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.
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