Salary Sacrifice for Labour Hire (PSI) Employees

Overview

If the 'Engagement Type' in an employee profile is set to 'Labour Hire', salary sacrifice is not supported for STP Reporting.

If you have processed salary sacrifice amounts for Labour Hire employees in Astute, you'll need to process an adjustment so their wages are reported under the 'Casual' engagement type instead. Please see this article for steps on how to do this.  

Alternatively, the employee can manually edit the amounts in their tax return. Please seek further advice from the ATO or your accountant/financial advisor before you decide how to proceed in Astute.

Information from the ATO

The following screenshots and information are from the ATO website, from the pages linked below.  

ATO: STP Reporting Phase 2 Employer Guidelines - Income types

ATO: STP Reporting Phase 2 Employer Guidelines - Rules for reporting amounts

LAB (labour hire) in the screenshot below is the equivalent of choosing 'Labour Hire' as the Engagement Type in Astute, which produces a PSI income type in the STP Update.

 

The second screenshot below shows that salary sacrifice is not something that can be reported against Labour Hire (PSI) income. 

The first income type (SAW) is 'Salary and Wages', which is what all other wages under the other engagement types are reported as in Astute. 

You may be classified as Labour Hire Firm, but there is quite often confusion about whether your workers are employees or contractors, with the assumption being that as a Labour Hire firm, all workers are automatically classified as 'Labour Hire' and their income is classified as PSI (Personal Services Income).

Please discuss this with the ATO if you're unsure, as we're not able to advise you on this, but the guidelines on what can and can't be reported through STP based on the SAW and LAB income types are currently defined in the above table. For more information on labour-hire firms, please see the ATO website.
 
You may also like to refer to the table of indicia on this ATO page about the difference between employees and contractors. Below are some additional links from the ATO Community page with some discussions around income types and salary sacrifice reporting for workers at labour-hire firms. 
 
ATO Community: Labour hire employees and salary sacrifice
ATO Community: Issues reporting using STP Phase 2