

Payments for entering into a restraint of trade agreement

No

No

Payments for domestic or private work under 30 hours per week

No

No

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