Setting up a superannuation liability for a contractor

Nadine

We have a contractor whom is paid on receipt of his invoice but we pay super for him and therefore need to accrue a superannuation liability for him. Currently, at the end of each quarter I do a manual expense payment write cheque entry, which obviously relies on me making sure this is done but also means it doesn't ever show on our balance sheet with the super liability accounts. Just wondering how others may handle this in reckon (using Accounts Premiere Edition 2017)?

Adrian_6974554

Hello Nadine

I have some clients that reflect the amount in the bill, have separate line to show super expense and allocate to super Liability.

But this does not then get picked up in any superannuation reports, you need to then manually add to SuperStream. But the PnL and Balance Sheet reflect the amounts of super.


Some have set the supplier up as an employee, and process a wage for the super amount, then it is included on super reports and exported SuperStream data file.

In the Taxes area for that contractor employee they are ticked to exclude from Payment Summaries.


Hope that gives you a couple of options.

Adrian

Nadine

We only pay it quarterly with the other quarterly super payments for our staff, so it is a liability as I see it, until we pay it.
Both of these options are good, I will look into these. I always avoided setting him up in Payroll because of the tax side and the Payment Summaries, just worried it would complicate things.
Thanks for your help.

Pam_9173848

Nadine I would most definitely set up the super as an expense and liability whether  you go through payroll or enter manually, - so dr the super expense account  and cr the super liability for the invoice.  This gives you a true reflection of your costs in the period as well as showing on your balance sheet, and with the other employees you know exactly how much you need to pay out at period end and your P & L is more accurate for a time period. 

Wilma van Eyk

And in addition to that Pam I would reconcile my Super Liability account to ensure no payments were missed

Pam_9173848

Absolutely and always Wilma, thats part of good bookkeeping! 

Lee_8688889

Following on from this thread, @Zappy do your contractors supply you with an invoice that contains a line for the Super? or is it calculated by Payroll functions?

And how do you set up the contractors in Payroll? Do you use their ABN or TFN?

Many thanks

Acctd4

I agree with Zappy - Setting the contractor up as an “Employee” is a great way of tracking & managing their Super.

* You can set up & use a specifically-created Payroll Item linked to the appropriate expense account (eg Subcontractors - Do NOT use a Payroll expense account as they’re not (payroll) “employees”!)

* Ensure you select “None” from the dropdown in “Tax Tracking Type”. It is THIS section that determines if &/or how an Payroll Item flows through into STP!

* Make sure you do NOT tick PAYG in the “Taxes” window (but do check Payroll Tax inclusions in your state to determine if “Payroll Tax” should be ticked) Also ensure you do NOT have the checkbox ticked for inclusion in leave accruals here too!

* Ensure you choose to “exclude from Payment Summaries” in their employee record.

Acctd4

@Lee A subbie who is switched on will have it on their invoice however, this is most often not the case as the onus is on the employer to be aware of their responsibility & calculate this liability.

Lee_8688889

@Acctd4 Thanks Shaz for all your information and assistance. It was really helpful.

Procasa

I have tried setting contractor as an employee for superannuation however it wont process with just super as its a $0 pay cheque- How do i get around this.

AND

Then i tried adding it to the invoice superannuation expense dr so -$126

and superannuation liability cr $126 this does not work

Should this just be journaled separate to the invoice. This is the first time doing this so i want to set it up correctly any help is appreciated

Kris_Williams

I would Set him up as an employee but use a payroll item called subcontractor pay, tick the relevant boxes so no tax is allocated but super is. And link the pay item to your sub contractor expense account

Procasa

Thanks Kris

I ended up paying them from a bank acc- contractor clearing acc (BANK)

Creating a Contractor Clearing acc -super acc in payroll - using contractor clearing bank acc as the expense acc

Then paid via STP it seems to have worked as i reconciled the Contractor clearing acc (BANK) and ensured the liability has been created. I hope this is correct

Kris_Williams

Glad you’re on top of it