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.
Many key dates are looming for business including those relating to Activity Statements, superannuation, and more….
DECEMBER 2019
1 December – Due date for income tax payments for companies that were required to lodge by 31 Oct. 21 December – November monthly Activity Statments – due for lodgement and payment .
JANUARY 2020
15 January – Due date for lodgement of income tax returns for companies and trusts that were taxable medium to large businesses in the prior year and are not required to lodge earlier. If you fail to lodge by the due date, your 2019/2020 income tax return will be due on 31 October 2020. 21 January – Due date for lodgement and payment of December 2019 monthly Activity Statements. 28 January – Due date for October-December 2019 Superannuation Guarantee contributions to be made to a complying fund on behalf of your employees. 31 January – Final date for lodgement of October-December 2019 TFN report for closely held trusts for TFNs quoted to a trustee by beneficiaries.
FEBRUARY 2020
21 February – Due date for lodgement and payment of January monthly Activity Statements. 28 February – Due date for lodgement and payment of October-December 2019 quarterly Activity Statements, including electronic lodgements. 28 February – Due date for lodgement and payment of Annual GST returns or Annual GST information reports – if you do not have an income tax return lodgement obligation. 28 February – Due date for lodgement and payment of income tax returns for self-preparing entities that were not due at an earlier date. If you fail to lodge by the due date, your 2019/2020 return will be due on 31 October 2020. 28 February – Due date for lodgement and payment of income tax returns for medium to large businesses (taxable and non-taxable that are new registrants). 28 February – Due date for lodgement and payment of Superannuation Guarantee Charge Statement if you failed to pay Superannuation Guarantee charge on time for the October-December 2019 quarter. Superannuation Guarantee Charge is not deductible.
Where one of these dates falls on a weekend or a public holiday, the due date is extended to the next business day except in the case of Superannuation Guarantee contributions.
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.
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 theserequirements.
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/
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.
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
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.
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:
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.
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.
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.
Could you as an employer benefit from taking advantage of the Government’s new Superannuation Guarantee (SG) Amnesty? This article informs you of how you can wipe your SG slate clean, and enjoy some once-off taxation benefits in doing so.
Subject to the passage of legislation (which is currently before the Senate), the Amnesty will be available for the 12-month period from 24 May 2018 to 23 May 2019.
BACKGROUND The latest data indicates that the “SG Gap” or SG Shortfall (the difference between the theoretical amount payable by employers to be fully compliant with their SG obligations and the amount they have actually paid) is $2.85 billion annually. This indicates that a concerning number of employers are not paying sufficient SG to their employees or are not paying it at all. In response to this and in order to recoup this key employee entitlement, the Government in late May 2018, announced a once-off, 12-month Superannuation Amnesty for employers. BENEFITS For an employer, the benefits of the Amnesty are:
The administration component of the Superannuation Guarantee Charge (SGC) is waived (this is currently a $20 per employee, per quarter charge 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 amount that you owe to employees)
All catch-up payments that you make during the 12-month Amnesty period will be tax deductible. The amendments also allow contributions that an employer has elected to offset against SG Charge imposed on the SG Shortfall disclosed in accordance with the Amnesty to be deducted from an employer’s assessable income. This ensures commensurate benefits are provided for employers who contribute directly to their employees’ funds when disclosing under the Amnesty as opposed to the benefits for those who instead make payments in relation to SG Charge and leave it to the ATO to distribute the amounts to the relevant funds.
By contrast, under the current law, SG Charge paid to the ATO is not deductible, and late contributions that an employer has made to an employees’ superannuation fund and has elected to offset against their SG Charge liability are also not deductible. DETAILS With a Bill to enact the new Amnesty now having been introduced to Parliament, we can reveal the details are as follows:
The Amnesty applies to any SG Shortfall from the introduction of SG back on 1 July 1992 to the quarter ending 31 March 2018.
You must voluntarily disclose amounts of SG Shortfall relating to the above period. Therefore, if an employer has already lodged an SG Charge Statement (and in that Statment disclosed particular SG Shortfalls), then those particular Shortfalls are not eligible for the Amnesty even if the amount of the Shortfall has yet to be paid. Likewise, Shortfalls that the ATO uncovers during current, future, or past audits of the employer are not eligible for the Amnesty. The disclosure of a new Shortfall must come from the employer, and must occur during the 12-month Amnesty period. By way of background, SG Charge Statements and SG Shortfalls operate under a self-assessment model. The ATO are in most cases unaware that an SG Shorfall exists except in the case where an employee lodges a complaint against their employer themselves, or the Shortfall is uncovered in an ATO audit. This lack of awareness by the ATO of past employer Shortfalls is why eligibility for the Amnesty rests on the disclosure by the employer of new, undisclosed Shortfalls.
There is no requirement to actually make a payment to get the benefit of the Amnesty. Rather, you only need to disclose an SG Shortfall. However, where you fail to make a payment during the Amnesty period, you will not receive a deduction for the catch-up payments (which are only available during the Amnesty).
Any payments made outside the Amnesty period are not eligible for a deduction. For example, if an employer discloses a Shortfall during the Amnesty period, and then makes a payment arrangement with the ATO to pay the required amounts back in instalments, any amounts paid after 23 May 2019 cannot be claimed as a deduction.
ACCESS To access the Amnesty, employers or thier Advisors must first calculate the amount payable (the SG Shortfall, plus nominal interest) and lodge one of the following forms:
SG Amnesty Fund payment form (where you wish to access the Amnesty and can pay the amount in full (including nominal interest) direct to an employee’s superannuation fund)
SG Amnesty ATO payment form (where you wish to access the Amnesty but cannot pay the amount owing in full). If an employer has already lodged an SGC Statment or received an SGC assessment for a quarter, they can only use this form.
Employers need to lodge these completed forms electonically through the Business Portal or their Accountant or Bookkeeper on their behalf via the BAS Agent or Tax Agent Portal respectively. There is now a radio button on all portals. Information that must be provided includes:
Details of Employer
Number of quarters covered
Number of employees, (no employee details are required)
Amount to be paid.
CONCLUSION Legislation to enact this Amnesty was introduced into Parliment in late May and has been passed by the House of Representatives. It is currently before the Senate. Interestingly, the Opposition have criticised the legislation which it says shows leniency to non-complying employers. Therefore, it is no absolute certainty that the Amnesty will be passed into law over the coming months. For this reason, if you are contemplating disclosing past shortfalls specifically to get the benefits of the Amnesty (including claiming a deduction for their late contributions) then it may be prudent to hold off until such time the Amnesty actually becomes law. We will keep you apprised of the passage of the legislation through Parliament.
Irrespective of the Amnesty however, all employers should strongly 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) – meaning non-complying employers may be easily detected going forward.
For more on this subject: Members – login to the members area, Useful Links tab – watch the Tackling Tax video ‘Superannuation Amnesty’ presented by our CEO Kelvin Deer. https://mytaxsavers.com.au/
