There are many things to consider when hiring employees, their Salary or Hourly Rate being only the beginning.
Depending on the industry you are in and the size of your overall payroll, the on-costs you may incur can include Superannuation, WorkCover, Payroll Tax & CoINVEST, as well as meeting lodgment deadlines for Single Touch Payroll.
Below is an outline of these on-costs to help you understand how are they calculated and reported.
What is Superannuation?
Superannuation is money set aside while working to support financial needs in retirement. Superannuation is then invested in a range of assets to help grow the balance over time.
How is Superannuation Calculated?
For the 2022/23 financial year, the Superannuation rate is 10.5% on ordinary times earnings* earnt by your employee, regardless of their employment status if they are 18 years of age or older. If they are younger than 18 years old, they need to work more than 30 hours per week to be eligible for super contributions. This rate is set to increase annually and will be capped at 12% by July 2025.
*Ordinary times earnings are what is earned for ordinary hours of work, including certain bonuses, allowances and paid leave. Overtime hours paid are generally not included in ordinary times earnings.
How, and when, is Superannuation paid?
Superannuation contributions must be paid at least quarterly via a Clearing House, however, they can be paid monthly if preferred. This is called the ‘super guarantee’.
The latest date for quarterly payments to be made and cleared in your employee’s funds, is 28 days after each quarter end (e.g. 28th October, 28th January, 28th April, and 28th July.)
If the employee’s superannuantion has not cleared through the Clearing House by these dates, a Super Guarantee Charge may be payable.
If you need further information regarding how to use a Clearing House, or on the Super Guarantee Charge, please contact our office for assistance.
What is WorkCover?
This is a form of Insurance that covers all employees of a business and offers them compensation for any injury or illness that occurs at work regardless of fault. WorkCover insurance may cover medical expenses, loss of income, rehabilitation, lump sum payments, and legal costs.
Each state in Australia operates differently when it comes to this insurance, so if you employ in multiple states, you will have to register separately in each state.
How is WorkCover Calculated?
Each industry is attributed with a set rate. Your WorkCover premium is calculated by multiplying your total remuneration cost for the financial year by the applicable rate set for your industry, noting that there may be an adjustment (up or down) based on your claims experience (e.g. no claims over time will reduce the rate applied, or lodging claims could increase the rate applied).
The average WorkCover premium rate for the 2022/23 year is set at 1.272%.
How, and when, is WorkCover paid?
If your premium is less than $1,000 per year, you must pay the full amount as a one-off payment by the 1st of November each year.
If your premium is in excess of $1,000 per year, you can choose to pay your WorkCover premium as a one-off payment or in quarterly instalments. Paying in full will allow you to take advantage of the following discounts:
- paying before 15th August = 5% discount
- paying before 1st October = 3% discount
If you choose to pay it quarterly, the payments are due by the 1st of October, 1st of December, 1st of March, and 1st of June.
For more information on understanding your WorkCover requirements, including what counts towards the total remuneration cost your premium is calculated on please feel free to contact us. If you are a Victorian Employer you can find more information at Home page – WorkSafe Victoria.
What is Payroll Tax?
This is a tax levied on wages paid or payable by an employer when the total taxable wages of the employer (or group of employers) exceeds a threshold amount. Payroll tax is self-assessed and paid by the employer.
Like WorkCover, Payroll Tax is governed differently by each state, so if you employ in multiple states, you will have to register with each state’s authority. The rates and thresholds vary per state as well.
How is Payroll Tax Calculated?
In Victoria, an employer must register for payroll tax if, during any one month, the total Australian wages are above the relevant threshold. For the 2022/23 financial year, the monthly threshold is $58,333.
The employer will have access to Payroll Tax Express, which is an electronic portal where they will lodge a monthly return.
Australian wages for payroll tax purposes includes Gross Wages, Allowances, Bonuses, Superannuation and certain Fringe Benefits. Further, it may include payments to some contractors and employment agencies. Payroll tax is assessed on the Australian wages an employer pays over the monthly threshold amount with this excess being taxed at the applicable payroll tax rate. For Victorian employers, the rate is 4.85%, unless you are classified as a ‘regional Victorian employer’ where the rate is 1.2125%. For information on other States please refer to the applicable State Revenue Office.
How, and when, is Payroll Tax paid?
A monthly return must be lodged, by the 7th of the following month (e.g. a return for August needs to be lodged by the 7th of September.)
Once the form is lodged the system will generate payment instructions for the employer to make the payment.
What is CoINVEST?
CoINVEST is the portable Long Service Leave provider for the construction industry in Victoria. All members of the construction industry, including employers, employees, working subcontractors, working directors, and apprentices are required to be registered with CoINVEST.
This scheme was established so that workers are not disadvantaged if they move from project to project, or employer to employer, over time.
Once a worker has been employed in the industry for 7 or more years, they can make a claim to CoINVEST for a Long Service Leave payment. CoINVEST then pays the worker directly so that their current employer does not have to.
How is CoINVEST Calculated?
CoINVEST keeps a record of how many days of eligible service a worker accrues in Victoria and is tracked across all employers.
Each employer must register their details and employees with CoINVEST and report the eligible days worked and the Gross pay for each person on a quarterly basis. Please note that Apprentices are included on the form for days worked but not Gross hours.
The contribution is then calculated at 2.7% of the Gross Wages.
How, and when, is CoINVEST paid?
Once the quarterly data is lodged, CoINVEST will issue an Invoice for payment of the required amount. The costs are not itemized per employee and there is no dollar value building up against an individual worker’s name.
Single Touch Payroll
Outside of the monetary obligations listed above, all employers now also have a requirement to lodge all payroll data with the Tax Office via Single Touch Payroll (STP). STP must be lodged at or before the time of making payment to the employees and must meet the ATO’s data requirements. All payroll programs should now be at least STP Phase 1 compliant and moving toward STP Phase 2 compliance by December 31st, 2022.
To learn more about STP Phase 2, read our article ‘STP Phase 2 is here – but you still have time to be compliant‘.
As always, we are here to help you. If you need assistance with your payroll obligations or you would like to speak with one of our payroll specialists, please contact us on (03) 5221 6399 or at email@example.com.
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Disclaimer: This information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.
This article was written by Davidsons Bookkeeper Leanne Hamer.