As we head into the new financial year a number of slated changes are coming into effect. It’s important to know what these changes are and how they may effect you or your business.
A snap shot of the key changes:
- Superannuation guarantee staturory rate is rising from 9.5% to 10%
- The company tax rate is dropping to 25%
- Employers of a closely held employees will need to start reporting through single touch payroll
Superannuation rate change
In July 2021, the rate will rise to 10%. From then on, the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.
Prepare for the change
- Review your current superannuation costs for all employees, both hourly and salaried.
- Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
- For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
- Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2021. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
- Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.
Drop in company tax rate
The company tax rate has been reducing from 30% to 25% over the past few years for base rate entities. Broadly, a base rate entity refers to a company that has a turnover less than $25 million and no more than 80% of the income is base rate enity passive income.
If you meet the above criteria, the reduced tax rate will be applied.
Single Touch Payroll Reporting
The exemption for reporting closely held employees via single touch payroll is coming to an end on 30 June 2021. A closely held employee is commonly directors or shareholders of a company and their family. There will be three ways you can report payments to closely held employees.
- Report actual payments on or before the date of payment
- Report actual payments quarterly
- Report a reasonable estimate quarterly
You will need to report using one of the above methdos through a single touch payroll enabled solution. You won’t be able to lodge through the ATO portals.
Micro employers are employers with 1-4 employees. You will need to report through a single touch payroll solution unless you qualify for an exemption.
If you have closely held employees or a micro employer and already submitting via single touch payroll you won’t need to make any changes.
If you’d like help reviewing payroll costs and single touch payroll requirements, talk to us now, and we can guide you through these changes. Getting organised now means that you’ll be well prepared for your business’s increased costs and are single touch payroll compliant.