How to pay employee tax and super

Pre-tax contributions includes superannuation contributions under a salary sacrifice arrangement and non-monetary contributions to an employee’s fund, such as the transfer of real property and marketable securities.

Under sections 9CA–9CD of the PTA Act, a superannuation contribution is taken to be

• a contribution paid or payable by an employer to, or as, a superannuation fund in respect of an employee in a return period or
• any amount, although not paid or payable, that is or is required to be credited under a superannuation fund as an employer’s contribution in respect of an employee. This refers only to an Australian superannuation fund that does not provide any defined benefits.

The amount to be included as a superannuation contribution is

• the contribution made by the employer in the return period
• a notional contribution taken to have been made by the employer in the return period and
• if an employer has an individual superannuation guarantee shortfall for the return period, the amount of the shortfall.

The setting aside of any money or anything that is worth money as, or as part of, a superannuation fund is taken to be the payment of a contribution.

Definitions

Employee includes any person

• to whom (or in relation to whom) wages are payable and
• to whom remuneration is paid or payable by a company in that person’s capacity as a director of that company.

Superannuation fund means

• a superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) and
• any other form of superannuation, provident or retirement fund or scheme including
  • the Superannuation Holding Accounts Special Account within the meaning of the Small Superannuation Accounts Act 1995 (Cth) or
  • a retirement savings account within the meaning of the Retirement Savings Accounts Act 1997 (Cth).

An Australian superannuation fund is a superannuation fund that

• was established in Australia or has any asset in Australia and
• has its central management in Australia.

Notional contributions

A notional contribution is taken to have been made if the employee is a member of an Australian superannuation fund and the fund is a defined benefit fund. For each return period in which an entitlement accrues, an employer is taken to have made a notional contribution to the fund in that return period. The amount of the notional contribution is the amount that an actuary determines would be sufficient to meet the expected long-term cost of that benefit to the employer.

If you make a notional contribution to the fund for the employee as described above, no actual contribution for that employee is to be included in the payroll tax return as wages. This ensures that the amount payable and the amount paid are not accounted for twice.

Superannuation guarantee shortfall

An individual superannuation guarantee shortfall (shortfall) is defined in section 19 of the Superannuation Guarantee (Administration) Act 1992 (Cth). For the purposes of inclusion as wages, it does not include any superannuation guarantee shortfall penalty imposed on you because of non-compliance with choice of fund requirements.

If your contribution to a fund is payable, but not paid, it is treated as a superannuation contribution for payroll tax purposes, and the amount should be declared on the payroll tax return at the time the contribution arises. As a superannuation contribution for payroll tax purposes also includes a shortfall paid to the Australian Taxation Office, any amount that is treated as a shortfall because you failed to pay the contribution is reduced by the amount you have declared as a superannuation contribution in a payroll tax return for that period. Without this provision, you would be liable for payroll tax on both contributions. Any penalty included in a superannuation guarantee shortfall is not included for payroll tax purposes.

If you have an individual superannuation guarantee shortfall for an employee, that shortfall is taken to be paid for the last month of the relevant quarter.

At the end of each financial year, you need to give each of your payees (i.e. your employees and anyone else you’ve withheld payment from) a payment summary. You must also provide an annual report to the ATO.

Payment summaries

A payment summary should be provided to your payees by no later than 14 July each year, and needs to specify:

• how much you paid them in the financial year
• how much you withheld from the payments.

If you lodge your PAYG withholding reports online you can provide your workers with electronic payment summaries as long as these meet the formatting requirements.

For assistance on what to include in a payment summary, and guidelines for each different type of payment summary, read the ATO’s information on PAYG payment summaries: forms and guidelines.

Annual report

If you’ve withheld from payments, you will also need to lodge a PAYG withholding annual report at the end of each financial year. The report must include:

• all payments you made to employees, workers or businesses during the financial year
• the amounts you withheld from those payments.

To find out more about payment summaries and annual reports, visit the ATO’s information on payment summaries and annual reports.

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