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debbieg's avatar
debbieg
Experienced Cover User
2 years ago

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 sacrific...
  • Earl_HD's avatar
    Earl_HD
    2 years ago

    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

Earl_HD's avatar
Earl_HD
MYOB Moderator
2 years ago

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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