Feeling confused about payroll changes?

The new financial year means new tax rates; increased superannuation guarantee rates; minimum wage increase and award rates increases. But when do they all apply?

There are a lot of questions floating around on social media about when the new tax withholding, super & award rate increase apply. What happens if the days worked in the pay week splits across the end of financial year?? There’s also a lot of incorrect information being provided and a lot of guess work.

We’ll address each of these aspects below.

•          New Tax Rates / Withholding
•          Superannuation Guarantee Rate Increased to 11.5%
•          Fair Work national minimum wage and award rate increases
•          Pay week crosses the financial year
•          Can I pay wages early to bring them into the other financial year?

New Tax Rates / New Tax Tables / Changes to PAYGW

The new tax rates (tax tables) take effect from 1 July 2024. These are based on the date the payroll is PAID. Not the date the employees worked to earn those wages.

For example, let’s use the situation where you normally pay “last week’s” wages on Thursday “this week”. This means the wages you are paying in the first week of July were earned/worked during the last week of June. This time worked was last financial year, but it needs to be paid in this financial year. As the payment date is in the new financial year, the new tax tables / withholding rates apply.

In the 2025 year, this will result in an increase to the employees’ net pay as less tax will be withheld – yay! It will feel like a small pay rise! Never fear though, in many cases you can “accrue” the wages in last financial year so that the business gets the deduction in the year that the employees worked.

Superannuation Guarantee Rate Increased to 11.5%

The increased superannuation guarantee rate of 11.5% of ordinary time earnings takes effect from 1 July 2024. Just like the tax tables / PAYGW, this increased percentage is based on the date the payroll is PAID. Not the date the employees worked to earn those wages.

Using the same example as above, let’s discuss where you normally pay “last week’s” wages on Thursday “this week”. This means the wages you are paying in the first week of July were earned/worked during the last week of June. These hours were worked last financial year; however, the payroll needs to be paid in this financial year. As the payment date is in the new financial year, the new superannuation guarantee rate of 11.5% of ordinary time earnings applies.

As with all superannuation guarantee payments, ensure you pay the accrued amounts to the superannuation funds via an electronic clearing house in enough time that the funds are received by the fund and allocated to the employees’ superannuation account by the legislated due date of the 28^th of the month following the end of the quarter. If you miss this deadline, you must prepare and lodge a superannuation guarantee charge form with the ATO, even if you’ve already paid the superannuation, albeit late. Penalties apply from the due date right up to the date you lodge the form, even if it is years later. Late superannuation guarantee is also not able to be used as a tax deduction.

Fair Work National Minimum Wage and Award Rate Increases

Every year, the Fair Work Ombudsman reviews the national minimum wage. Generally, when the national minimum wage increases, so do the minimum award rates for many awards and registered agreements. The legislation states that the minimum wage increase should be applied to eligible employees’ pay from the first full pay period starting on or after the date that the increase applies.

What do they mean by this? Consider the situation where your pay week runs from Wednesday to Tuesday, and you pay staff two days later on the following Thursday. In 2024, the pay week of Wednesday 26^th June to Tuesday 2^nd July crosses over the end of the financial year. These wages will be paid at the old rate, because it’s not a ” full pay period starting on or after the date that the increase applies”. The following week’s wages, where the first day of the pay period is in the new financial year satisfies the criteria “the full pay period starting on or after the date that the increase applies”. Therefore, the pay week that runs from Wednesday 3^rd July to Tuesday 9^th July and paid on Thursday 11^th July use the new award rates. Note that this is different to the tax table withholding and superannuation guarantee mentioned above, which is dictated by the date of payment, not the pay week that the employees worked.

Pay Week Crosses the Financial Year

Do you need to split the pay for PAYGW, superannuation guarantee charge and /or award rate increase if the pay week crosses the end of financial year? NO.

The new tax withholding and superannuation guarantee rates are based on the payment date and the award rate increase comes into effect for the first WHOLE pay period in the new financial year.

For accounting purposes, you can accrue or apportion the days worked into the financial year that they were actually worked, and in some cases you can utilize the tax deduction based on the accrual / apportionment. However, for actual paying of payroll, and the related STP filing and EOFY finalisations, the full pay period is treated as a whole.

Can I pay wages early to bring them into the other financial year?

It’s important to keep to the normal pay cycle so as not to disadvantage employees. If you pay the wages earlier (or record in your accounting system as paid earlier) than their normal pay day cycle, when this changes the financial year that the wages are reported to the ATO in, this can adversely affect employees.  This moves an extra pay into one financial year and removes it from the next. This can cause issues with pushing an employee into another tax bracket, meaning they now have a tax bill; It can affect their Centrelink and Family Tax Benefit entitlements. This can also cause someone to have to pay back HECS when they weren’t expected to, by them breaching a threshold they wouldn’t normally breach. For some this might tip them into being required to pay additional child support (or lose access to child support) or being required to pay the Medicare Levy Surcharge. If your motivation as an employer is to increase your tax deductions in the financial year, consider accruing for those wages as per our comments above.

The final consideration here, is when you pay staff on the weekend. In reality, this is considered as being paid on the following Monday. Our banks are still archaic in that many don’t process transactions on weekends, despite the widespread use of OSKO payments. In 2024, processing wages on Sunday 30^th June will actually be considered 2025 financial year wages, with implications as discussed in all of the points above.

Payroll is important. It is extremely important to get it correct. Around end of financial year, small errors and changes can make a big impact on your staff, some who live pay day to pay day.

Should you need assistance or clarification on any of these issues, please contact our bookkeeping team on 07 3207 1030.