As you know, the government legislated SG (Superannuation Guarantee) rate increased from 9.5% to 10% on 1/7/21, this means that any pay run with a PAID date on or after 1/7/21 should have calculated 10% SG on all Ordinary Time Earnings (OTE). NB. all pay runs are identified by their paid date, not the pay period, at the ATO.
This is the first time SG has increased since 1/7/14 so we’ve done a "post increase" audit and identified that the wrong rate may have been used when calculating super in some pay runs in the new/current financial year. If pay runs in your account are affected then we'll have posted an Action Message on your payroll dashboard to let you know that this is the case (and directed you to this article for more information/advice).
NB. None of this will impact on your 2020-21 STP data, including finalisation, because all pay runs with paid dates on or before 30/6/21 were calculated with the correct default SG rate 9.5% (unless the SG rate has been deliberately overridden at the pay category or employee level).
So, here follows the questions we imagine you'll ask:
We'll endeavour to answer these questions as comprehensively as we can in this article (just click on the link to jump straight to the question/answer if you prefer).
What happened/why?
After applying the SG rate increase to the system, we noticed that pay runs where the pay period was wholly or partially in the 2020/21 financial year were still being calculated using the old rate, despite having a date paid after July 1.These were the only pay runs affected and it was due to the way the SG rate was being selected in certain circumstances.
This resulted in the system still calculating 9.5% SG in any pay run that was either wholly or partially in June (ie. the 2020-21 financial year), even if the paid date was in July 2021, whereas any pay run with a paid date and pay period wholly in July 2021 was calculating SG correctly at 10%.
We worked quickly to apply a fix to correct the rate in all accounts but any pay runs that were created in the period after the SG rate was deployed and before we were able to apply the fix were left alone, with incorrect SG rate calculations in place (we will never adjust your pay run data without direct instructions from you).
How will it be fixed?
Via an automated process - coming soon...
We are currently building a tool that will let you know, via a pay run warning in a future pay run, if we've detected that a super/SG adjustment is required for an employee in that pay run. The pay run warning will give you the option to click on a button/link that will automatically calculate the adjustment required and then add said adjustment to the employee's pay run record. We hope to have this tool ready before the end of the month.
If you're happy to wait then you don't have to do anything but pay attention to the pay run warnings in future pay runs (which I'm sure you do anyway) and take the appropriate action where required.
If you terminated an employee in an affected pay run then they will not show up in any future pay runs, this means you will need to manually add them to a pay run in order to use the fix/tool. You can either:
- add the terminated employee to your next pay run (add employee is an option on the pay run actions button at the top of a pay run)
- refresh the pay run page and the pay run warning should include the newly added employee (you can use the tool to fix the super)
- if any earnings lines show up in the pay run "by default" you need to remove them, hover over the earnings line and you'll see the delete option to the far right of the line
or
- create an ad hoc/nil earnings pay run with the same pay period and paid date as the original pay run
- add the terminated employee to the pay run
- if any earnings lines show up in the pay run "by default" you need to remove them, hover over the earnings line and you'll see the delete option to the far right of the line
- the pay run warning should show up to offer you the tool to fix the super (you may need to refresh the pay run page if the warning doesn't show up)
- use the tool to fix the super
- finalise the pay run, export the journals and lodge the pay event
NB. if a terminated employee was added to a pay run and a super adjustment added, then this employee may not show up in the pay event created from that pay run, because they've already been marked as Is Final in an earlier event. If that happens you will need to create an Update event, add the terminated employee to it and lodge that.
You can fix it now if you don't want to wait until next week...
If you don't want to wait for our "fix/tool" then you can either recalculate the pay run now or calculate the amount of SG that was underpaid and add a super adjustment to the next pay run yourself.
To do this, go to the pay runs tab on your payroll account, you'll need to check any pay runs with paid date on or after 1/7/21.
Luckily it's not difficult to immediately see if the SG calculated for any employee is not 10% of the total earnings (ie. if gross earnings are $1710.24 SG should be $171.02, if gross earnings are $3465.50 then SG should be $346.55) so you can perform a quick check without even opening up employee pay run records.
The quickest option to fix the SG calculation is a simple recalculation. You can do this in one hit for the entire pay run or for each employee, individually.
To do it for the entire pay run:
- unlock the pay run (an option on the pay run actions button)
- click on the pay run actions button at the top of the pay run and select Recalculate pay run
- you should see the SG amounts update in the pay run to be (the correct rate) 10%
- finalise the pay run and re-export the journals
- if this pay run was the last lodged from your payroll account you can lodge an amended pay event, choose this option from the Lodgement options button at the top of the finalised pay run.
- if this pay run was not the last lodged from your payroll account then you will not have the option to lodge an amendment - if this is the case simply create and lodge an Update event to correct the data at the ATO
***NB. If you've made any manual adjustments to the pay run a recalculate "may" affect PAYG, earnings and deduction totals and it's important that these are not affected (because you've already physically paid your employees and possibly the PAYG and/or deductions) so we suggest you take the extra (precautionary) step of only doing a recalculation after you've downloaded a detailed pay run audit report to excel from the original pay run - to do this click on the Reports button on the pay run and select Audit Report, tick the boxes at the top of both lists, Summary and Employee details (to extract all possible data), then hit the Download button and choose excel. This way you can download another Audit report after you've recalculated the pay run and compare the PAYG, earnings and deductions totals in it to those in the original pay run Audit report - any discrepancies will need to be carefully investigated and any adjustments that the recalculation may have affected will need to be reinstated.
To recalculate each employee individually
- click on the Actions button within the employee record in the unlocked pay run
- choose the Recalculate option, again, be careful to check that the net earnings, PAYG, deductions figures have not changed
- you should see the SG amounts update in the pay run to be (the correct rate) 10%
- finalise the pay run and re-export the journals
- if this pay run was the last lodged from your payroll account you can lodge an amended pay event, choose this option from the Lodgement options button at the top of the finalised pay run.
- if this pay run was not the last lodged from your payroll account then you will not have the option to lodge an amendment - if this is the case simply create and lodge an Update event to correct the data at the ATO
If you're not comfortable recalculating the pay run for any reason, and you don't want to wait for our "tool/fix", then you can check and adjust the super yourself. To do this:
- check the pay run totals - is the SG total 10% of the total gross earnings total?
- If the answer is yes then no further action is required
- If the answer is no don't be surprised, there are a number of reasons why SG might not be calculated on all earnings
- now you'll have to check each employee's record in the pay run, is SG 10% of gross earnings?
- If the answer is yes for some employees then it's more than likely all employees have been correctly calculated at 10% and the reason your pay run totals don't show SG is 10% of total earnings is due to a legitimate reason. If you're not comfortable assuming then carry on...
- If the answer is no then there are several "legit" reasons why this might be the case:
- have the employee's earnings breached the $450 per month threshold under which SG is not payable?
- if the employee is under 18 then they not only have to breach the $450 per month threshold but they also have to work a minimum of 30 hours per week to be eligible for SG
- If neither of those explain the SG amount calculated then you'll need to expand the employee's pay run record to expose the earnings lines and look further:
- make sure each of the pay categories used attracts SG
- to check if the pay category is OTE/"superable" go to the pay categories page under the pay run settings heading on the payroll settings tab, scroll through to find the pay category, click on the name to expand the settings then check the super rate field, if that is blank or different to the default SG rate then this may explain the variance in the pay run
- if any of the pay categories are not OTE (do not trigger SG) then deduct those earnings from the earnings total in the pay run and again check if SG is 10% of that earnings (sub) total
-
- If the answer is yes, move on, no further action required
- If the answer is no then a super adjustment will be required for affected employees. To work this out:
- total up all earnings paid to the employee who met the monthly threshold for SG (as per above) with pay categories that are OTE/attract SG
- calculate 10% of that total
- deduct the SG calculated in the pay run for that employee to get your super adjustment amount ie. the amount of super that was underpaid for this employee
- the super adjustment amount will need to be added as a super adjustment in this employee's next pay run
- If the employee has been terminated and/or is not likely to be paid any time soon then you should
- create an ad hoc/nil earnings pay run with the same pay period and paid date as the original pay run
- add the employee to it
- if any earnings lines show up in the pay run "by default" you need to remove them, hover over the earnings line and you'll see the delete option to the far right of the line
- click on the Actions button within the employee's pay run record and choose Adjust super
- choose Superannuation Guarantee as the type of super
- add the super adjustment amount, hit Save
- finalise the pay run, export the journals and lodge the pay event
- if a terminated employee was added to the ad hoc pay run and a super adjustment added, the this employee may not show up in the pay event created from that pay run. If that happens you will need to create an Update event, add the terminated employee to it and lodge that.
-
- make sure each of the pay categories used attracts SG
- now you'll have to check each employee's record in the pay run, is SG 10% of gross earnings?
Super adjustments added to any pay run in July will be included along with all other contributions when you next pay your super.
Could this happen again next year?
We really hope not! The fact is we plan to change where we "store" the default super rate in our system so that it can more easily be updated. Given the SG rate is scheduled to gradually increase at a rate of .5% a year to reach 12% from 1/7/2027 this is an important project and therefore a very high priority for us. Once that is in place then the types of issues we experienced when increasing the default super rate this time will not reoccur.
What are the implications/repercussions of not fixing this?
In Australia you are obligated to pay SG for your employees at the legislated rate. If you choose not to fix this anomaly in your initial pay runs in this financial year then you will not be meeting that obligation, with possible repercussions down the track (from the ATO).
There won't be any implications with regards to meeting your SG obligations around paying super for your employees if you adjust the super in a July pay run - based on the assumption that you've not paid any of your employees' super to the super funds yet. Meaning, as long as you add the super adjustment to a July pay run the adjustment will be picked up and paid along with all other super in the period when you get around to paying your super, be it monthly or quarterly (depending on your business processes). Note you are only "obligated" to pay your employee super guarantee contributions to the nominated super funds quarterly but we recognise that some employers to choose to pay super monthly.
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