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debbieg's avatar
debbieg
Experienced Cover User
9 months ago
Solved

payroll

I've read the posts on paying employee's accumulated annual leave directly into their super. I've also discussed with accountant. But still uncertain how to do this. He said make it a salary sacrifice. Employee wants it paid direct to her super. Are there tax problems with this? If i don't pay it through wages as normal, then i assume i'd have to manually take it off her annual leave? That part's easy. Now e.g. Gross for 2weeks pay is $2500.40. Tax is $558- Nett is $1942.40. So if i set up and use salary sacrifice - do i pay the gross or nett to her super? And how is tax taken care of in the transaction? I'm sure there's something i'm just not seeing, and I appreciate any help. But i would ask that if you know how this is done, then please advise in detail. 

My trial and error- I'm thinking i do a pay with her hol hours - gives gross figure, -i set up the salary sacrifice as the Nett figure which will allow the tax to come off (so accounted for) and the pay is Zero. Am i on the right track? And she would get normal SCG and accruals on this pay i'm thinking. Hoping someone can help. many Thks

 

  • Hi debbieg,

    Thank you so much for your post and my apologies for the late response. I understand your concern about paying an employee's accumulated annual leave directly into their superannuation account. It's essential to handle this process correctly to ensure compliance with tax regulations and the employee's preferences.

    When an employee prefers direct payment to her super, consider using a salary sacrifice, deducting from her gross salary before taxes. Pay the gross amount to the super fund, with tax accounted for prior, potentially reducing the employee's tax liability. Be mindful of annual contribution limits that can vary, necessitating regular updates. Calculate the gross pay for accumulated leave, set up the salary sacrifice for the desired net amount (post-tax), and ensure the tax is deducted from the gross amount before reaching the super fund, resulting in a lower regular pay but increased super fund contribution. calculated accurately, superannuation guarantee (SG) contributions should be made on this gross amount, and annual leave accruals should not be affected.

    Furthermore, we strongly advise seeking guidance from a tax professional or financial advisor who can offer the latest insights on managing these transactions in compliance with current regulations and tailored to your unique situation.

    Feel free to post again, we're happy to help!
    Regards,
    Earl

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  • Earl_HD's avatar
    Earl_HD
    MYOB Moderator

    Hi debbieg,

    Thank you so much for your post and my apologies for the late response. I understand your concern about paying an employee's accumulated annual leave directly into their superannuation account. It's essential to handle this process correctly to ensure compliance with tax regulations and the employee's preferences.

    When an employee prefers direct payment to her super, consider using a salary sacrifice, deducting from her gross salary before taxes. Pay the gross amount to the super fund, with tax accounted for prior, potentially reducing the employee's tax liability. Be mindful of annual contribution limits that can vary, necessitating regular updates. Calculate the gross pay for accumulated leave, set up the salary sacrifice for the desired net amount (post-tax), and ensure the tax is deducted from the gross amount before reaching the super fund, resulting in a lower regular pay but increased super fund contribution. calculated accurately, superannuation guarantee (SG) contributions should be made on this gross amount, and annual leave accruals should not be affected.

    Furthermore, we strongly advise seeking guidance from a tax professional or financial advisor who can offer the latest insights on managing these transactions in compliance with current regulations and tailored to your unique situation.

    Feel free to post again, we're happy to help!
    Regards,
    Earl