Overpayment of salary & managing super

 Author: PayrollDeanne(Taxicorn)Taxicorn

12 June 2025

Hiya @will.widj1957 👋

It's all about the steps in the process. Let me provide an example of what should happen, with the following assumptions:

• Employee paid $5,000 ordinary pay each month, tax of $750 each month, SG of $575
• Pay period 03 of 12 YTD reported: Gross $15,000, PAYGW $2,250, SG $1,725

Now the discovery of the overpayment (as per the ATO guidance) steps and impacts:

1. Reclassification of "salary and wages" to "overpayment" (OP is not taxable, superable or reportable), so correct the:
   1. Salary and Wages - employee data to result in a reduction of: Gross $1,153.85 ( 1 week's salary), PAYGW $173, SG $132,69
   2. Overpayment/Loan amount - as the Fair Work obligations prevent you from making unauthorised deductions from an employee's pay, you offset the reduction in step a.) by the net amount of the overpayment by creating a Loan $980.85 (Gross less PAYGW). In other words, take back salary and pay it as a loan, as it is no longer salary if it is an overpayment.
   3. Super Guarantee - if you haven't yet paid it, reduce the SuperStream data/payment by the amount of the SG correction due to overpayment (as salary is OTE but a Loan is not). If you have paid it, use the entitlement in APRA SPG 270 paragraphs 24-36 to contact the super fund and request a refund of the contribution in error.
   4. These corrections will have been included in the STP pay event (depending on how your payroll works, either a submit or update) to correct the reportable income of the employee and the parent period total amounts. You may need to consider the impact to your BAS if you are a small/medium business.
2. Loan - if you give the employee time to repay, the loan may be subject to FBT. If you waive the debt (decide the employee doesn't need to pay it back), then a Debt Waiver Fringe Benefit exists (see that FBT employer guide that explains the difference between a "write-off" and a "debt waiver").

I hope that helps?

Deanne

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 Author: will.widj1957(Enthusiast)Enthusiast

13 June 2025

Hi Deanne,

This employee was paid total taxable gross of $12,916.37. The correct taxable gross salary should be $9,538.26. We have requested employee to return the net pay after tax but the person had left Australia. As a result, we decided to waive off the overpayment of salary.

We paid 11.5% super of the correct payment $9,538.26 which was $1,096.90

So on the STP, gross taxable amount to be reported will be $12,916.37 and super $1,096.90.

Given the employee did not return the money, the gross taxable total to be reported should still be $12,916.37, correct?

Or I should create another pay component called "overpayment" and move the $3,378.11 to overpayment which is not reported through STP?

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