Scrapping of SG Threshold: Should small businesses be worried?

Accountants Daily, an online news publication, recently reported that the scrapping of the superannuation guarantee (SG) threshold is likely to increase the administrative burden for small businesses.

The SG is the minimum amount employers are legally required to pay into their employees’ super funds.

Currently, an employee who has ordinary time earnings of up to $450 per month is not eligible for the SG.

As part of its 2021–22 Federal Budget, the Morrison government announced that the threshold would be scrapped.

It means all employers will have to pay their employees the SG, regardless of how much they earn.

In an interview with Accountants Daily, tax counsel at Tax & Super Australia, John Jeffreys, said the change is “likely to have adverse administrative implications for small business owners”.

While the change — expected to take effect on 1 July 2022 – will undoubtedly affect some small businesses, Modoras senior accountant Annette Harden predicts the disruption will be minimal.

Annette says there are two main reasons for her confidence.

“First, following the introduction of Single Touch Payroll for reporting payroll information directly to the ATO, most employers would be using payroll or accounting software for processing wages.

“Therefore, it should only be a matter of making the necessary changes in the software.

“Second, all employers should be using SuperStream, which enables them to quickly and easily report and pay super guarantee contributions electronically.”

SG payment options

Employers can make payments one of several ways, including through super clearing houses.

Employers can send a single electronic payment to a clearing house plus the contribution data for all their employees; the clearing house does all the rest.

Businesses with either 19 or fewer employees or an annual aggregated turnover of less than $10 million can use the ATO’s Small Business Superannuation Clearing House for free.

“It’s rare for 100% of employees in a business to be earning less than $450 a month,” Annette says.

“Most employers are already paying the super guarantee to at least some employees, so they’ll already have the relevant reporting and payment systems in place.

“When the super guarantee threshold is scrapped, all employers will need to do is get their eligible employees to fill in a super choice form and reconfigure the payroll software to calculate the super guarantee payable to them.”

(Employees aged under 18 or who are private or domestic workers — e.g. nannies — must work more than 30 hours a week to qualify for the SG.)

SG payments must be made to complying funds or retirement savings accounts (RSAs) at least four times a year by the quarterly due dates.

On 1 July 2021, the SG will increase to 10% of employees’ ordinary time earnings.

Unsure about your business’s SG obligations? Complete the ATO’s two-hour online course.

IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (QLD) Pty. Ltd. ABN 81 601 145 215. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance, or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (QLD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals, and circumstances. Information, forecasts, and opinions contained in this blog can change without notice. Modoras Accounting (QLD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (QLD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies, or omissions. To the extent permissible by law, neither Modoras Accounting (QLD) Pty. Ltd. nor its employees, representatives, or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability is limited by a scheme approved under Professional Standards Legislation.