Contractors Superannuation – Voluntary Agreement and Non-Employees

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. 

Generally speaking, contractors are paid from a financial system, such as Sybiz Vision and tax is withheld as part of that process and Sybiz Visipay is used purely for superannuation purposes. As a result, even though the Tax Scale must be set to Fixed Tax Rate, the rate used should be 0.

It is important to ensure reporting does not double up certain values through activity statement reporting and STP reporting. In essence, superannuation related figures are reported through STP, but the gross and withholding are reported through the financial system.

From an STP reporting perspective both Voluntary Agreement and Non-Employee data elements are far fewer than for other records. Both report Qualifying Earnings and Superannuation Liability figures. Whilst Voluntary Agreement records are also able to report Gross Earnings and PAYG, if these data are also reported via the financial system, any pre-fill information will duplicate and require manual intervention.

Using Sybiz Visipay to pay super and report Super Liability and Qualifying Earnings for contractors (Voluntary Withholding or Non-Employee) via STP, businesses, in most cases, will not require payment and tax reporting to be handled via Sybiz Visipay. That is because payment and tax reporting occurs within the financial system, for example, Sybiz Vision, due to contractors invoicing the business they are contracting to.

As such, there are some unconventional methods required to achieve the desired outcomes, which can extend to journals exported from Sybiz Visipay to Sybiz Vision or other systems.

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.

The following snapshot from the pay history shows the achievement of the desired outcome of a zero net pay, with Qualifying Earnings of $10,000 reported via the earning pay item with the corresponding superannuation liability of $1,200.

In the event that 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. The earning and allowance pay items should be configured to the same general ledger account so the positive earning and negative allowance do not result in postings to the general ledger.

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.