The Government has updated the Superannuation Guarantee regulations in relations to Jobkeeper payments.  These changes provide clarity for employers in regards to how they calculated superannuation guarantee payments for employees receiving Jobkeeper.

Key facts on Jobkeeper superannuation guarantee changes

The changes to the Superannuation Guarantee (Administration) Regulations 2018 to ensure that:

  • employers are not required to make superannuation guarantee contributions in respect of amounts paid to employees to satisfy the wage condition under the Jobkeeper Scheme, but which do not relate to the performance of work;
  • if the amount of salary or wages for a calendar month remaining after reduction by the excluded amounts of salary and wages is less than $450, the remaining amount is excluded salary or wages for the purposes of calculating the minimum superannuation contribution for that employee.

These changes exclude from ‘salary and wages’ for the purposes of calculating the employer’s superannuation guarantee (SG) shortfall, amounts that are paid to an employee to satisfy the ‘wage condition’ under the Jobkeeper Scheme to the extent that such payments exceed payments for the performance of work. Payments made to satisfy the wages condition would otherwise be considered salary or wages and ordinary times earnings.

The following examples best illustrate how these changes work.

Example: Employee’s salary or wages do not exceed the amount required to be paid for the performance of work

Liz is a full-time employee who usually earns $3,000 per fortnight. As a result of the Coronavirus, her employer issues a Jobkeeper enabling stand down direction and reduces her hours of work. She now earns $2,000 per fortnight for the performance of work. Liz’s employer is entitled to Jobkeeper payments for her.

During the Jobkeeper fortnight beginning on 25 May 2020, Liz takes five days of personal leave at full-pay. Her employer pays her $2,000 for that fortnight: $1,000 for the days she worked, and $1,000 in relation to the taking of personal leave.
Liz’s salary or wages and ordinary time earnings for the fortnight are $2,000.

The Regulations do not apply as the salary or wages paid to Liz do not exceed the amount required to be paid to her for the performance of work.

The minimum superannuation contribution her employer must make to avoid a SG charge liability for the relevant quarter is 9.5 per cent of Liz’s ordinary time earnings. Her ordinary time earnings will include the $2,000 she was paid in respect of the fortnight.

Superannuation Guarantee amount payable: $2,000 x 9.5% = $190

Example: Employee’s earnings for the performance of work are less than $1,500 per fortnight

Rachael is a part-time employee who continues to earn her usual wages of $1,000 per fortnight. To satisfy the wage condition for Jobkeeper payment for Rachael, her employer pays her an additional $500 per fortnight so that she is paid a total of $1,500 per fortnight. Rachael’s employer is entitled to Jobkeeper payments for her.

The additional payment of $500 is excluded from being salary or wages because it is paid by Rachael’s employer for the purpose of satisfying the wage condition and is not paid to Rachael for the performance of work. Therefore, Rachael’s salary or wages and ordinary time earnings for the fortnight are $1,000.

The minimum superannuation contribution her employer must make in order to avoid a liability to SG charge for the relevant quarter is 9.5 per cent of Racheal’s ordinary time earnings. Her ordinary time earnings will include the $1,000 she was paid in respect of the fortnight.

Superannuation Guarantee amount payable: $1,000 x 9.5% = $95

Example: Employee stood down and employer not entitled to Jobkeeper

Erin is a long term casual employee who was earning approximately $1,750 per fortnight. As a result of the Coronavirus, she has been stood down by her employer. Her employer has a reasonable expectation of participating in the Jobkeeper Scheme and satisfies the wage condition in respect of Erin by paying her $1,500 for the first Jobkeeper fortnight.

After making the payment to Erin, her employer discovers that they are not entitled to Jobkeeper payment for Erin under the Jobkeeper Rules.

However, the Regulations still apply as the payment of $1,500 is considered salary or wages paid to Erin in respect of a Jobkeeper fortnight.

As Erin remains stood down, the entire amount is excluded from being salary or wages as it is paid by her employer for the purpose of satisfying the wage condition and is not paid to Erin for the performance of work.

Therefore, Erin’s salary or wages and ordinary time earnings for the fortnight are nil. This means her employer is not required to make a superannuation contribution in respect of Erin for the fortnight in order to avoid a liability to SG charge.

Superannuation Guarantee amount payable: Nil

Example: Employee’s earnings for the performance of work are less than $450 for a calendar month

Nelson is a long term casual employee who earns $400 in April 2020 for the performance of work. To satisfy the wage condition for Jobkeeper payment for Nelson, his employer pays him $400 for the month, plus an additional $2,600, totalling $3,000 before tax for that month.

Nelson’s employer is entitled to Jobkeeper payments for him.

The additional payment of $2,600 is excluded from being salary or wages because it is not an amount that is required to be paid to Nelson for the performance of work.

The remaining $400 is also excluded from being salary or wages under new s. 12A(3) of the SGA Regs because his earnings in relation to the performance of work during the calendar month are less than $450.

Therefore, Nelson’s salary or wages and ordinary time earnings for the month of April are nil. This means his employer is not required to make a superannuation contribution in respect of Nelson for that month in order to avoid a liability to SG charge.

Superannuation Guarantee amount payable: Nil

The Explanatory Statement is available here.

Processing Jobkeeper and Superannuation payments through Xero payroll

Although the above intricacies of how superannuation and Jobkeeper payments work together can be complex, fortunately for employers using Xero as their payroll system ensuring the correct payments are made to employees is simplified.

If you have any questions regarding how to calculate superannuation guarantee payments for employees receiving Jobkeeper, please contact your Quill Relationship manager or contact us if you need assistance with your business accounting or payroll needs.