Many announcements have been made over the past few months, including the Federal Budget, and these have led to confusion about what is and is not changing. We have provided details below about what the status of those changes are and what will apply from 1 July 2014.
Superannuation guarantee rate
The minimum rate will change from 9.25% to 9.5% from 1 July 2014. This means that all wages paid on or after 1 July 2014 will be subject to the increased rate. There is a proposal to defer future increases in the superannuation guarantee rate for four years but this will only need to be considered at the end of 2014-2015 as to whether the proposal has been agreed to or not.
Check what changes will be required for your staff who are on total remuneration packages inclusive of super. Will there be a reduction in the cash component for the employee or will the employer meet the additional superannuation costs? These are the two approaches currently being applied although, depending on the employer, the most common approach being taken is the reduction in the cash component for the employee.
Medicare levy rate
The rate increases from 1.5% to 2% from 1 July 2014. PAYG withholding tables are being revised to reflect this change and therefore all wages received on or after 1 July 2014 will be affected.
Advise your staff that the rate is changing and consequently their take-home pay may reduce slightly. Informing your staff in advance will hopefully reduce the number of queries on why cash wages have reduced post-June 30.
All award rates will increase from 1 July 2014 but the increases will apply to the first full pay from 1 July 2014. Any pay that straddles the change of income year should not be affected.
This means some staff may notice a reduction in their first take-home pay from 1 July 2014 due to the Medicare levy increase and then an increase in their subsequent take-home pay due to the pay rate rise. Once again, informing your staff in advance will pre-empt the potential flood of enquiries you may receive.
Temporary deficit levy
The temporary deficit levy of 2% for taxable wages above $180,000 is to apply for three years. Whilst agreement to this change will only be formalised in the Senate next week, the Labor party has indicated its support and the ATO has started changing the PAYG withholding schedules to include the increase.
Paid parental leave
The Government’s paid parental leave of 18 weeks will continue. There is an intention to exclude the need for employers to be involved but at this late stage it is highly unlikely to proceed from 1 July.
The Coalition’s proposal of six months of paid parental leave is still being debated and, if passed, will not apply until 1 July 2015.
Termination rates and thresholds
The redundancy tax-free limits will increase from 1 July 2014. These apply to payments received on or after 1 July 2014 even if the retrenchment occurred prior to 1 July 2014.
Other termination rates will increase by 0.5% therefore 16.5% will become 17%, 31.5% will become 32% and the top rate will increase to 49% (a combination of the Medicare levy increase of 0.5% and temporary deficit levy of 2%).
The ETP Cap increases to $185,000 but the Whole of Income Cap remains at $180,000.
Superannuation concessional limits
The concessional limits for 2014-2015 are as follows:
Age at income year-end
The limits are based on the total of the employer superannuation and sacrificed superannuation received and recognised by the fund(s) for an individual in the 2014-2015 income year.
This will commence from 1 July 2014 for employers of 20 or more employees but transitional rules will give such employers a 12-month period to comply. Most funds will have until 3 November 2014 to meet the new obligations initially but they can also choose to inform the ATO of when these new obligations will be met and they then have up to 30 June 2015 to be compliant.
Small employers with less than 20 employees will commence in the new system from 1 July 2015 but have until 30 June 2016 to be compliant.
If you have a payroll of less than 20 employees, consider using the ATO’s Small Business Superannuation Clearing House to meet your obligations. It is a free online service and details are available at this link: https://www.ato.gov.au/Business/Employers-super/In-detail/Small-Business-Superannuation-Clearing-House/Using-the-small-business-superannuation-clearing-house/
High income threshold
The high income threshold will increase from $129,300 to $133,000 from 1 July 2014.
An employee with earnings which exceed this threshold:
- who is covered by an award can opt out of that award by written agreement with the employer and be engaged under a separate employment contract; and
- cannot bring an unfair dismissal claim through the Fair Work Commission unless they are covered by an award or EBA.
High income threshold components
The high income threshold includes:
- salary sacrifice amounts; and
- any agreed value of non-monetary benefits (eg mobile phones).
The high income threshold excludes:
- payments that can’t be determined in advance (eg commissions, bonuses or overtime);
- reimbursements; and
- superannuation contributions that the employer has to make (eg the SG component).