RESC deduction type for Salary Sacrifice Super payments

The following changes were deployed on Wednesday 4 November 2020

We will be making some significant changes to how pre-tax deduction categories are set up and behave when being used to pay contributions to a super fund that need to be reported as RESC, like salary sacrifice super. These changes are being made to assist users with avoiding setting up RESC deductions incorrectly and therefore being reported incorrectly. Once the changes have been deployed, instructions on how to set up a new pre-tax deduction category using a RESC deduction type will be added here. 

RESC deduction type 

A new deduction type is now available when setting up a pre-tax deduction category - Reportable employer super contribution (RESC). The RESC deduction type can only be used for salary sacrifice super contributions (ie a pre-tax deduction that is paid directly to the employee's super fund). This deduction type will be available and set by default as a system default 'Salary Sacrifice Super' deduction category for all new businesses created moving forward. With regards to existing businesses, this deploy includes updating any existing salary sacrifice super deduction categories with the RESC deduction type, as specified below.

NB: The deduction name, deduction type, Impact on SG calculations or payment classification fields for any system generated Salary Sacrifice Super deduction category in a new or existing business cannot be edited:

You will know that a deduction category is system generated as it will now have a "SYSTEM" label displayed, as follows:

The addition of the new RESC deduction type means there are some other changes you will need to be aware of regarding existing pre-tax deduction categories, pay run inclusions and pay runs. This article will outline these changes and any actions required to ensure the correct application of such deduction categories moving forward. 

Pre-tax deduction categories automatically updated to the RESC deduction type 

The following are the existing pre-tax deduction categories that will be automatically updated to the RESC deduction type as at the deploy date stated at the start of this article:

• system generated "Salary Sacrifice Super" pre-tax deduction categories. Any deduction category that fits this criteria will be updated regardless of previous payment methods used in a pay run. This includes the default "Salary Sacrifice Super" deduction category that is made available by default when a new business has been created; and
• any pre-tax deduction category that has only ever been used in deductions that were paid to a super fund in the pay run. NB: If at any point a pre-tax deduction category has been used in deductions that have been paid manually or to a bank account we will NOT update the deduction category with a RESC deduction type; and
• any pre-tax deduction category with the exact name "Salary Sacrifice Super". 

Changes to payment options for deduction categories

We are going to also restrict the payment options available when using a deduction category with the RESC deduction type. The changes will differ slightly for existing deduction categories versus newly created deduction categories. 

NB: These changes are relevant for deductions being set up as pay run inclusions as well as manually added to a pay run.

• When a deduction category has a RESC deduction type:
  • existing deductions will only have the 'paid to a super fund' option available. 
  • new deductions will only have the 'paid to a super fund' option available. 
• When a deduction category has a deduction type of pre-tax (ie not a RESC deduction type):
  • existing deductions will have the 'paid to a super fund', 'manual' or 'bank account' options available. 
  • new deductions will only have the manual or bank account options available.
• When a deduction category has a deduction type of post-tax:
  • existing deductions will have the 'paid to a super fund', 'manual' or 'bank account' options available. 
  • new deductions will have the 'paid to a super fund', 'manual' or 'bank account' options available. 

Existing pay run inclusions deductions

1. If an employee has an existing recurring deduction, set up as a pay run inclusion, using a Salary Sacrifice Super deduction category or a pre-tax deduction category that has automatically updated to a RESC deduction type and the payment option is 'paid manually/bank account', the user will need to update the payment option to 'paid to a super fund':
   
   

   
   
   

   In this case, we will display a warning - 'RESC deductions should be paid to a super fund. You can find out more about paying pre-tax deductions to a bank account or via manual payment here'.

   You can change the payment option here on the employee's pay run inclusions page and this will correct any further deductions going forward. 

   We strongly advise that you do an audit on any previous deductions that have been made using this deduction category for an employee to make sure all historical payments are updated to 'paid to a super fund' as well. This article will assist.                                                                              

2. If an employee has an existing recurring deduction, set up as a pay run inclusion, using a non RESC type, pre-tax deduction category but is being paid to a super fund already, no further action is required. These deductions will remain unchanged but will be labelled as a pre-tax deduction paid to a super fund as opposed to the new RESC label on the pay run inclusion: 
   
   

   
   
   

Existing deductions in pay runs

1. If an employee has an existing deduction in a pay run using a Salary Sacrifice Super deduction category or a pre-tax deduction category that has automatically updated to a RESC deduction type and the payment option is 'paid manually/bank account', the user will need to update the payment option to 'paid to a super fund':
   
   

   
   
   

   In this case, we will not allow the user to finalise the pay run until this has been fixed. If the user tries to finalise the pay run a popup modal will appear. The names of the affected employees will be listed here: 
   
   
   
   Once the modal is closed all affected employees’ earnings lines will be ‘expanded’ by default. The original payment method will have been removed and the user will need to select a super fund as the payment option for the relevant deductions and hit save:
   
   

    

   Once all affected employees have been updated the pay run can be finalised. 

   NB: If the deduction in the pay run has populated from the employee's pay run inclusion, this will also need to be fixed on the employee's pay run inclusions page so the error doesn't continue to occur in pay runs going forward. Refer here for instructions on how to fix this.

   We strongly advise that you do an audit on any previous deductions that have been made using this deduction category for this employee to make sure all historical payments are updated to 'paid to a super fund' as well. This article will assist.                                                       

2. If an employee has an existing deduction in a pay run using a non RESC type pre-tax deduction category but is being paid to a super fund already, no further action is required. These deductions will remain unchanged but will be labelled as SALARY SACRIFICE SUPER in the pay run, as opposed to the new RESC label:
   
   

   
   
   

FAQs 

Q. If an existing Salary Sacrifice Super deduction category has been used to pay deductions manually or to a bank account in the past, will it still be updated with the RESC deduction type?

A. YES! Even if the existing Salary Sacrifice Super deduction category was previously used to pay super manually or via a bank account, the deduction category will still be updated with the RESC deduction type.

Q. I have a deduction type named Sal Sac Super which looks like it has mostly been used for deductions that were paid to a super fund! Why did it not automatically update to the RESC deduction type?

A. The deduction type doesn’t have the exact name (with capitalisation variations) Salary Sacrifice Super AND even though it was MOSTLY used in deductions that were paid to a super fund, all it takes is for the deduction category to have been used once in a manual payment for it to have not been updated.

If you have any questions or feedback please let us know via support@yourpayroll.com.au