Tag: Superannuation Guarantee

SUPER AMNESTY – TAKE ADVANTAGE!

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:
  1. Details of Employer
  2. Number of quarters covered
  3. Number of employees, (no employee details are required)
  4. 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/

Key Dates for November & December 2018

NOVEMBER 2018 
11 NOVEMBER – July-September quarterly Activity Statements – due for lodgement and payment. (if lodging electronically)
21 NOVEMBER – October monthly Activity Statements – due for lodgement and payment. 
28 NOVEMBER – Superannuation Guarantee Charge (SGC) Statement – due for lodgement and payment if insufficient contributions or late contributions were made for the July-September quarter.

DECEMBER 2018 
01 DECEMBER – Due date for income tax payments for companies that were required to lodge by 31 October.
21 DECEMBER – November monthly Activity Statements – due for lodgement and payment.

Where the due date falls on a weekend or public holiday, it is deferred until the next business day (except in the case of Superannuation Guarantee deadlines) 

Director Remuneration & Superannuation

Question – We have a small business set up as a company. My partner and I are the directors. We would both rather not pay super. The money could be far better spent in the business. Is there any way to get out of not paying?
Answer
TYPES OF PAYMENT TO A DIRECTOR: At the outset, it’s worth noting that there are a variety of ways that a director or stakeholder of a company can receive remuneration including via ‘Directors Fees’, Directors Salary, fringe benefits, dividends, even as a contract style payment (in very unusual circumstances) etc.

SUPERANNUATION: All fees paid to a company Director are earnings in respect of the Director’s ordinary hours of work. As such, they attract Superannuation Guarantee (SG). Director SG payments must, as with payments to employees, be made to the nominated superannuation fund or a Superannuation Clearing House as the case may be. It’s against the law to make them directly to the Director (irrespective of any written agreement in place between them and the company).

YOUR QUESTION As noted, drawing payments such as a salary from the company would attract SG and this cannot be avoided or contracted our of. To minimise the company’s SG obligations, you could discuss with Accountant the possibility of being remunerated solely by way of a dividend (such remuneration does not attract SG). Alternatively you could consider restructuring into a Partnership or Trust structure (in those cases, distributions of profit generally do not attract SG). To this end, we note the Government’s recently introduced Small Business restructure rollover which allows small business owners to change their operating structure without incurring CGT or income tax, subject to various conditions being met.

Burning Issues for Employers

SUPERSTREAM – COMPULSORY FOR ALL! 

All employers are now required to be SuperStream compliant. The 31 October compliance extension granted by the ATO to smaller employers has now passed. Note that there are no general exemptions from SuperStream – all employers must comply except for:
  • Contributions to your own SMSF (i.e.if you’re a related-party employer) – for example, if you’re an employee of your family business and your Superannuation Guarantee contributions go to your SMSF.
  • Personal contributions – for example, if you’re a sole trader and you contribute to a superannuation fund for yourself
Fines of up to $8,500 can now be imposed by the ATO on employers who are not SuperStream compliant. For more information on the SuperStream regime including compliance solutions, see the September/October 2016 edition of your ATR Bimonthly newsletter which is available in the Members Area if you are a subscriber.

SUPERANNUATION GUARANTEE

Still on superannuation… although the ATO allows an extra month for businesses to lodge their December quarterly BAS (the due date is February 28 regardless of whether you are lodging online via the Business Portal, by paper or via a Tax Agent/BAS Agent) there is no equivalent extension for the payment of Superannuation Guarantee.

Superannuation Guarantee for the October-December quarter is still due 28 days following the end of the quarter i.e. 28 January 2017. Failure to pay on time (even if you are just one day late) will result in your business being liable for the Superannuation Guarantee Charge. For this reason, if you are closed throughout January, you may wish to consider making the October-December contribution in December.

FINANCE

Following yet another recent reduction by the Reserve Bank, interest rates in Australia are now at record lows (the cash rate is currently at just 1.50%). With talk that rates will remain relatively low into the future, it’s an opportune time to review if you are making the most of them. Have you considered the following?

Fixed rate options. While rates are at an all-time low there may be opportunities to fix your loans or 3 or 5 years at under 5% per annum. Explore your options. Some borrowers may wish to fix just a portion of their loan.

Review your position. Low interest rates offer an opportunity to refinance or revise your payment schedule to pay your loan off sooner. Talk to your broker to see if there’s a home or business loan that better suits your needs.

Debt reduction. With lower rates, your monthly/fortnightly repayments will be less. Rather than pocketing the difference, if you put the difference into extra  repayments, you can shave years off your loan and, in doing so save thousands in interest. For example, a $500,000 home loan at an interest rate of 7% requires repayments of $3,078 per month over 30 years. At 4.5%, the repayments are $2,533, a difference of $545 a month. If you put that $545 into extra repayments, you can potentially take more than 9 years off the home loan term and save almost $140,000 in interest.

Create an offset account. This is effectively a money source sitting beside your mortgage. Any savings inside this account are effectively offset against your loan which in turn reduces the amount of interest you pay.

Of course, low rates will not be around forever. As a borrower it’s important not to become complacent and to make sure that you still have the capacity to meet your repayment obligation in the event that rates increase.

To continue to read this article (other headings Equipment Purchases & Annual Leave Issues), see the November/December 2016 edition of your ATR Bimonthly newsletter which is available in the Members Area if you are a subscriber, simply log in with your username & password.

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