Category: Superannuation

Key Dates for July & August 2020

Key Dates for Business 

July 2020 
01 July – First day of the 2020/2021 financial year 
21 July – Monthly Activity Statements (June 2020) due for lodgement and payment 
28 July – Quarterly Activity Statements (April-June) due for lodgement and payment (if lodging by paper) 
28 July – Superannuation Guarantee Contributions (April-June) due for payment to superannuation funds or Clearing Houses 

August 2020 
11 August – Quartelry Activity Statments (April-June) due for lodgement and payment (if lodging electronically) 
21 August – Monthly Activity Statemnts (July 2020) due for lodgement and payment 
21 August – Final day for eligible monthly GST reporters to elect to report annually 
28 August – 2020/2021 Contractor Taxable Payments Annual Reports – due for lodgement

Where one of these dates falls on a weekend or a public holiday, the due date is extended to the next business day.

PRESS CONFERENCE – AUSTRALIAN PARLIAMENT HOUSE, ACT – 22/03/2020

THE HON. JOSH FRYDENBERG MP, TREASURER:  Since the government announced its first stimulus package just over a week ago, the global and the domestic economic environment has deteriorated. We now expect the economic shock to be deeper, wider, and longer. Every arm of government and industry is working to keep Australians in jobs and businesses in business, and to build a bridge to recovery on the other side.

Today, the government is announcing a second package, $66 billion dollars to cushion the blow to households as a result of the coronavirus and to support businesses, and we are enhancing in an unprecedented way Australia’s safety net. This package is consistent with our principles. The initiatives are targeted, are temporary, are proportionate, are scalable, and are using our existing systems. Today, this package, together with the other initiatives that have been announced, sees the government’s support for our Australian economy, announced over the last 10 days, at $189 billion dollars or as the Prime Minister said, around 10 per cent of GDP.

Today’s package has three parts involving 10 separate initiatives. The package will support households, including casuals, sole traders, retirees and those on income support. It will provide assistance for businesses to keep people in a job and it will provide regulatory protection and financial support for businesses to stay in business.

Today, the government is announcing:-

The doubling of the Jobseeker Allowance, formerly known as Newstart, through the introduction of a temporary coronavirus supplement.
The government will also waive the assets test and waiting periods for the Jobseeker Allowance, allowing more Australians to more quickly access the support that they need. The coronavirus supplement will provide an additional $550 a fortnight on top of the existing jobseeker or Newstart payment and will be available to sole traders and casual workers who meet the income test. This means anyone eligible for the maximum jobseeker payment will now receive more than $1,100 a fortnight, effectively doubling the jobseeker allowance.

In the first package on the 12th of March, we announced a $750 payment for Australians on income support. Today, we announce that from July 13, a further $750 payment to those on income support that are not eligible for the coronavirus supplement. This includes those receiving the age pension, the carer’s allowance, family tax benefits and the Commonwealth Seniors Health Card. In total, 5.2 million Australians. We are also reducing the deeming rates by a further quarter of a per cent to reflect the recent Reserve Bank interest rate cut. Over 900,000 thousand social security recipients on income tested support will now benefit.

Our economic response will allow those Australians who are in financial stress as a result of the Corona virus to access more of their own money in superannuation. From April, those affected will gain access to their superannuation capped at $10,000 this financial year, and a further $10,000 next financial year. These withdrawals will be tax free. I repeat, these withdrawals will be tax free and available to those who are eligible for the coronavirus supplement, as well as sole traders who have seen their hours worked or income fall by 20 per cent or more as a result of the coronavirus. So if you’re a sole trader or you’re a casual and you’ve seen your income or your hours worked fall by 20 per cent or more as a result of the coronavirus, you will be able to get early access to your superannuation. Applications will be made online through a simple declaration to the tax office. This initiative builds on existing provisions that allow early access to super in the event of hardship or on compassionate grounds, and it is estimated to put up to $27 billion dollars of superannuation back into the pockets of hardworking Australians. This comprises less than 1 per cent of the 3 trillion dollars in superannuation today. APRA, the prudential regulator, has advised the government that they do not expect this initiative to have a significant impact on the industry overall.

The government is also giving retirees more flexibility over their superannuation. Currently, retirees are required to draw down a minimum of 4 percent a year from their superannuation, a number that increases with their age. The government is halving this requirement to 2 per cent for this year and for next year, to give retirees more discretion over the management of their assets.

The second part of our package sees a massive scaling up of support for small and medium sized businesses across the country. We are increasing cash payments to SME’s to boost their cash flow and to keep their workers employed. All employing businesses will receive at least $20,000. All employing small businesses will receive at least $20,000 and some of the larger SME’s will receive up to one hundred thousand dollars. And we are extending this measure to around 30,000 not for profit organisations, which have an annual turnover of less than $50 million dollars. This will be a lifeline for hundreds of thousands of employers like the local hairdresser, the local cafe, the local mechanic whose income has been significantly reduced over this difficult period. This is the single largest measure in this second package, and together with the first initiative in the first package for small businesses is worth $31.9 billion dollars in total. This payment will be automatically paid through the tax system largely over the next six months with the first payment after 28 of April. No new forms will be required from Australian small and medium sized businesses.

Over the course of the last week, $105 billion dollars is being injected into the financial system by the government and the Reserve Bank of Australia, the purpose of which was to lower the cost and increase the availability of credit, particularly to smaller, medium sized businesses. Today, the government is going one step further and is guaranteeing in a 50/50 partnership with the banks and other lenders, more lending to Australia’s small and medium sized businesses. This $40 billion scheme, which will start in early April, will provide loans of up to $250,000 for up to 3 years for a business with a turnover of less than $50 million dollars. No repayments will be required for the first six months. These will be unsecured loans and they will help build a bridge for small and medium sized businesses to the other side of the coronavirus, and I urge small businesses to go and talk to their bank about these new opportunities that are available. These funds will provide hope and confidence to a vitally important sector and together with the red tape reduction for SME lending announced on Friday, more credit will be coming their way.

The third part of our package will provide a regulatory shield for what are otherwise profitable and viable businesses that find themselves under severe financial pressure as a result of the coronavirus. Now is the time for more flexibility in insolvency and bankruptcy laws to keep these businesses alive and to trade through this period. The government is proposing to increase the threshold at which a creditor can take action to initiate insolvency or bankruptcy from as low as $2,000 today to $20,000 and giving companies and individuals 6 months instead of 21 days to respond. We will also provide relief from directors, from personal liability, where the company is trading while insolvent. This relief will be provided over the next 6 months and will be vital to helping companies get through this period. As a result of the health related restrictions being put in place to reduce the impact of the coronavirus, it will not be possible for many companies to comply with their obligations under the Corporations Act, for example, holding general meetings in person. A temporary 6 month power will be provided to me as the Treasurer to deal with these situations as they arise

These extraordinary times require extraordinary measures and we face a global challenge like we have never faced before. But by working together, we will get to the other side and we will bounce back stronger. Today’s announcement will provide hope and support for millions of Australians at a time when they need it most. We know that there is more to do and we will continue to do what it takes.

https://www.pm.gov.au/media/press-conference-australian-parliament-house-act-22march

Superannuation Amnesty – Now Law

This week the Parliament passed legislation to enact the Superannuation Amnesty. 

The Amnesty is designed to encourage employers to come forward and disclose past quarters (from 1 July 1992 to 24 May 2018) where they have not paid Superannuation Guarantee (SG) to employees in full (i.e. an SG shortfall still exists). 

The Amnesty period in which employers can come forward is from 24 May 2018 and ends six months after the date the legislation receives Royal Assent (therefore until at least late August 2020). 

Under the Amnesty, the employer in coming forward will enjoy the following benefits: 

  • Tax deductions for payments of the SG Charge (these would otherwise not be tax deductible) 
  • No administrative penalty of $20 per employee 
  • No Part 7 penalties (which could otherwise be 200% of the SG Charge owing). 

It is anticipated more than 7,000 additional employers will come forward now that the legislation has passed. 

Given that SG non-compliance can now be more easily detected by the ATO, non-complying employers should strongly consider their options. 

Employers who do wish to take advantage of the Amnesty should contact the ATO. 

 

Superannuation Amnesty is back on the table!

The Government’s superannuation amnesty for employers is now back on the table! 

The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 was introduced into the House of Representatives on 18 September 2019. It seeks to legislate the super guarantee amnesty that the Government failed to pass into law before the Federal Election. The legislation provides for a one-off amnesty to encourage employers to self-correct historical SG non-compliance. 

Specifically, an employer that qualifies for the amnesty in relation to their SG shortfall for a quarter: 

  • Will have the administrative penalty waived ($20 per employee, per quarter) 
  • Will have Part 7 penalties waived (this can be an additional penalty of up to 200% of the shortfall owed) 
  • Will be able to deduct the late shortfall contribution (under current law, late payments cannot be deducted). 

The beneficial treatment provided by the amnesty is available for a quarter that ends at least 28 days before the start of the amnesty period. This means that the beneficial treatment provided by the amnesty is available in relation to the quarter starting on 1 July 1992 (which is the day that Superannuation Guarantee commenced) and all subsequent quarters until and including the quarter starting on 1 January 2018. An employer will not be able to benefit from the amnesty for SG shortfalls relating to the quarter starting on 1 April 2018 or subsequent quarters. 

To qualify for the amnesty, a disclosure must be made by an employer during the amnesty period. The amnesty period is the period that started on 24 May 2018 and ends 6 months after the day the legislation is passed (therefore, at least until March next year if the legislation passes next month). 

On releasing the legislation, the Assistant Treasurer said.   

Since the one-off amnesty was announced, over 7,000 employers have come forward to voluntarily disclose historical unpaid super. The ATO estimates an additional 7,000 employers will come forward due to the extension of the amnesty. This means around $160 million of superannuation will be paid to employees who would otherwise have missed out. 

The amnesty reinforces recent changes to the superannuation system to improve the visibility employees have over their superannuation. We have given the ATO greater powers to ensure employers meet their obligations, and to help ensure employees receive their superannuation entitlements. The Government’s legislated package of integrity measures – part of the Treasury Laws Amendment (2018 Measures No. 4) Act 2019 – includes up to 12 months jail for employers who continue to do the wrong thing by their workers, and gives the ATO near real-time visibility of how much SG employees are owed and the contributions they actually receive. 

This is a practical measure that is all about reuniting hardworking Australians with their super. My message to employers who owe super is: come forward now. Do not delay. This is a one-off opportunity to set things right, and going forward the ATO has the tools to spot unpaid super. 

Irrespective of whether the amnesty passes into law, all employers should strongly consider getting their superannuation affairs in order. There is now real time, and more granular reporting of superannuation liabilities and payments – down to the employee level. The ATO will now know in close to real time if an employer is not paying superannuation in respect of any employee. Therefore, it will be in a position to immediately follow up late payers. 

 

Does Your SMSF Investment Strategy Meet Diversification Requirements?

On the 9th August, the ATO announced it will contact, at the end of August, about 17,700 self-managed super fund (SMSF) trustees and their auditors where their records indicate the SMSF may be holding 90% or more of its funds in one asset or a single asset class.  

They are concerned some trustees haven’t given due consideration to diversifying their fund’s investments; this can put the fund’s assets at risk.  

Lack of diversification or concentration risk, can expose the SMSF and its members to unnecessary risk if a significant investment fails.  

They will ask trustees to review their investment strategy and clearly document the reasons behind the investment decisions.  

They will also ask trustees to have their documentation ready for their SMSF’s approved auditor for their next audit to help the auditor form an opinion on the fund’s compliance with these requirements

SINGLE TOUCH PAYROLL

1 July Employers with less than 20 employees should start transition to Single Touch Payroll (STP)

Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO.

If you are using a solution that offers STP reporting, such as payroll or accounting software, you will send your employees’ tax and super information to the ATO each time you run your payroll and pay your employees.

The information is sent to the ATO either directly from your software, or through a third party – such as a sending service provider.

If you have a software provider, they can tell you more about the type of STP solution they offer. For a list of available STP solutions visit the https://api.gov.au/productregister/

There will also be a number of options available for employers who do not use payroll software, such as http://No-cost and low-cost Single Touch Payroll solutions.

Options will depend on your number of employees:

  • Large employers with 20 or more employees should now be reporting through STP, or have applied to the ATO for a later start date.
  • Small employers with 19 or less employees will need to report through STP from 1 July 2019. This is a gradual transition, and the ATO is providing flexible options.
    • If you’re an employer with four or less employees you will have additional options.

Super Guarantee Amnesty Update

The Government’s proposed Superannuation Guarantee (SG) Amnesty will not proceed. To recap, the SG amnesty was to be available for the 12-month period from 24 May 2018 to 23 May 2019. To get the benefits of the Amnesty (set out below) employers must have during this 12-month period voluntarily disclosed any SG underpayments that existed in the past (going as far back to when SG commenced in 1992). For an employer, the tax benefits of the amnesty were:

  *   The administration component of the SG Charge (SGG) would not be payable (this is a $20 per employee, per quarter, for whom there is an SG Shortfall)

  *   Part 7 penalties would not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall that is owed to employees)

  *   All catch-up payments made during the 12-month amnesty period were to be tax deductible.

By contrast, under the current law, when SG has been underpaid or paid late, the SG Charge that must paid to the ATO is not deductible, and late contributions that an employer has made to an employee’s superannuation fund and has elected to offset against their SG Charge liability are also not deductible.

With Parliament having been prorogued for the Federal Election, the legislation to enact the Amnesty (which is opposed by the Labor Party) will not pass into law. Therefore, employers who disclosed SG shortfalls during the Amnesty period will be subject to the current law and not enjoy the Amnesty concessions, irrespective of any assurances offered by ATO employees at the time employers made disclosures. The ATO have however indicated that it will exercise its discretion and not apply Part 7 penalties to these employers. The Part 7 penalties aspect of the SG Charge regime did not require a change to legislation as the discretion to waive penalties already sits with the ATO. Going forward, with super funds now reporting to the ATO more regularly (at least once per month), we would strongly urge all employers to pay SG on time and in full by the quarterly cut-off dates

2019 Federal Budget Wrap

Following is a brief summary of some of the headline Budget measures.

BUSINESS

*         Instant Asset Write-Off Boosted and Expanded – Two key changes have been made:

o    The write-off has been extended to medium-sized businesses (those with an aggregated annual turnover of less than $50 million.

o    The threshold has been increased to $30,000.

Therefore, subject to legislation, businesses with an aggregated turnover of less than $50 million will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are purchased and then first used, or installed ready for use, from Budget night (2 April 2019) to 30 June 2020.

*         Division 7A Changes Deferred – The Government’s proposed Division 7A changes will be deferred by 12 months to 1 July 2020. To recap, Division 7A is designed to prevent profits or assets being provided to shareholders or their associates tax-free. You can read more about these proposed changes – which are not yet even in draft legislative form – on the ATO website.<https://www.ato.gov.au/General/New-legislation/In-detail/Other-topics/Targeted-amendments-to-Division-7A/>

*         Crackdown on Unpaid Tax and Super by Larger Businesses – The Government will provide more than $40 million to the ATO to recover unpaid tax and Superannuation Guarantee owed by larger businesses.

*         Strengthening ABN Rules – This measure imposes new compliance obligations on ABN holders to retain their ABN. From 1 July 2021, ABN holders with an income tax return obligation will be required to lodge their income tax return and from 1 July 2022 confirm the accuracy of their details on the Australian Business Register annually.

*         Tackling Sham Contracting – The Government will provide more than $9 million to establish a dedicated unit within the Fair Work Ombudsman to address sham contracting. This is where employers seek to avoid statutory obligations and employment entitlements (such as paid leave and superannuation) by misrepresenting employer/employee relationships as independent contracts.

PERSONAL TAX CHANGES

*         Income Tax Cuts by Increasing Tax Offset – Subject to the passage of legislation, tax relief will be granted to individuals via the non-refundable low and middle income tax offset (LMITO). The LIMTO will increase from a current maximum of $530 per year to $1,080. Further, the base rate will increase from $200 to $255 per year for 2018/2019 through to 2021/2022. Depending on your level of income, the changes will benefit individuals as follows:

o    The LMITO will now provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less.

o    Between taxable incomes of $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080.

o    Taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080.

o    For taxable incomes of $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.

The LMITO will be enjoyed straight after individuals lodge their income tax returns for the above years.

*         Income Tax Cuts via Rate and Threshold Changes – The following changes are slated for future income years:

o    From 1 July 2022, an increase to the top threshold of the 19% personal income tax bracket from$41,000 to $45,000.

o    From 1 July 2022, an increase in the low income tax offset (LITO) from $645to $700.

*         New Deductible Gift Recipients (DGRs) Approved – The following organisations have been granted DGR status from 1 July 2019 to 30 June 2024: Australian Academy of Law, China Matters Limited, Foundation Broken Hill Limited, Motherless Daughters Australia Limited, Superannuation Consumers Centre Limited, and The Headstone Project (Tasmania) Incorporated. The Government will also establish a deductible gift recipient (DGR) general category to enable Men’s Sheds and Women’s Sheds to access DGR status from 1 July 2020.

SUPERANNUATION CHANGES

  *   Removal of Work Test for Certain Taxpayers – The current superannuation work test will be removed for people aged 65 and 66 from 1 July 2020.

  *   Extending Eligibility for the Bring-Forward Cap – From 1 July 2020, access to the bring-forward cap will be extended from taxpayers aged less than 65 years of age to those aged 65 and 66.

  *   Increase to Age Limit for Spouse Contributions – The age limit for spouse contributions will increase from 69 to 75 from 1 July 2020.

Legislation Update 26/02/2019

The first sitting of Parliament for 2019 wrapped up last week. While legislation to extend the Single Touch Payroll reporting regime to all employers passed into law (just awaiting Royal Assent), there are a couple of other measures that remain unlegislated which could impact your business. With the full Parliament only expected to sit for three more days (April 2 – 4) until an Election is called, there are now serious doubts surrounding whether these measures will pass into law. In view of this, we put forward the following suggested approach in the meantime: 

  1. Superannuation Amnesty 

The legislation to enact this measure is still before the Senate. To recap, the Superannuation Guarantee Amnesty was to be available for the 12-month period from 24 May 2018 to 23 May 2019. To get the benefits of the Amnesty (set out below) employers must during this 12-month period voluntarily disclose any Superannuation Guarantee underpayments that exist in the past (going back to when Superannuation Guarantee commenced in 1992). 

For an employer, the tax benefits of the Amnesty are: 

* The administration component of the Superannuation Guarantee Charge (SGG) is not payable (this is a $20 per employee, per quarter, for whom there is an SG Shortfall) 

*  Part 7 penalties will not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall that you owe to employees) 

* All catch-up payments that you make during the 12-month Amnesty period will be tax deductible. 

By contrast, under the current law, when superannuation has been underpaid or paid late Superannuation Guarantee Charge that must paid to the ATO is not deductible, and late contributions that an employer has made to an employee’s superannuation and has elected to offset against their SG Charge liability are also not deductible. 

If an employer is contemplating disclosing past superannuation shortfalls specifically to get the benefits of the Amnesty (including claiming a deduction for your late contributions) then it may be prudent to hold off until such time that the Amnesty actually becomes law (if at all). We will keep you apprised of the passage of the legislation through Parliament. However, with only a few sitting days remaining for this Parliament, and with the Opposition opposed to this measure, there are serious doubts about it becoming law. 

Irrespective of the Amnesty however, all employers should consider coming forward to disclose and pay past shortfalls to get their Superannuation Guarantee affairs in order. The Government is committing more resources to this area – including requiring Superannuation Funds to report more regularly to the ATO (at least once each month) – therefore non-complying employers may be more easily detected going forward. 

  1. Enhancing the Instant Asset Write-Off 

Legislation to expand and extend the Small Business Instant Asset Write-Off is still before the House of Representatives. This Bill seeks to extend the write-off by 12 months until 30 June 2020 (currently set to expire on 30 June 2019) and increase the threshold by $5,000 to $25,000; with the increase backdated to 29 January 2019. If passed into law, this would mean that there would be two thresholds for 2018/2019 as follows: 

* $20,000 (for assets installed ready for use between 1 July 2018 and 28 January 2019), and 

* $25,000 (for assets installed ready for use between 29 January 2019 and 30 June 2019. 

Irrespective of the whether the legislation passes into law, it is important to have perspective. You are only getting back the tax rate on the asset, not the full value of the asset. This is the same as the old law where the write-off threshold was $1,000  You don’t get any extra cash than you would otherwise have received under the old rules – you simply get it sooner. Consequently, you should not let tax distort or blur your commercial instincts – as you don’t get any extra cash than you would otherwise have under the old rules, you should continue to only buy assets that fit within your business plan. 

The Tax Advantages of Superannuation

Superannuation is a concessionally taxed environment as follows  

* Superannuation earnings (such as interest, dividends, rent etc.) are taxed at 15% when your account is in accumulation mode (i.e. not in pension mode). These earnings are tax-free when your account is in pension mode. By contrast, investment earnings on assets (such as shares, property, term deposits etc.) held outside of superannuation are taxed at your marginal tax

* Capital gains made by superannuation funds are likewise taxed at 15% when your account is in accumulation mode. Where a CGT assets supports a pension, any capital gain made when those assets are sold is tax-free. Any capital gain made by your superannuation fund is reduced to 10% (a 33% discount) where that asset has been held for 12 months or more.  Although this is a lesser discount than the 50% discount available to trusts and individuals, this is negated by the base CGT superannuation taxation rate of 15%.

Therefore, as well as making provision for your retirement, by contributing to superannuation you can also enjoy the above tax concessions. From 1 July 2017 all individuals up to age 75 can claim an income tax deduction for personal superannuation contributions. Before this date, you could only claim a deduction for your personal contributions where less than 10% of your assessable income, your reportable fringe benefits and your reportable employer superannuation contributions (e.g. salary sacrifice contributions) for the year were from being an employee – this was known as the 10% Rule. This rule prevented most employees from claiming a tax deduction for this type of contribution. However, under the new rules, to claim a deduction, the following requirements must be met:

* Age – All individuals under the age of 65 are eligible. Those aged 65 to 74 meet the superannuation ‘work test’ (work for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which you plan to make the contribution). For those aged 75, the contribution must be made no later than 28 days after the end of the month in which you turn 75. Older taxpayers are ineligible.

* Minors –  If the individual is under 18 at the end of the income year in which the contribution is made, they must derive income in that year from being an employee or carrying on a business.

* Complying Fund – The contribution must be made to a complying superannuation fund.

* Notice Requirements – To claim the deduction you must provide your superannuation fund with a Notice of intention to claim a deduction form before you lodge your tax return in respect of that financial year.

Superannuation is also a great asset protection strategy. If a person becomes bankrupt, they may lose most (or all) of their assets. However, the Bankruptcy Act provides that the interest of the bankrupt in a regulated superannuation fund at the time of the commencement of the bankruptcy is not ‘property’ that can vest in their trustee in bankruptcy to be divided among creditors. Furthermore, if the superannuation fund pays a lump sum to a bankrupt (though not a pension) after the date of the bankruptcy, this money is also not divisible among creditors.