Employment in Australia and the 2022 Federal Budget.

Australia’s employment laws evolve regularly and this year has been no exception.

The latest Federal Budget was released on 29 March and as always, there’s a lot to digest. We’ve summarised the key changes relating to employment, tax and superannuation payments in Australia that have come about as a result of the budget.

Superannuation changes

By law, Australian employers must pay superannuation to their staff. This money is deposited into a ‘super’ fund on behalf of each worker, to be accessed after they retire.

Superannuation helps to ensure people are financially comfortable in the future and there are penalties for failing to pay it correctly. Over the next few years, the amount of money employers must pay is set to increase in increments.

Super Guarantee Rate Change

– From 1 July 2022, the amount of superannuation that business owners need to contribute for their staff will increase from 10% of salary and wages paid to 10.5% of salary and wages.

– This means if your employment agreements are written as wages + super, you will be increasing your overall employee costs by an extra 0.5% for the year.

– The super rate will continue to increase by 0.5% every year until it hits 12% in 2026.

In Australia, superannuation must be paid to employees’ super accounts every quarter. The cost applies to ‘ordinary time earnings’ (OTE) or salary.

If you are an overseas company that employs people in Australia, you are not exempt from paying superannuation. Work with a reliable PEO to ensure this money is distributed accurately and on time.

Removal of the $450 threshold amount for super contributions

Until this year, if an employee has earned less than $450 per month, their employer has not been required to contribute to their superannuation.

This changes from 1 July 2022. From that date, everyone over 18 will be paid super on every dollar they earn.

If you have a number of casual workers who only earn a couple of hundred dollars per month, be aware that this update to regulations will add to the cost of employment in Australia.

One-off cost of living tax offset

From 1 July 2022, individuals who earn under $126,000 may receive a once-off $420 cost of living tax offset that is paid through their 2021-22 tax return.

This once-off offset is combined with the Low and Middle Income Tax Offset (LMITO), meaning eligible low and middle-income earners will receive up to $1,500 for a single income (or up to $3,000 for a couple) for the 2021-22 income year.

This Cost of Living Tax Offset has been clearly labelled as a once-off, and the LMITO is set to end this year.

As shared by Australia’s ABC News, the money will be distributed when people file their tax returns. As an employer, you don’t have to take action to ensure they receive the funds.

However, it’s worth noting that this bonus is coming to an end. It may see some people interested in receiving benefits instead of money, so they can reduce the tax they pay. This will depend on the individual but your PEO can help you negotiate packages to help minimise tax for your employees if their salary is pushing them into a higher earning threshold.

Skills and training

Upskilling employees is a priority in Australia due to the limited number of skilled workers. If you are focused on creating employment in Australia, offering training can help attract quality candidates and reduce turnover.

The 2022 Federal Budget announced access to a 20% deduction for the cost of external training courses delivered to employees by providers registered in Australia for small businesses with an annual turnover of less than $50 million.

Take note of the following if you’re considering training courses for your staff:

– This boost will apply to eligible expenditures incurred from Budget night until 30 June 2024.

– For eligible expenditure incurred by 30 June 2022, the boost will be claimed in tax returns for the following income year.

– For eligible expenditure incurred between 1 July 2022 and 30 June 2023, the boost will be claimed in the income year the expenditure was incurred.

As a business that employs people in Australia, the 2022 superannuation changes are likely to have the biggest impact on your bottom line. As mentioned, you may wish to negotiate perks such as allowing staff to salary sacrifice their vehicle lease or issuing rebates for health insurance/gym costs. This has the potential for your business to reduce wages and pay less super, while still giving people plenty of reasons to work for you.

Contact APEO to find out more about the superannuation and tax requirements of employing local workers in 2022 and beyond.