In Australia, employer superannuation contributions are a critical part of payroll obligations, particularly when it comes to reportable employer super contributions (RESC). For businesses using Xero accounting software, understanding how to correctly classify and report these contributions is essential to staying compliant with Australian Taxation Office (ATO) requirements. With the end of the financial year being a busy time for payroll processing and tax reporting, correctly handling RESC in Xero ensures transparency for both employers and employees and helps avoid potential penalties. In this topic, we will explore how Xero handles reportable employer super contributions, why they matter, and how to manage them accurately in your payroll reporting process.
Understanding Reportable Employer Super Contributions (RESC)
What Are Reportable Employer Super Contributions?
Reportable employer super contributions are extra superannuation contributions made by an employer for an employee, beyond the compulsory Superannuation Guarantee (SG) contributions. These are typically made under a salary sacrifice agreement or any arrangement where an employee has influenced the amount of super contributions.
According to the ATO, RESC must be reported on the employee’s annual income statement and included in their tax return, even though they are not taxed as income. They are considered for income tests when assessing eligibility for certain government benefits and financial obligations, such as child support and student loans.
Examples of RESC
- Salary-sacrificed super contributions arranged by the employee.
- Employer contributions made over the mandated SG amount at the employee’s request.
- Contributions to defined benefit super funds that exceed employer obligations due to employee negotiation.
It is important to distinguish RESC from standard SG contributions, which are not reportable and are paid at the legislated minimum rate (currently 11% as of 2025).
How Xero Manages Reportable Super Contributions
Setting Up Superannuation Pay Items
In Xero, super contributions are managed through pay items. To ensure reportable contributions are correctly recorded, employers need to set up custom superannuation pay items that are marked as reportable. This allows the payroll system to separate standard SG contributions from RESC.
When setting up a pay item in Xero:
- Select ‘Superannuation’ as the pay item type.
- Set the contribution type to ‘Salary Sacrifice’ or ‘Employer Additional Super’.
- Ensure the box for ‘Reportable Employer Super Contributions’ is checked if applicable.
Linking Pay Items to Employees
Each superannuation pay item must be assigned to the appropriate employees. In cases of salary sacrifice or voluntary additional contributions, you should link these custom super items to individual employee profiles. This ensures that Xero includes the amounts in the RESC total when generating payment summaries or Single Touch Payroll (STP) reports.
Tracking RESC in Payroll Reports
Xero automatically includes reportable super contributions in payroll reports if the relevant pay item is set up and flagged correctly. The RESC totals will appear in:
- Payroll Activity Summary
- Payment Summary Annual Report
- Single Touch Payroll (STP) submissions
- Employee income statements accessible via myGov
Always verify the accuracy of RESC entries before finalising payroll for the year, especially when completing the STP finalisation process.
Why Accurate RESC Reporting Matters
ATO Compliance
The ATO requires accurate reporting of all RESC to ensure transparency in tax assessments and social service eligibility. Mistakes in reporting may result in audits, penalties, or corrections that consume time and resources. By using Xero’s built-in tools and following best practices, businesses can meet these reporting obligations with confidence.
Employee Financial Impacts
Reportable super contributions impact employees in various ways. These amounts are used in income tests that determine eligibility for certain government benefits and support programs. Incorrect reporting might affect an employee’s:
- Family Tax Benefit eligibility
- Higher Education Loan Program (HELP) repayments
- Child support payments
For this reason, employees may seek clarification or corrections if their RESC amount is misreported, leading to additional administrative workload for employers.
Common Mistakes in Xero and How to Avoid Them
Failing to Set Pay Item as Reportable
This is one of the most common errors. A pay item might be created for additional contributions but not marked as RESC. Always double-check the ‘reportable’ box when setting up or editing super pay items.
Incorrect Classification of SG Contributions
Only voluntary or negotiated contributions count as RESC. Standard SG contributions should never be marked as reportable. Ensure payroll staff understand the distinction and apply it consistently.
Manual Adjustments Without Review
Sometimes manual payroll adjustments are made without checking their classification. Any manual entries related to super should be reviewed to ensure they are correctly flagged in Xero’s system and reported as needed.
Best Practices for Managing RESC in Xero
Keep Payroll Settings Up to Date
Review and update payroll settings regularly, especially when government superannuation laws change or new employees are onboarded with custom super agreements.
Educate Payroll Staff
Train payroll administrators to understand RESC requirements, how to use Xero effectively, and how to communicate with employees about superannuation reporting. A knowledgeable team reduces the risk of errors.
Perform End-of-Year Reconciliation
Before submitting final reports to the ATO, reconcile payroll reports in Xero to confirm that RESC amounts match what was agreed upon with employees. This ensures that income statements and government data are aligned.
Properly managing and reporting Reportable Employer Super Contributions in Xero is vital for Australian businesses. Not only does it ensure compliance with tax laws, but it also maintains trust with employees and minimizes the risk of regulatory issues. By understanding how RESC works, setting up correct pay items, and using Xero’s payroll features to track and report contributions accurately, businesses can simplify their end-of-year processes and support both operational and employee financial health. Taking the time to configure Xero correctly and training staff to handle RESC effectively can save time, reduce errors, and improve overall payroll transparency.