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Payroll & Superannuation

Which of the Three Fair Work Information Statements do you need to give to your employees? One or all three?

Once upon a time, there was only one Fair Work Information Statement (FWIS). But now there are three of them! As an employer, you need to know which one to give to your employees. This could be only one depending on your employment situation, or all three. But before we look at the three statements, let’s quickly revisit the background of the FWIS for those who may not be across it.

The FWIS provides information to new employees about the conditions of their employment, including details about the National Employment Standards. The FWIS must be given to new employees before or as soon as they begin working for you.

3 Fair Work Statements

As mentioned above, there are now three statements. Let’s look at each one separately.

1. The Fair Work Information Statement. This is the most well-known statement as it has been around for some time now. The FWIS has information on:

  • the National Employment Standards
  • right to request flexible working arrangements
  • modern awards
  • making agreements under the Fair Work Act 2009
  • individual flexibility arrangements
  • freedom of association and workplace rights (general protections)
  • termination of employment
  • right of entry
  • the role of the Fair Work Ombudsman and the Fair Work Commission.

2. The Casual Employment Information Statement. The CEIS has information about:

  • the definition of a casual employee
  • when an employer has to offer casual conversion
  • when an employer doesn’t have to offer casual conversion
  • when a casual employee can request casual conversion
  • casual conversion entitlements of casual employees employed by small business employers
  • the role of the Fair Work Commission is to deal with disputes about casual conversion.

Employers aren’t required to give casual employees the CEIS more than once in any given 12-month period (for example, if an employer employs a casual employee temporarily at different stages in one 12-month period, they only need to give them the CEIS once. However, it should be noted that large employers (15 or more employees) must give the CEIS to employees every 6 months. Still, small employers (15 or fewer employees) must provide the CEIS every 12 months on the anniversary of each employee’s start date.

3. The Fixed Term Contract Information Statement. The FTCIS has information about:

  • what a fixed-term contract is
  • limitations on the use of fixed-term contracts
  • exceptions to the limitations
  • how to resolve disputes about fixed-term contract limitations and exceptions.

How to Give these Statements to your Employees

Fair Work states that you may provide these statements in a variety of ways:

  • in person
  • by mail
  • by email
  • by emailing a link to this page of their website
  • by emailing a link to a copy of the FWIS available on the employer’s intranet

Depending on the employment status of your employees, you may need to provide the FWIS only. However, if you employ a mix of employees i.e. full-time, part-time, casual, and/or fixed-term contract, it may be necessary to provide all three statements as described above. Remember, providing the FWISs is not optional – it is compulsory. Failure to do so may incur penalties – see here.

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Think you can get away with not paying your employees’ super? Think again!

Employers intentionally not paying their employees’ super has always been a bugbear of mine. If you follow my Twitter (X) account, you may have seen the hashtag I use: “#notyourmoney“. I use this hashtag because I believe that employee superannuation is not your money and never will be and I want to enforce this concept. These irresponsible employers anger me. It is completely wrong to hire people and then fail to fulfill the contract you agreed upon, which includes paying their super. In my opinion, not paying super is equivalent to stealing.

In the past, employers were able to get away with this unacceptable behavior because the Australian Taxation Office (ATO) only found out about it when employees reported them. At that point, the ATO would investigate, audit, and penalise these employers. This reactive approach has resulted in an estimated $2.5 billion shortfall in unpaid super. This is a truly disgraceful situation.

But things are about to change…

In the 2023-24 Federal Budget, it was announced that the ATO will receive $40.2 million for super compliance measures. This funding includes $27 million for data matching capabilities to identify and take action on cases of Superannuation Guarantee (SG) underpayment, as well as $13.2 million for consultation and co-design.

So what does this mean? Who/what will the ATO be data matching with?

Firstly, it is now widely known that the ATO receives payroll data from employers through Single Touch Payroll events (STP). This data includes the superannuation amounts owed to employees’ super funds. The ATO also receives information about employees’ super from the Australian Prudential Regulation Authority (APRA) through the Member Account Transaction Service (MATS). MATS is a reporting service used for more frequent and detailed reporting of member super contributions and transactions. The ATO utilises the information from both sources to identify potential non-compliant behaviour by employers.

With increased funding from the budget, the ATO will intensify data-matching activities between STP and MATS. This shift from a reactive to a proactive approach means that the ATO will be able to initiate audits themselves instead of relying on employees to report non-compliance after the fact.

It is important to note that this data-matching activity is not new. It has been ongoing since 2019, with the ATO reporting a 24% increase in investigations of super non-compliance. What is new is the improved data matching capabilities enabled by better technology and more comprehensive STP data.

The ATO is now more focused than ever on addressing super non-compliance. They have the necessary tools and resources to conduct investigations and audits on a large scale.

This makes me feel more positive about this problem. I sincerely hope the ATO succeeds in its efforts. I have a strong aversion to employers who think they can evade paying super. It is essentially stealing, a white-collar crime. Thanks to the ATO’s real-time monitoring, the likelihood of getting away with non-payment of super is rapidly decreasing. And that is a very good thing!

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Upcoming Changes to Workplace Laws

Fair Work often updates the rules regarding payroll and right now is no different! Several aspects of payroll have or will change in the very near future. Read below for the details.

1. Small Business Employers Must Offer Paid & Domestic Violence Leave from 1st August 2023

All employees in the Fair Work system, including part-time and casual employees, will soon have the right to 10 days of paid family and domestic violence leave within a 12-month period.

This new entitlement will be available to employees of small business employers (employers with less than 15 employees on February 1, 2023) starting from August 1, 2023. Employees of non-small business employers have already been able to access this leave since February 1, 2023.

Employees will receive the full 10 days of leave upfront, without needing to accumulate it over time. To help you understand and manage your new responsibilities, access the Fair Work fact sheet here. You can also find a summary of the details in our blog.

2. Paid Parental Leave Scheme Changes

From July 1, 2023, there will be some changes to the paid parental leave scheme. One of these changes is that the current 18 weeks of paid parental leave pay will be combined with the current 2 weeks of Dad and Partner Pay. This means that partnered couples and single parents will now be able to claim up to 20 weeks of pay. For more details go to this Fair Work page.

3. Right to Superannuation in the National Employment Standards (NES)

Starting January 1, 2024, the National Employment Standards (NES) will have a new provision that guarantees superannuation contributions for employees. This means that employees, employee organisations, and the Fair Work Ombudsman can make sure that employers pay the correct amount of superannuation or address any unpaid amounts under the Fair Work Act. 

Employers are already required to contribute to superannuation for eligible employees according to existing laws. As long as employers meet their obligations under these laws, they will not be in violation of the NES provision.

The Australian Taxation Office (ATO) will continue to oversee employer compliance with superannuation guarantee laws.

4. Changes to Unpaid Parental Leave

Starting July 1, 2023, the Fair Work Act will bring in more flexibility for employees who take unpaid parental leave. This change is in line with updates to the Paid Parental Leave scheme. Now, employees can take up to 100 days of their 12-month leave entitlement flexibly within 24 months after their child is born or placed with them. This is a significant increase from the previous allowance of 30 days.

Pregnant employees will also have the choice to access their flexible unpaid parental leave up to 6 weeks before their expected due date.

Furthermore, employees will no longer be limited to taking a maximum of 8 weeks of unpaid parental leave at the same time as their spouse or de facto partner. Both parents can now take up to 12 months of unpaid parental leave within 24 months of their child’s birth or placement, and they can even apply for a 12-month extension beyond the initial leave period.

5. Authorised Employee Deductions

Starting on December 30, 2023, employees will be able to authorise recurring salary deductions from their employers, even if the deduction amounts change. Before, they had to provide a new written authorisation every time the deduction amount changed. With the new law, employees can give a single written authorisation that allows their employer to deduct varying amounts from their salary. The employee can still withdraw this authorisation in writing at any time. It’s worth noting that deductions for specific amounts can still be authorised if they mainly benefit the employee and are provided in writing.

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ATO STP Filing Error Codes – what do they mean and how do you fix them?

At the time of writing this blog, most employers are actively submitting payroll events via Single Touch Payroll (STP). STP has been around since July 2018 and has now evolved into STP Phase 2. Most software companies used by small businesses to file STP reports, are now STP 2-enabled, so many employers will be reporting payroll via this mode.

While the process of filing or reporting payroll via STP is fairly straightforward, there can be occasions where things may go wrong. This is particularly true now, given the setup for STP Phase 2 is quite involved and onerous. Should the setup for STP 2 not be done correctly, this will most certainly lead to filing errors.

If a pay event is returned after filing it, the ATO will provide an error code that describes the issue. While these codes are useful in terms of helping the lodger understand what is wrong, they do not assist in providing details about how to fix the error within the software you may be using.  Luckily, there is help available from each of the main software providers. 

Here is a list of the software providers and the links to their help pages, should your filing return an ATO error code:

MYOB

QBO

Xero

Also, from Reckon, here is a list of the most common submission errors via the ATO. Each error code is explained and a reason behind the error is given. This can be a helpful starting point when trying to rectify any STP errors.

I hope this blog has been helpful to you if you are an employer or bookkeeper. It would be a good idea to add the link for your chosen software to your favourites list for future access, should you encounter an STP filing error.

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What NOT to include in payslips for paid Family & Domestic Violence Leave

Here is a reminder that access to paid family and domestic violence leave for employees of non-small business employers (employers with 15 or more employees) began on 1st February 2023 (and 1st August 2023 for small business employers). The leave is for 10 days for any full, part-time or casual employees and is not pro-rated. Read more about this new leave type in our previous blog here.

Something important to call out in relation to paying this leave is the information that is prohibited from being included on the employee’s payslip. 

Employers must not include:

  • A statement that an amount paid to an employee is a payment in respect of the employee’s entitlement to paid family and domestic violence leave
  • A statement that a period of leave taken by the employee has been taken as a period of paid family and domestic violence leave
  • The balance of an employee’s entitlement to paid family and domestic violence leave

The reason for not including this information is that if a perpetrator of violence gains access to the employee’s payslip and sees that this type of leave has been taken, this may pose a significant risk to the employee.

When setting up this type of leave in the payroll system, it is important to give it a generic name that does not reference the words “Family and Domestic Violence Leave”. In fact, not calling it “leave” at all is best practice. Given the payment is for an employee’s full rate of pay for the hours he/she would have worked if they weren’t on leave, then simply producing a payslip that shows “gross” pay, is recommended. In the back end of the payroll setup, details can be added noting what the payments actually are, and leave entitlement balances can be recorded but not included on the payslip (simply uncheck that box in the employee’s payroll setup (software-dependent)). 

Precluding statements about this type of leave on an affected employee’s payslip is now part of the Fair Work Legislation Amendment Regulations 2022. Employers must take note and ensure that their payroll systems are set up correctly to reflect these amendments. Failing to do so may/will put affected employees at significant risk. If you are an employer, make sure you action this now (or by August 2023 if you are a small employer).

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A Better Employee Onboarding Experience is coming…

The way new employees are onboarded is changing. Currently, employers ask new employees to provide a Tax File Number Declaration form, a Super Choice form, and also other personal information required in order to set them up in their payroll systems.

While this process is fairly straightforward, often employers find themselves chasing new employees for the data and at times, needing to confirm details that may or may not be correct (usually not correct in my experience!). This process can therefore be very time-consuming and tedious for employers, not to mention that the room for error is very high. It is also not a great deal of fun for new employees either!

Enter the “New Employment Form”.

This is an all-in-one onboarding form that new employees access from their myGov accounts. The form will provide both the ATO and the employer with all of the information required to set up new employees in one easy action.

Importantly, this form will replace several forms. These include the Tax File Number Declaration, the Super Choice form, the Variation to Tax Withholding Declaration, the Variation to Medicare Levy Declaration, etc. Employees can also use it to update their tax circumstances, for example, if:

  • their residency status has changed
  • they no longer have a government study and training loan
  • they are claiming the tax-free threshold from a different employer.

This change to employee onboarding will reduce the administrative burden for employers and increase process efficiencies. It will also reduce data recording errors which are very common when obtaining personal details from new staff members.

How the new onboarding process works

Firstly, the employer needs to provide his/her ABN to the new employees.

To access the new form, employees will require a myGov account linked to the ATO. Once signed in they will:

  • access ATO online services
  • go to the ‘Employment’ menu
  • select ‘New employment’ and
  • complete the form then
  • submit the form

After submitting the form, the details will be sent straight to the ATO removing the requirement for employers to send completed TFN Declarations separately. It’s important to note that the changes to Single Touch Payroll Phase 2 have also made this possible i.e. every time a pay run is reported via STP 2, employees’ tax information is sent to the ATO. Although this step can now be removed from the onboarding process, employers must continue to receive completed TFN Declarations from new employees and retain them as part of the employees’ records.

Once the form is submitted, the employee will print the form and give it to the employer who will use the information to set up the employee in the payroll system.

It’s important to note that the downloadable version of the TFN declaration form will be removed by the end of 2022.

 The ATO is therefore requiring new employees to be onboarded using the new above process going forward. This is a new process that both employers and employees need to understand and adopt. It has benefits in terms of efficiency and data security and in my opinion, is the way forward.

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New PAID Family & Domestic Violence Leave

Employees (full-time, part-time, and casual), will soon be able to access 10 days of paid family and domestic violence leave in a 12-month period.

This will replace the current 5 days of unpaid leave available to affected employees.

Employees will be entitled to the full 10 days upfront, meaning they won’t have to accumulate it over time. The leave won’t accumulate from year to year if it isn’t used. The leave will renew every year on an employee’s work anniversary.

The new leave entitlement will be available from:

  • 1 February 2023, for employees of non-small business employers (employers with 15 or more employees on 1 February 2023) 
  • 1 August 2023, for employees of small business employers (employers with less than 15 employees on 1 February 2023

Reasons for requiring this type of leave could include:

  • making arrangements for their safety, or the safety of a close relative (including relocation)
  • attending court hearings
  • accessing police services
  • attending counselling
  • attending appointments with medical, financial or legal professionals

An employer can ask for evidence from an employee when the leave is applied for. Types of evidence can include:

  • documents issued by police
  • documents issues by court
  • family violence support service documents or
  • statutory declaration

Employees will continue to be entitled to  5 days of unpaid family and domestic violence leave until they can access the new paid entitlement.

Reporting paid Family and Domestic Violence Leave on payslips has very specific rules – read our blog here to find out more!

For more information go to the Fair Work website.

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Which Income Type do you choose for Closely Held Payees?

As part of the set-up for STP Phase 2, employees must be labelled correctly as per a category of taxpayer (e.g. Regular, Actor, Senior or Pensioner & Horticulturist or Shearer) etc) and an additional layer known as an income type from the list below:

  • SAW (salary and wages)
  • CHP (closely held payees)
  • WHM (working holiday makers)
  • FEI (foreign employment income)
  • IAA (inbound assignees to Australia)
  • SWP (seasonal worker programs)
  • JPD (joint petroleum development area)
  • VOL (voluntary agreement)
  • LAB (labour hire)
  • OSP (other specified payments)

Most of the above income types are self-explanatory, with the exception of “closely held payees” (CHP). The CHP income type is tripping people up because they assume a payee who is a CHP should automatically be given the CHP income type. While this appears to be a logical choice, a CHP may have either an income type of SAW or CHP, depending on the entity’s situation. So how do you know when to choose one over the other? Below is my explanation of this issue.

Firstly, what is a CHP? The ATO says it’s a person directly related to the entity from which it receives payments such as the following:

  • family members of a family business;
  • directors or shareholders of a company; and
  • beneficiaries of a trust.

Payments made to CHPs which are subject to withholding tax and superannuation guarantee must be reported via STP Phase 2.

When to choose the CHP Income Type

If the following applies to the entity that is paying CHPs, then the CHP income type must be selected during setup for STP 2:

  1. There are 19 or fewer employees (small employer) and
  2. One of the 2 x quarterly reporting concessions is being used
    • Option 2 – Report actual payments quarterly
    • Option 3 – Report a reasonable estimate quarterly
  3. Payroll finalisation will occur later than 14th July

Choosing either CHP or SAW Income Type

If the above reporting concessions are not being used by the entity and finalisation will occur by 14th July along with other arms-length employees, you may choose the income type CHP or SAW for your closely held payees.

I hope this has clarified the confusion around when to choose CHP as an income type for a payee who is a CHP.

If you are in the process of setting up your payroll for STP Phase 2, the ATO has a number of resources available. See also here for further ATO resources. It is worth checking them out to ensure that your setup is correct. Remember, STP Phase 2 will see a large proportion of payroll data shared with Services Australia on behalf of your employees. Services Australia will use this information as the basis for calculating future payments to your employees, should they be receiving them. For this reason, as well as ensuring employees’ wages are taxed properly, it is very important to ensure that your STP Phase 2 reporting is accurate and correct.

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Complete a TFN Declaration via your myGov account

Have you taken on new employees? Did you know they can complete a TFN declaration through ATO online services?

This is an easy way for them to provide both you and us with the information we need. If your new employee has a myGov account linked to the ATO, they can:

  • access ATO online services
  • go to the ‘Employment’ menu
  • select ‘New employment’ and complete the form.

This sends the TFN declaration details straight to us so you don’t have to. Your employee will need your ABN to complete the form. Once they’ve submitted the form, they need to print it and give you the summary of their tax details so you can input the data into your system.

You may be able to link your payroll software to the online commencement forms. But check first with your software provider if they offer this service.

You can also use the New employment form to collect a range of information. Despite its name, you can also use this form instead of the:

  • Withholding declaration form
  • Medicare levy variation declaration form
  • Superannuation standard choice form.

Your employees can use the New employment form to update their tax circumstances with you, for example, if:

  • their residency status has changed
  • they no longer have a government study and training loan
  • they are claiming the tax-free threshold from a different employer.

You can continue to use your current processes, including providing a paper TFN declaration where employees can’t create a myGov account or don’t have access to the internet.

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Common STP Phase 2 Mistakes

STP Phase 2 is in full swing. It began on 1st January 2022 but various accounting software have not been ready until recently. This means many employers are only just now learning about, and setting up their payroll systems, to comply with STP 2 requirements.

Unfortunately, as it is still relatively new, some employers are making errors when reporting via STP Phase 2. Recently, the ATO published a list of those mistakes it is seeing. I am highlighting them here so you can be sure to avoid them when you start to report via STP Phase 2.

Common STP Phase 2 Mistakes List

  • Breaking the continuity of year-to-date amounts from STP 1 reporting. Unless you are using the replacing IDs method for transitioning to STP 2, you need to ensure that you maintain the STP 1 data that you have already reported. Your accounting solution will help you manage this and you should contact your provider if you require assistance with this issue.
  • Selecting “not reportable to the ATO” when setting up pay codes/categories. Most payments to employees need to be reported except for:

1. Travel allowance below the ATO’s reasonable amounts

2. Overtime meal allowance below the ATO’s reasonable amount

3. Reimbursements

4. Post-tax deductions except for those you need to separately identify.

  • Omitting a cessation date and reason. When an employee leaves your business, you need to report the date he finished and the reason why he left. Your accounting solution will include these fields to complete upon termination. The ATO will share this information with Services Australia which means you will no longer need to complete a separation certificate for that employee.
  • Some income types you report for employees will also include a special country code. If you are required to report a country code, you must report the code relevant to that employee. Some employers are incorrectly reporting a “NA” country code, thinking that it means “not applicable”. It actually means “Namibia”. So if you use NA in your reporting, you are telling the ATO that your employee is either working: 

1. Overseas in Namibia or,

2. Is in Australia and they are from Namibia.                                     

  • Allowances. All allowances must be reported separately using one of 8 specific allowance categories. You must not simply report an allowance to the “Other Allowance” category (allowance type OD). You must report allowances using their appropriate category because each category is treated differently for tax, super and social security purposes. Only report an amount as Allowance type OD if it’s an allowance that does not belong in one of the 8 specific allowance categories. 
  • Treating reportable super contributions (RESC) and salary sacrifice as the same thing. These are 2 different things and need to be reported correctly. Check out this ATO video which explains how to report these payments via STP 2.

Here is the link to the ATO webpage which provides more in-depth information about the STP 2 reporting mistakes listed above, including several helpful videos.

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