Contractors Superannuation – Voluntary Agreement and Non-Employees
Sybiz Visipay 26.11 introduces the ability to include STP reporting for contractors that are paid superannuation through Sybiz Visipay.
Now that Payday Super is here, the new reporting requirement to report Qualifying Earnings applies to all individuals receiving Employer Superannuation Guarantee, whether employees or not.
For both Voluntary Agreement and Non-Employee records in payroll, there are certain combinations of details that need to be recorded on the Personal and Employment tabs. Both types should have their payment methods set to cash to mitigate the risk of any inadvertant payments via bank transfer in the event of any mistakes.
It is recommended to start creating the details for a new employee on the Employment tab to make the selection for the employment basis and review the tool tip for other settings that need to be configured for that employment basis:
Note that in some cases, the Fixed Tax Rate may be misconfigured, and even though Fixed Tax Rate is selected, this error message will persist: Voluntary Agreement records must have a tax scale of ‘Fixed Tax Rate’. Contact Sybiz, who will be able to run a script to update your database (you will need to provide credentials to access your database; have those handy before contacting Sybiz).
In most cases, contractors will provide an invoice that is entered into the financial system, such as Sybiz Vision, and payment, less any relevant withholding, will occur in the financial system. The date of payment can be thought of as effectively the same as a payday from payroll for Payday Super purposes.
In the event the entire transaction chain occurs in the payroll system, it is not really necessary to treat contractors any differently from a payroll processing point of view in terms of creating and applying relevant pay items and ensuring tax calculations are in line with any voluntary agreements.
However, if processing invoices and payments in an accounting system, you will need to ensure reporting, tax and payments are not duplicated. This requires a little bit of preparation work. The following takes you through the recommended approach if using Sybiz Vision, including sending journal entries from Sybiz Visipay to Sybiz Vision.
Because the aim is to pay contractors from the financial system, it is necessary to neutralise the postings and payment creation in Sybiz Visipay. This entails using a pairing of an earning pay item, set as a qualifying earning, and an allowance set to non-taxable, non-reportable, superannuation does not apply. The allowance will be used to process an equal and opposite value to the Qualifying Earning earning pay item. Both are of the Lump Sum calculation method.
It is recommended to set up a separate department in Sybiz Visipay for contractors to permit separate treatment from a general ledger postings perspective. Specifically, PAYG liability should be posted to the same account as the Payroll Clearing account and Earnings and Allowances should be set to the same posting account as each other for the contractor department. This will result in all non-superannuation postings neutralising each other for contractors, with just the superannuation related postings remaining.
The following snapshot from the pay history shows the achievement of the desired outcome, with Qualifying Earnings of $10,000 reported via the earning pay item with the corresponding superannuation liability of $1,200. The negative balance resulting from the tax can be ignored, as the payment method is set to cash (assuming all other employees are paid via bank transfer).
An extract from the STP2 Reconciliation Report is also shown.
As mentioned, if journals are exported from Sybiz Visipay to a financial system such as Sybiz Vision, it is recommended to use a separate department for contractors to segregate postings from regular employees.
In some cases, contractors will invoice inclusive of superannuation, but in most cases it will be exclusive of superannuation. In the event your contractors invoice you exclusive of superannuation, you will want the Super Liability and Super Expense accounts to differ in your journal configuration; in the event your contractors invoice inclusive of super, you will want the journal configuration to hit the same account for Super Liability and Super Expense, as the super liability and expense should be recognised in the financial system at the time the invoice from the contractor is processed.
In the rare event your business encounters a mix of contractors invoicing inclusive and exclusive of super, you should use separate departments in Sybiz Visipay to distinguish the treatment and configure journals as advised above.
The following image shows the postings that occur as a result of the pay that has been processed for the scenario in which the contractor invoiced $10,000 exclusive of super, which was subject to a voluntary withholding of 20% (the financial effect of these elements were handled in Sybiz Vision), and Sybiz Visipay was used to report the data to the ATO via STP and handle the superannuation that was payable on top of the invoiced amount.
