Taking on staff brings with it a whole host of associated compliance obligations, including the requirement to pay superannuation contributions on behalf of your employees.

In essence, you must pay superannuation contributions on behalf of each employee, into the fund of their choice. These payments must be made at least four times a year at a rate of 9.5% of the amount they earn from their ordinary hours of work.

Payments must be made on behalf of all employees (including temporary or casual staff) who are over 18 and earn more than $450 (before tax) per month. In some cases, you also need to pay super on behalf of contractors who provide labour to your business, even if they have an ABN.

TIP: Don’t try to treat people who are really employees as contractors. The burden of getting that decision right rests with the hiring business. If you incorrectly – based on the facts – deem someone to be a contractor when they are really an employee, you will still be liable to pay superannuation on their behalf.  The Fair Work Act prohibits “sham contracting arrangements”, where an employer treats a worker as an independent contractor in an attempt to avoid meeting employee entitlements. It is illegal for a business owner to convert staff into contractors. Employers who try it can face prosecution for tax evasion and can be penalised for flouting superannuation laws and avoiding workers compensation laws.

If you don’t pay super contributions on behalf of your employees on time, you could be liable for the superannuation guarantee charge. This is effectively a penalty for late payment of employee contributions and is made up of three components; the unpaid super itself, an interest charge at a rate of about 10% and an administration fee of $20 per employee per quarter. If your business continues not to pay its super obligations, the ATO can then pursue directors of the business in a personal capacity.

Single Touch Payroll

The actual mechanics of paying super to the ATO for your employees is in the process of changing. Using payroll or accounting software that offers Single Touch Payroll (STP), employers send their employees’ tax and super information to the ATO each time they run their payroll and pay their employees (as opposed to quarterly, as used to be the case).

The new system was launched for employers with 20 or more employees last year but, following legislation passed on 12 February 2019, it has now been agreed that STP will apply to all smaller employers (those with less than 20 employees) from 1 July 2019.

No matter how few staff you employ (even one or two), the STP rules will still impact you, even if you don’t currently use a payroll software package (and we know that many small employers still prepare payrolls manually).

To help small employers, the ATO is preparing a number of measures to ease the burden including asking software developers to build low-cost STP solutions at or below $10 per month for micro employers – including simple payroll software, mobile phone apps and portals. They also promise exemptions to businesses with no or limited internet connectivity and an option for employers with up to 4 employees to allow your accountant to report quarterly on your behalf (rather than at the time of each payroll).

Nevertheless, many of the assistance measures for small businesses are still lacking in specific detail and considering that the change comes into force in just a few months, if you are an affected employer – and remember every employer with less than 20 employees is affected – you should talk to your tax or BAS agent now to get advice on your next move.

Mark Chapman is Tax Communications Director at H & R Block.