Getting the timing right to claim employee super payment deduction

With many businesses finalising their EOFY plans and looking to claim a deduction in the 2020 tax year for the June quarter’s contributions, the timing of employee superannuation payments is crucial. Employers should take into account the processing time of the clearing house they use.

From the Hall Chadwick WA team

The contributions must be received by the superannuation fund – not just the clearing house – before 30 June 2020. If the clearing house does not transfer the contributions to the superannuation fund until after 30 June 2020, the deduction will not be available until next year.

If the superannuation fund does not receive the contributions by 28 July 2020 (being 28 days following the end of the quarter) no deduction will be available at all. The time it takes for a superannuation contribution to be received by a fund after being paid by the employer to the clearing house may vary. MYOB and Xero advise the following timelines:

MYOB

To ensure that the funds receive your payments in time, you should submit the super payments in your MYOB software at least four business days before they are due. In our experience, contributions often taken longer than four business days, so we suggest ensuring payments are processed by 23 June 2020.

Xero

To ensure your contributions reach the superannuation funds by 30 June 2020, your Auto Super batch must be “Approved” by 24 June 2020. Allowing an extra two business days in these timelines might be helpful.

Please note that the above payment dates may mean that the final pay run in June may not be taken up as part of the June quarter’s superannuation paid before year end. Where this is the case, the balance of superannuation for the June quarter will still be required to be received by the superannuation fund within 28 days following the quarter end. However, the balance will not be deductible until the 2021 tax year.

If you are using the Small Business Superannuation Clearing House (SBSCH) super payments need to be accepted by 23 June 2020. Given payments may take a few days to be received, allow an additional two to three business days for EFT and BPAY.

Single Touch Payroll

Many businesses are now approaching their first financial year end using single touch payroll (STP). The end-of-year finalisation process has different due dates depending on the number of employees within the business:

  • 20 or more employees the due date is 14 July 2020
  • 19 or fewer employees, 31 July 2020.

Please check the information carefully before completing the finalisation declaration. Any corrections to the information submitted need to be made through your STP compliant software.

Businesses who previously held an exemption as closely held employers will need to be STP compliant from 1 July 2020.

Inform your employees

As an employer, you will also need to inform your employees that they will no longer receive a payment summary from you. Instead, employees will be able to access their Income Statement through their registered tax agent or through MyGov. The ATO has provided an Employee Fact Sheet for employers to provide to their employees to help them understand this change.

For payments to employees that were not reported through STP, employers are still required to:

  • Provide a payment summary to their employees; and
  • Provide the ATO with a payment summary annual report for these payment summaries.

These payment summaries must be provided to employees by 14 July 2020.

Discuss this in more detail with our team, please call +61 3 9820 6400.