Wages, Allowances, Superannuation & Tax FAQ 2014

30th June 2014

I have received several questions on the changes to minimum wages, allowances, superannuation and tax so here is some additional information for you.

When do increases to minimum wages and allowances commence?

The new minimum rates apply from the first full pay period commencing on or immediately after 1 July 2014. For most employers that run weekly or fortnighly payroll Monday to Sunday, this means the increases will apply to the pay period commencing on the 7th or 14th of July. Note that the increases to wages may be offset (absorbed) against higher actual wages and salaries paid to your employees unless you have expressly agreed to pass on the amount decided in the Annual Wage Review. The Fair Work Commission has now updated all modern awards with the new wages and allowances.

How does the increase to award wages affect the equal remuneration payments to community service employees?

The equal remuneration order payments applicable to employees covered by the Social Community Home Care & Disability Services Industry Award increase with movement in the award rate on 1 July. However, you won’t find the ER payments in the award. The Fair Work Ombudsman has created a calculator that you can use to calculate the correct minimum ordinary hourly wage inclusive of the ER payment. However, you will need to know the pre-modern award classification of your employees as well as the modern award classification. For employers in NSW and VIC contact me for our own ER Payment Calculator where we have already matched the pre-modern and modern award classifications for you.

Does the Superannuation Guarantee increase to 9.5% apply from the pay period or pay day after 1 July?

Onced again a reminder that coinciding with the increase to minimum award wages and allowances, mandatory employer superannution contributions increase to 9.5% from 1 July as well. Note that unlike the increases to minimum wages, Superannuation contributions of 9.5% apply from the actual pay day (not the pay period) immediately on or following 1 July 2014. The payment to superannuation funds must be made at least quarterly.

Should I update my employment contracts to reflect the changes?

You should edit your employment contract templates to reflect the new superannuation contribution percentage. It should read as follows:

“The Employer will contribute 9.5% of your annual salary towards superannuation (providing your wages are in excess of $450 per month). Note that this percentage may increase over time in accordance with Superannuation Guarantee (Administration) Act 1992.”

If you refer to the casual loading in your contracts then you should ensure it is 25% from 1 July as the transitional period has now expired.

It is not necessary to reissue employment contracts to current employees. Simply inform them of the increase through your normal payroll systems and payslips. Contact me if you wish to review and update your employment contract templates.

What is happening to tax rates?

New tax tables have been published by the Australian Tax Office reflecting the most recent increase to the Medicare levy which is now 2%. The change will also affect Salary Packaging arrangements as the fringe benefits tax moves to 47%. If you are using the statutory method to calculate the taxable value of car fringe benefits then you will note that it is 20% of the purchase price for all vehicles no matter how many kilometres are travelled. For further information go the ATO website..

Further advice

If you would like further advice or information on any of these and other matters affecting your business please do not hesitate to contact me advice@maguire.com.au