Reporting Super for Contractors

Legacy KB ID: 5360

Question

How do I pay Super for a Contractor with my other Employees?

Answer

You are not obligated to pay a super contribution for a Contractor as this relationship is a business to business contract and not an employer-worker arrangement.  If you wish to make a super contribution through the standard super process, you will face a number of hurdles to ensure all requirements of both a super system and contractor system are met and charges are not doubly entered. 

We provide the following as a guide.  We recommend users discuss their needs and proposed solutions with their Accountant before proceeding.

Setup requirements

Bank:  Contractor Payment Clearing Account

Supplier:  your contractor

Payroll item:  Contractor Payment – No Super

Payroll Item:   Contractor Payment – Super

Employee:  Contractor setup as an Employee

Expense Account – for contractor services

Basic Procedures

1. Create a Bill for contractor services
2. Pay Bill
3. Create Payroll Cheque:
   1. Either, supplier not registered for GST
   2. Or, supplier registered for GST
4. Reconcile the contractor Payments clearing Account.

Detailed Instructions

Inputs

Bank Account - Contractor Payment Clearing Account

This bank account is used for the purpose of creating a PayCheque and Bill Payment.  Also allows the account to be reconciled once the process is completed,

Supplier – your contractor – eg: ABC Accounting Services

This Supplier Account is for charging the basic contract expense, with any GST coding attached.

Payroll Item – Contractor Payments – No Super

Use this item for contractors who do are not registered for GST

Payroll Item Type:  Wage

Wages:  Other

Name:  Contractor Payment – No Super

Expense Account:  Contractor Payment Clearing Acc

Tax Tracking Type:  None

Taxes

• PAYG Tax:  Untick
• State Payroll Tax:  Untick

Default Rate:  Leave blank

Inclusions

• Include in “Every hour worked” leave accruals:  Untick
• Super (super items):  Untick

Click Finish

Payroll Item - Contractor Payment – Super

Use this item for the Contractor Expense portion of the payment

Payroll Item Type:  Wage

Wages:  Other

Name:  Contractor Payment – Super

Expense Account:  Contractor Payment Clearing

Tax Tracking Type:  None

Taxes

• PAYG Tax:  Untick
• State Payroll Tax:  Untick

Default Rate:  Leave blank

Inclusions

• Include in “Every hour worked” leave accruals:  Untick
• Super (super items):  Tick

Click Finish

Employee  -  setup Contractor as employee

You must use a unique name that is different from the Supplier name. If your Supplier name is Jenny Jones, you should use a variation like Jennifer Jones.

(Not all of the details need to be setup)

(** Check the payroll setup defaults which automatically come through when you create an employee.**)

Personal Info – Personal Tab

• Firstname: 
• Lastname: 
• Fill in other required details for the Superstream Export file (SAFF and NAB SuperPay) – see the KB5217:
• Configuring Reckon Accounts Business and Hosted for SuperStream

Payroll and Compensation Info Tab

• Add both Contractor Payment items to Earnings
• Taxes button
  • Tax:  8-No TaxC
  • Exclude from Payment Summary:  Tick
• Super Details button
  • Select the Super item
  • Ensure setup as required for SuperStream Export File.

Expense Account – Contractor Expense

Process Contractor Payment

1. Create a Bill to the Contractor for contractor services and code with appropriate GST code.
2. Pay the Bill using Bill Payment, with the bank account: Contractor Clearing Account
3. Create a Payroll Cheque.

Where Supplier not registered for GST:

1. 1. In Employee Centre select Payroll tab
   2. Select Pay Employees button
   3. Enter date of  supplier payment for “Pay Period Ends” and “Payment Date”
   4. Select normal operating bank account in the Bank Account box
   5. Tick the contractor(s) being paid and click Continue
   6. Click on the name underlined that you are paying
   7. Process paycheque - enter Payroll Item Contractor Payment – Super and invoiced amount (step 1 above) if not automatically provided and the amount to be paid and check super is calculating – Save & Close
   8. Tick “Create Payment” pays unless others to be done.
   9. Tick cancel on the payslips page unless you can see a use for this

Where supplier is registered for GST

Follow the steps a – i above, with the additional step at g.

1. Process paycheque:
   1. enter Payroll Item Contractor Payment – Super and invoiced amount (step 1 above) if not automatically provided
   2. enter Payroll Item Contractor Payment – No Super and invoiced amount (step 1 above) if not automatically provided and the amount to be paid
   3. Check super is calculating only on the  Contractor Payment – Super amount and then Save & Close

1. Reconcile the Contractor Payments Clearing account

This account is reconciled after each payment/s are processed through for the contractors ensuring the same figures are processed.

1. 1. Click on the Banking menu
   2. Select Reconcile
   3. Begin Reconcile Window: 
      1. Account:  Contractor Payments Clearing Account
      2. Statement Date:  Date of Bill Payment
      3. Beginning Balance:  should always be zero
      4. Ending Balance:  type in zero
      5. Click on Continue button
   4. Click on the Mark All button
   5. Check difference in zero, if not then check the entries and correct errors
   6. Click on Reconcile Now

Your contractor Bill has now been paid and Super set aside with other Employee Super amounts. 

Thanks to Accredited Partner Robyn Ricket

Need more help?

Ask the Reckon Community at: https://community.reckon.com/categories/reckonaccounts

Or Log a Support Ticket: https://www.reckon.com/au/support/