Employers often provide additional payments to employees at year-end, such as Christmas bonuses or overtime payments. It is essential for employers to understand the reporting obligations to the Australian Taxation Office (ATO) and the implications for superannuation guarantee contributions.
Christmas Bonuses
Christmas or performance bonuses are lump sum payments made to reward employees for their service, performance, or achievement of specific goals. Employers should note the following:
- Superannuation Guarantee: These bonuses are classified as ordinary time earnings (OTE) and are therefore subject to superannuation guarantee contributions.
- Single Touch Payroll (STP) Reporting: Such payments must be separately itemised as bonuses and commissions in STP reporting.
- Tax Withholding: Tax must be withheld from these payments. Employers should refer to the ATO’s Tax Table for Back Payments, Commissions, Bonuses and Similar Payments for guidance.
Gifts to Employees
Non-monetary gifts differ from bonuses as they are not processed through payroll and are not subject to superannuation guarantee or PAYG tax withholding. Non-entertainment gifts (e.g., Christmas hampers, wine, gift vouchers, or flowers) are exempt from fringe benefits tax (FBT) if their value does not exceed $300 per employee.
Overtime Payments
During the busy festive period, retail and hospitality employees often work overtime. Overtime is defined as work performed outside the ordinary hours stipulated in an employee’s award, enterprise agreement, or employment contract.
Superannuation Treatment:
- Excluded from Superannuation Guarantee: Overtime payments and bonuses specifically tied to overtime, on-call allowances, and work outside ordinary hours are not subject to superannuation guarantee if the employee’s ordinary hours are clearly defined in their award or agreement.
- Included in Superannuation Guarantee: If an employee’s ordinary hours are not stipulated or cannot be distinguished from other hours, all payments (including overtime) are treated as ordinary time earnings and attract superannuation guarantee contributions.
Reporting and Tax Withholding:
- Single Touch Payroll: Overtime payments should be separately itemised under Overtime in STP reporting. This category also includes payments for on-call or availability allowances and overtime bonuses directly tied to hours worked outside regular hours.
- Tax Withholding: Employers must withhold tax from overtime payments. Generally, these payments are added to the employee’s earnings for the relevant pay period, and tax is calculated using standard tax tables. For lump sum payments such as one-off overtime bonuses or leave loading, tax should be withheld in accordance with the ATO’s Tax Table for Back Payments, Commissions, Bonuses, and Similar Payments.
By adhering to these requirements, employers can ensure compliance with ATO regulations and avoid potential penalties.
