The new financial year has arrived, bringing significant changes to Australian taxation & payroll.
The first step in becoming compliant is understanding your business’ new payroll obligations. To help in this regard, we’ve examined the latest changes and summarised them for your convenience.
Fast-track your research with this guide to the 2017/18 financial year.
Superannuation Contribution Caps
For employees info only – No change to employer’s obligations.
As of the 1st of July 2018, any unused portion of contribution caps can be carried forward.That means, from 1 July 2019, your employees will be able to access, for the first time, any unused portion of the concessional contributions cap from the previous financial year.
They will be able to access a maximum of 5 years, on a rolling basis. Amounts carried forward that have not been used after 5 years will expire. They will only be able to carry forward their unused cap if their total superannuation balance is less than $500,000 at the end of the previous financial year.
Please advise your employee to contact their financial planner or tax advisor for further discussion.
As a reminder, this has no impact on your obligations as an employer. It is purely for your employees’ information.
The roll-over of any unused concessional contribution cap will not be handled in the Australian payroll service that we provide. It is your individual employees’ responsibility to keep track of their concessional cap.
Please contact your Polyglot Payroll Officer if you require any clarifications.
Individual Income Tax Rates
Individual income tax rates for the 2018-19 year will be changed as follows:
|Resident individual||Non-Resident Individual||Working Holiday Maker|
(Visa 417/462 Holder) *
|Taxable Income||Tax Rate*||Taxable Income||Tax Rate||Taxable Income||Tax Rate|
|0 – $18,200||Nil||0 – $18,200||32.5%||0 – $37,000||15%|
|$18,201 – $37,000||21%||$18,201 – $37,000||32.5%|
|$37,001 – $90,000||34.5%||$37,001 – $90,000||32.5%||$37,001 – $90,000||32.5%|
|$90,001 – $180,000||39%||$90,001 – $180,000||37%||$90,001 – $180,000||37%|
|$180,001 and over||47%||$180,001 and over||45%||$180,001 and over||45%|
*2% Medicare Levy is included
*Company will need to register with ATO as employer of Working Holiday Makers.
The Fair Work Commission has announced a 3.5% increase to the minimum wage. The increase will apply from the first full pay period starting on or after 1 July 2018. The national minimum wage will be $719.20 per week, or $18.93 per hour.
The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38-hour week for a full-time employee.
This might have an impact on your Australian operations, from a budgetary perspective.
Penalty Rate cuts in the Australian Modern Awards
On 1 July 2018, Sunday penalty rates have changed, following a Fair Work Commission decision last year.
Changes will apply to the:
- General Retail Industry Award 2010 [MA000004] (the Retail Award)
- Fast Food Industry Award 2010 [MA000003] (the Fast Food Award)
- Pharmacy Industry Award 2010 [MA000012] (the Pharmacy Award)
- Hospitality Industry (General) Award 2010 [MA000009] (the Hospitality Award).
This might have an impact on your Australian operations, please contact your payroll or HR account manager for more details.
Key Rates & Thresholds
Lump Sum D Threshold
The Lump Sum D threshold will increase to $10,399 + $5,200 for each completed year of service from 1 July 2018.
The ETP indexed cap is changed to $205,000 from 1 July 2018.
The Whole of Income cap remains at $180,000 as this is a non-indexed figure.
Maximum employer super contribution cap
Will increase to $5,132.85 per quarter from 1 July 2018. (This represents an annual equivalent of $20,531.40)
Payroll Tax Thresholds
As part of the 2018 NSW Budget, payroll tax thresholds are to rise from the current level of $750,000. From 2018-19 the threshold will be $850,000 a year. Tax rate remain 5.45% unchanged.
From the 1st of July 2018, The Victorian Government increase the payroll tax tax-free threshold to $650,000 at 4.85%. The rate of payroll tax for Victorian regional businesses also decrease to 2.425% with payrolls that consist of at least 85% of regional employees.
From the 1st of July 2018 – For a 5-year period, the threshold amount remains unchanged $850,000.
The tax rate is now:
- 5.5% for the employers or group of employers paying taxable wages of $100 million or less.
- From 5.5% to 6% for the employers or group of employers paying taxable wages of between $100 million and $1.5 billion.
- From 6% to 6.5% for the employers or group of employers paying taxable wages of $1.5 billion or more.
Threshold amount remains the same at $600,000, the payroll tax rate for payrolls between $600,001 and $1 million, is 2.5%.
For payrolls in excess of $1 million but less than $1.5 million, 2.5% to 4.95%. For payrolls exceeding $1.5 million per annum, the rate is 4.95%. From 1 January 2019, legislative amendments will be implemented. Please follow us for any update.
The rate of Tasmanian payroll tax paid by employers for taxable wages between $1.25 million and $2 million is reduced from 6.1% to 4.0% and takes effect from the 1st of July 2018.
Termination of Employment
Fair Work has announced that it will introduce a new clause concerning the timing of termination payment. This will apply to the majority of Awards* in Australia.
*Awards are legal documents that outline the minimum pay rates and conditions of employment. They apply to employees depending on the industry and/or the type of job.
Starting from 1st November 2018, any payments due to employees under the affected Awards must be made no later than seven days after the last day of employment.
This new clause will be included into a total of 89 Awards; 33 Awards are still to be confirmed regarding the changes. Also, this clause will not apply to employees who are Award-free.
VIC Long Service Leave
The new Long Service Leave Act has been passed by the Victorian Parliament and comes into effect in November 2018.
– Any period of paid parental leave and up to 12 months of unpaid parental leave will count as service. No amount of parental leave will break the continuity of service.
– Employees can apply for Long Service Leave (LSL) after 7 years’ service (instead of 10 years’), as soon as their LSL entitlements begin accruing.
– The definition of “ordinary pay” to calculate the Long Service Leave will not change. However, there have been changes to the calculations of the average weekly rate when an employee does not have fixed working hours.The employee is entitled to the greater of the following:
1. The average weekly rate earned in the 52 weeks immediately before the employee starts long service leave (this method is not new)
2. The average weekly rate earned in the 260 weeks immediately before the employee starts long service leave (this method is not new)
3. The average weekly rate earned during the employee’s entire period of continuous employment with the employer (this method is new)
– Employees will be allowed to take Long Service Leave in smaller increments.
– Greater flexibility will available for women, families and people transitioning to retirement.
Processing payroll is hardly an easy feat. Not only does it require a complex understanding of surrounding regulations, but also requires in-depth knowledge on how to apply it for your particular business.
Needing help with your payroll? Looking to assure compliance? Perhaps you need to outsource your payroll to a trusted partner. If still unsure of the benefits of outsourcing your payroll, check out our FAQs on why you should.