Two Ways Small Businesses Need to Sharpen Up on Super

Whether you have a handful of employees or a significant number of workers on your payroll, managing their superannuation contributions in Australia is an important task that often goes under the radar. It is an aspect of your regular business practice. So, you set it in place, develop your super procedure, and then do not pay it too much attention.

However, every now and then it pays to examine your super procedures more closely. Two recent developments mean that now is one of these times.

First of all, you will need to be Single Touch Payroll (STP) ready by July this year. Second, the proposed amnesty to help you correct outstanding or unpaid superannuation guarantee (SG) contributions is facing a major obstacle: the upcoming Federal Election.

What do these two developments have to do with your super payments?

STP Increases the Likelihood of Superannuation Audits

We have outlined the significance of the upcoming shift to mandatory STP, and how businesses of all sizes must prepare before 1 July 2019. STP will require all businesses to use government-approved software to pay their employee entitlements and to report these payments in real time as they are made. While the obvious impact of STP will be on the way you manage employee pay and reporting, the implications for your super should also make small business owners think twice about how they organise super payments.

Essentially, the ATO will be able to access your super details in real time. They can easily cross-check whether or not you are paying correctly. Discrepancies that may have gone unnoticed in the past are more likely than ever to be noticed.

As such, we can expect more tax audits to be triggered by these discrepancies coming to light.

The incentive to launch audits based on super discrepancies and lack of payment is not only driven by the greater transparency derived from the upcoming STP reporting system. Keep in mind that super is generally easier to audit and that there is usually a strong public backlash against companies who do not honour their employees’ super payments. The tax office is therefore able to appeal to public support in initiating such tax audits.

So, are you paying your super contributions correctly?

Are you aware of the common errors small businesses commit with super payments? How long has it been since you reexamined your super practices with your business advisor?

You only have a few months to be STP ready. Identifying errors or discrepancies in your super payments now, as you set up your STP software platform, can save you from trouble with the ATO in the months to come.

There is scope for leeway in preparing your super and payroll practices for STP. The tax office is particularly mindful of the strain this transition to STP may have on businesses with fewer than 20 employees. A list of proposed low and no-cost reporting software solutions will be made available, and if you only have less than 4 employees alternatives such as monthly reporting, rather than reporting as you pay your employees, are on the table.

While there will be no penalties for mistakes or missed or late reports, and the ATO is willing to help small-scale employers who reach out to them, STP is still on its way and all employers still need to prepare, and do so now. We wish to stress that its particularly important not to forget to review your superannuation payment procedures as you prepare.

The Election Cast Doubt on Chances of Super Amnesty

Many small business carry outstanding or unpaid superannuation guarantee (SG) contributions. Last year the government announced a one-off chance for small businesses to correct SG issues without penalty.

But now, with the Federal Election looming and with the Amnesty Bill not yet law, there is a good chance that this will not be enacted.

How does this impact a small business which has prepared for this one-off amnesty with their accountant?

You will need to revise your SG planning in light of current law. If you haven’t paid an employee’s super on time or if you have missed a payment entirely then you must lodge an SG charge statement and pay the outstanding liability. And, in contrast to the practice envisioned under the proposed amnesty, late payments are not tax deductible.

Again, understanding the unlikelihood of the SG amnesty and the eventuality of the STP transition leaves you, in the end, with the same course of action to follow: a review of your super obligations.

Do you carry an SG shortfall? Perhaps you have been paying your SG later than the 28th day after the end of the relevant quarter. You may use an accounting system that fails to automatically work out your SG obligation on ordinary times earnings items such as non-contingent allowances or standard overtime. You may not have paid your SG payment for employees because they haven’t given you their super fund information in the first place.

These are all signs you may need to correct your SG contributions. As STP looms and looks to make your payroll and super practices all the more visible to the tax office, now is the time to sharpen up your superannuation procedures to ensure you are not hit with penalties, liabilities, or even a tax audit in the near future.

Here at Calibre Business Advisory, we put a great deal of emphasis on the old adage that to be forewarned is to be forearmed. Our expert Virtual CFO team and tax accountants can lighten the burden or help prepare your payroll and super well in advance in order to be ready for STP and to reduce the risk of any unwanted attention from the tax office.

Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.