Reform for Small Businesses: Changes effective 1st July 2021

As we head towards the finish line of the 2021 financial year, businesses are in for a number of significant and material changes from 1st July 2021 that will require some forward planning and update of systems. Below we have provided a summary of the key measures that will need to be considered by all businesses to ensure compliance.

SUPERANNUATION GUARANTEE

Superannuation Guarantee: Increase in Rate of payment

Employers in Australia are required by law to make regular contributions to their employees’ superannuation, however the amount they’re expected to contribute is about to rise. The minimum contribution amount, currently set at 9.5 percent of ordinary time earnings (OTE), will increase to 10 percent on 1 July 2021.

When the minimum SG contribution level goes up, businesses will need to adjust payroll systems to pay the increased amount to eligible employees. This will need to be active from 1st July 2021 for the first pay run of the new financial year.

If employers fail to do this by the due date, they could face penalties from the Australian Tax Office (ATO) for late or inaccurate payments.

Generally speaking, if you’re using an online payroll system that’s up-to-date and complies with Single Touch Payroll (STP), these changes will happen automatically for any new employees added after the SG increase date. For existing employees, employers will be able to follow a simple process to manually update the SG amount.

For those still paying employees on a manual base, the change will need to be noted and applied from 1st July 2021.

Superannuation Contribution caps to Rise

Caps on concessional and non-concessional super contributions are also set to go up from 1 July 2021. Concessional contributions are those made into your super fund before tax, and the cap will increase from $25,000 to $27,500.

Non-concessional contributions are those made into your super fund after tax is paid, and the annual cap will increase from $100,000 to $110,000.

Employees will be able to put more into their super funds, but will need to remain within the contribution caps to avoid paying additional tax.

How this impacts employers? Employers might expect some employees will wish to review their salary packages effective from 1 July 2021 with reference to salary sacrificed superannuation, to ensure they maximise — but don’t exceed — the new caps.

PAYMENT OF WAGES AND SINGLE TOUCH PAYROLL REPORTING

  • Employers with more than 20 employees have been using STP since 1 July 2018, but from 1 July 2021, all employers will have to report payroll obligations electronically (unless they have an exemption).

  • For employers with 4 or fewer employees, a concession has existed allowing lodgement of Single Touch Payroll obligations quarterly through a Tax Agent. From 1st July 2021 this concession will only be considered for those clients experiencing exceptional circumstances.

Exceptional or unforeseen circumstances may include:

  • natural disasters or other disasters or events that may have, or have had, a significant impact on individuals, regions or particular industries;

  • impeded access to records (e.g. records seized during a police search or retained as evidence in a court matter);

  • the serious illness or death of a family member, tax professional or critical staff member;

  • considerable lack of knowledge and understanding of taxation obligations; and

  • system issues, either with ATO online services or the entity’s business system.

In addition to those factors, the following circumstances may be considered exceptional when the ATO considers an application for the quarterly reporting concession from 1 July 2021:

  • seasonal or intermittent workers — see below; or

  • no or unreliable internet connection:

  • an inability to connect to the internet;

  • a connection that consistently requires multiple attempts;

  • consistent dropouts or disconnections; and

  • exceedingly slow data transfer.


    If an employer finds that they do not fit within one of the above categories, they will need to ensure they have STP Compliant software or a reporting process in place for the first pay run after 1st July 2021.This can still be done by your Tax Agent on behalf of a business, however it will need to be done at the time of payment rather than quarterly.

    If you would like assistance in getting a system in place, please contact our offices and we can help with your processes.

Dominique Schuh