Unit Code :- FNSPAY502
Unit Title :- Process Superannuation payments In Payroll
Assessment Type :- Assignment
Little Pear Administration Pty Ltd offers flexible remuneration plans through salary packaging to certain employees. Little Pear Administration Pty Ltd is not considered a concessional employer. In your position as a Payroll Officer you are required to calculate the benefits and costs associated with planned salary packaging arrangements. Refer to the Little Pear Group Salary Packaging Policy which can be found in VU Collaborate Assessment 1 folder to answer the following questions.
FNSPAY502 Process Superannuation payments In Payroll Assignment
Question 1 :-
Erick Hamilton, a management-level employee, wants to renew his Salary Sacrifice Agreement with Little Pear for the period April 2022 through March 2023.
New Employment Contract (Extract):
Date of commencement April 2022
Gross salary per annum $150,000
The gross salary is the earnings base used to calculate the compulsory 10% superannuation contributions paid by Little Pear Administration Pty Ltd.
Salary Sacrifice Agreement:
Novated Lease Agreement
Refer to the novation agreement.
Expense Payment Benefit
Mortgage repayments of $18,000 p.a. on private home
Exempt Fringe Benefits
Laptop valued at $3,000 net of GST* (Primarily business use)
FNSPAY502 Process Superannuation payments In Payroll Assignment
GST is payable by the employer and could claim GST credits on this expense.
Payment of mobile phone plan costs – $1,200 per annum (No private use declaration signed)
Other Salary Package Amounts
Additional superannuation contributions of $10,000
NOVATION AGREEMENT
This NOVATION AGREEMENT is made on
BETWEEN the “Financier”, the “Employer” AND the “Employee”
DETAILS
The Employee has entered into the Lease Agreement with the Financier for the Motor Vehicle valued at $50,000.
The Employee is employed by the Employer.
The Parties have agreed to no vate the Lease Agreement as set out in this Agreement.
AGREEMENT :
On the Effective Date the Employee novates to the Employer the Lease Agreement to the extent of the Lease Rights and Obligations. The Employer accepts the novation.
Under this agreement the finance lease is rescinded and the employee’s obligation to pay the lease rentals to the finance company is transferred to the employer for the term of the novation agreement.
The employer then makes all sub sequent lease payments of $17,500 (net of GST per annum directly to the finance company.
The lease payments will be charged against the employee’s remuneration package on a salary sacrifice basis.
The employer will pay FBT attributable to the vehicle.
The FBT cost will be charged to the employee’s remuneration package on a salary sacrifice basis.
The obligation to pay the running costs remain with the employee.
The employer, as lessee of the motor vehicle, provides it to the employee as a car fringe benefit for 70%
private usage until the novation is terminated.
The Employee and Employer may mutually agree to terminate the Novated Lease. In the event of termination, the employee accepts the lease obligations.
FNSPAY502 Process Superannuation payments In Payroll Assignment
a) The required documentation has not been kept allowing the company to use the operating cost method to determine the taxable value of the car fringe benefit. Therefore the statutory formula method must be used.
Required: Use the statutory formula method to calculate the FBT payable in respect of the novated lease.
b) Calculate the FBT payable by the company in respect of Erick’s salary packaging arrangement by completing the table below.
c) Evaluate the impact of the Salary Sacrifice Agreement on the employee’s gross salary per annum under the following scenarios:
1. No salary sacrifice ($150,000 Gross salary plus super)
2. Salary Sacrifice Agreement as detailed above
Refer to the Little Pear Group Salary Packaging Policy to learn about the FBT treatment.
i. Help Erick to compare the two options by completing the below table.
ii. Is this agreement beneficial to the employee? Why?
iii. Based on the Total Employment Cost what would be the best option for the employer gross salary plus super or the salary packaging agreement? Explain your answer including workings
Question 2
Little Pear Administration’s employee Lisa Hunt wants to enter a Salary Packaging agreement for the 2021/22 period that includes the following:
FNSPAY502 Process superannuation payments In Payroll Assignment
1. Superannuation contributions up to the capped amount
2. Purchased leave (refer to agreement)
3. Loan from employer of $7,500 at 4%p.a. interest rate
Her gross salary is $135,000 plus superannuation.
Assume the benchmark interest rate is 4.80%.
PURCHASED LEAVE AGREEMENT
Eligibility: Permanent full time and part time employees and fixed term contract employees with a contract of 3 months or greater duration may apply.
PURCHASED LEAVE OPTIONS (Please tick appropriate box)
purchase 4 weeks over 12 months
purchase 3 weeks over 12 months
purchase 2 weeks over 12 months
purchase 1 week over 12 months
Employee to complete:
I hereby apply to participate in the Purchased Leave Arrangement. I have read, understood and agreed to the terms and conditions of this Arrangement that are set out in the Little Pear’s Purchased Leave Policy and Guidelines. By signing this form, I agree to consent to recovery of any over payment of salary or adjustment to leave entitlements and allowances if required. I understand that my participation in the Arrangement will commence from the earliest practicable pay period after this form is approved and submitted to the payroll area. I understand that the arrangement end date will be March 2023.
Use the information extracted from Lisa’s Salary Packaging agreement to answer the following questions:
a) The concessional contributions cap is $27,500. How much can Lisa sacrifice to maximise her contributions without exceeding the cap?
i) What are the characteristics of concessional and non concessional contributions and the impact
to the employee
b) What is the value of Lisa’s purchased leave benefit?
c) What is the taxable value of the loan for FBT purposes?
d) Lisa would like to increase the loan amount and has asked if that is possible. Where could you find more information about the benefits offered by Little Pear & what is the amount Lisa can increase her loan?
e) What legislation or regulation should you refer to in order to confirm the concessional contributions cap amount in Lisa’s salary sacrifice agreement?
f) What criteria needs to be met before an employer is obligated to pay superannuation guarantee? Also, what changes happen
g) Explain what are ordinary time earnings is? Give 5 examples.
Question 3
Todd Williams works for Little Pear Administration Pty Ltd as a sales executive. He was recently promoted from sales trainee and he is considering salary packaging meal expenses in the next FBT year
FNSPAY502 Process Superannuation payments In Payroll Assignment
Employment contract extract:
Full-time
Gross Salary $80,000
After-tax pay $63,013
Salary Package information:
Meal expenses benefit – $5,000 (net of GST)
a) Calculate the costs incurred in relation to providing the meal expenses for Todd.
b) Todds after tax pay with the salary sacrifice option would be $56,216.
According to Little Pears Salary Packaging Policy would this agreement be accepted or rejected? Show your workings to support your answer
c) Use Little Pear’s letter template to advise Todd on his current employment situation and the reason why his salary sacrifice application has been accepted or rejected.
Make sure you have explained yourself in terms that Todd will understand and refer to the relevant legislation regulation
d) How should the little Pear Confidential Letter be distributed to Todd advising him of the outcome? How would this communication be kept or Stored by Little Pear? Explain the legislative/regulation requirement when handling payroll information.
Question 4
Little Pear Logistics Pty Ltd has decided to open a new warehouse in Dubbo, NSW. Harry Chadstone, a Little Pear Administration Pty Ltd employee, has agreed to move from Melbourne to Dubbo for 4-6 months, to help get the new warehouse running and to train new staff.
Harry is earning $813 per week after tax (or $961 before tax) and will receive a Living-Away-From-Home-Allowance (LAFHA) of $260 per week (considered a non-taxable allowance by the ATO).
a) Complete the below table to outline the impact of the allowance on Harry’s pay. Explain the impact of the allowance on tax withheld.
b) What external and/or organisational source should be accessed for information on an employee’s eligibility for an allowance?
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