Small businesses may ‘collapse under strain of payday super’, IPA warns
Existing issues within the SG system must be rectified before the government proceeds with the new changes, the IPA says.
.
The Institute of Public Accountants has told the government that the implementation of payday super should not proceed without system improvements being made first.
In its pre-budget submission, the IPA said the introduction of payday super is a significant departure from the existing arrangements where the payment of employees’ salaries and wages is separate from the payment of their super entitlements.
“Over 60 per cent of employers pay their SG contributions quarterly, so payday super will inevitably be one of the most significant changes to the superannuation sector since compulsory super began,” the IPA said.
The association said the existing SG system has many issues that need to be addressed so that they are not dragged into the new regime.
“PDS should not proceed without system improvements addressing the current identified drawbacks, otherwise we will be introducing additional unnecessary complexity into the new regime,” it stated.
“The use of SuperStream, clearing houses, super choice/stapling and remittance processes need to be refined and streamlined to support the move to near real time payment of SG.”
The submission noted that the proposed policy changes will impact a wide range of legislative provisions, employers’ compliance requirements, the onboarding of employees with an employer, payment and reporting systems and processes, and services provided by intermediaries such as payroll providers and clearing houses and administration by the ATO.
“As a result, every aspect of the policy and its impact needs to be carefully considered,” the IPA said.
“Otherwise, there is a high likelihood of significant and unintended consequences that may affect employers’ ability to comply with the PDS model.”
The IPA said processes within the current system must be improved as there is only a small window for error corrections to accommodate the more frequent payment of SG.
Cash flow challenges for smaller businesses
The association also warned that more frequent SG contributions will lead to higher costs for employers by way of processing costs and higher transaction and servicing costs.
“In addition, the cashflow consequences for employers cannot be ignored especially for small and medium businesses,” it said.
“The move to immediate payment may pose challenges during the transitional period where the old and new regimes overlap, and some entities, in particular smaller employers, may collapse under this strain, as the proverbial ‘straw that broke the camel’s back’ syndrome.”
Penalty regime for SG must be overhauled
The IPA is also calling on the government to change the current penalty regime for the late payment and underpayment of SG.
“We consider that the Superannuation Guarantee Charge (SGC) model in its current form is overly complex and punitive,” the IPA said.
“The design of the SGC and the associated penalties deter self-rectification, and they therefore operate as a disincentive for employers to voluntarily report and rectify historical shortfalls,” it said.
One of the key concerns, the IPA said, is the draconian application of penalties that do not proportionately reflect the loss to employees or the ‘culpability’ of an employer who is in arrears.
“Late payment penalties under the existing penalty regime for failure to make SG payments on time need to be revised,” the submission said.
“PDS represents an overdue opportunity to completely redesign the SG penalty regime, to make it simplified and less punitive for employers trying to do the right thing. It must deter bad behaviour, whilst encouraging employers to quickly identify and fix errors.”
07 February 2024
Miranda Brownlee
accountingtimes.com.au
Wheat Production by Country
Check out the countries that produce the most wheat.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Do you know how to recover debts?
Beginning the year with a clean financial slate can be pivotal to your business’ health.
.
Clearing debts early enhances creditworthiness, reduces stress, and fosters cash flow. It also facilitates strategic planning and growth, setting a solid foundation for a successful year ahead.
Here are five steps for recovering debt:
- Revisit your business terms and conditions: these should set out what steps the debtor must take to resolve payment-related disputes. Your lawyer can help review this for you.
- Follow up: remind the debtor via email or phone of the amount due.
- Send a letter of demand: request the debtor pay the outstanding balance.
- Negotiate with the debtor: before going to court, your lawyer will first try to resolve the dispute.
- Go to court: commence a legal claim against the debtor.
Some other actions:
Issue a Letter of Demand
The first stage in the debt collection process is usually to issue a letter of demand. This is a formal letter requesting payment of the debt. It sets out the specific amount owed and the period in which the debtor can make payment before you take further legal action.
Sometimes, issuing a letter of demand can result in the parties entering into negotiations concerning the debt payment. If parties reach an agreed payment plan, they can enter a binding settlement deed outlining the agreed proposal. This payment plan can be in full or instalments.
A formal letter can encourage a creditor to promptly take action. However, there is always some level of risk that a debtor may ignore the letter or raise a dispute concerning the debt.
Going to court
Going to court to recover a debt is intimidating, expensive and time-consuming. Therefore, you should think carefully before embarking on this final stage of the debt recovery process, especially if you have not exhausted your alternative options for getting paid. This article outlines what you should consider before filing your statement of claim.
- Consider Whether Your Debtor Can Pay
Even if you have a strong claim, if your debtor has no means to pay, you may get little from starting a lawsuit. Therefore, before commencing court proceedings, find out what you can about your debtor’s finances. For example, by checking their credit report and bankruptcy status.
- Determine if You Can Prove Your Claim
Every good lawyer will tell you that ‘litigation is never a sure thing’. The more evidence you have to support your claim, the stronger your position will be. While evidence in the form of written documents is always best, it is not essential. The court will determine a claim without written documentation on a ‘he said/she said’ basis.
Legal Vision
Updated guidance on R&D claims
.
We've released 2 new taxpayer alerts to warn entities and their advisers about our concerns regarding incorrect Research and Development (R&D) tax incentive arrangements we’re reviewing. These alerts are about expenditure incurred to associated entities and activities conducted overseas for foreign related entities.
We’re concerned these arrangements are being used to:
- claim the R&D tax offset in situations where it would not otherwise be available, either at all or in the income year claimed by the R&D entity
- artificially increase the amount of the R&D tax offset claimed.
We encourage you to read these alerts and consider if your clients need to contact us or make a voluntary disclosure by amending their R&D tax incentive claim.
Penalties may apply to participants of these types of arrangements. These penalties can be significantly reduced if the amendment request is treated as a voluntary disclosure. Generally, the reduction is greater if the disclosure is made before being notified of an examination of your client's tax affairs.
About the alerts
Taxpayer Alert TA 2023/4 Research and development activities delivered by associated entities. We’ve identified arrangements where an entity incorrectly claims the R&D tax offset for expenditure incurred under an agreement with an associated entity who conducts those activities.
Taxpayer Alert TA 2023/5 Research and development activities conducted overseas for foreign related entities outlines our concerns about arrangements where Australian entities claim the R&D tax offset for expenditure incurred on R&D activities conducted overseas. Arrangements of concern include where an R&D entity has purported that R&D activities were conducted for its own benefit, but those activities were instead conducted for a foreign entity that is ‘connected with’, or is an ‘affiliate’, of the R&D entity.
To provide information about this or another type of arrangement, or about a promoter of this or another arrangement, you can:
ATO
14 December 2023
ato.gov.au
2 in 3 SMEs benefit from instant asset write-off, survey reveals
The uncapped version of the instant asset write-off scheme was extremely popular among SMEs with the average spend over $90,000, according to ScotPac.
.
The latest SME Growth Index by ScotPac has shown that 63 per cent of Australian SMEs took advantage of the Uncapped Instant Asset Write Off Scheme in the financial year before the revised $20,000 per asset limit.
Since its introduction more than a decade ago, the Instant Asset Write-Off (IAWO) Scheme has allowed eligible businesses to claim an immediate tax deduction for the purchase of various assets, up to a specified threshold.
At the outset of COVID-19, the federal government increased the IAWO threshold from $30,000 to $150,000 to make it easier for small businesses to benefit from asset purchases. It later removed the cap entirely by introducing temporary full expensing.
It later removed the cap entirely by introducing temporary full expensing.
A revised IAWO threshold of $20,000 per eligible asset was introduced for 12 months from 1 July 2023.
The survey by ScotPac reveals that SMEs ramped up their use of the scheme in the lead-up to the capped version of the scheme.
The average amount spent by SMEs that used the IAWO scheme in the 2022–23 financial year was $91,500.
SMEs with declining or flat growth were the biggest users of the scheme with 68 per cent purchasing eligible assets, compared with 59 per cent of growth SMEs.
NSW and the ACT recorded the most use with 75 per cent of businesses in these states taking advantage of the scheme.
ScotPac CEO, Jon Sutton, said the IAWO scheme has been a major factor in SME decision making on capital expenditure in recent years.
“There is no doubt the Instant Asset Write-off Scheme has achieved its objective of encouraging SMEs to invest in assets to help grow their business,” Mr Sutton said.
“In raw numbers, hundreds of thousands of SMEs were able to claim tax relief worth billions of dollars for assets purchased in 2023-24.
“When you consider the rising costs faced by all businesses in that period, including the cost of critical assets, the Instant Asset Write-off scheme has provided a great boost for SMEs,” Mr Sutton said.
Under the current IAWO threshold, a $20,000 cap applies on an asset-by-asset basis.
Assets valued at more than $20,000 are placed into the small business depreciation pool and depreciated over several years.
Mr Sutton said while there was understandable disappointment that the temporary full expensing measure had ceased, the current IAWO scheme still provided incentives for SMEs to invest in capital.
“Average capital expenditure levels for SMEs are continuing to grow,” he said.
“While recent changes to the scheme have removed the immediate tax benefit for larger items, the $20,000 per asset cap still provides opportunities for SMEs looking to expand or upgrade their asset base.”
Miranda Brownlee
31 January 2024
accountantsdaily.com.au/
GrantConnect
GrantConnect provides centralised publication of forecast and current Australian Government grant opportunities and grants awarded.
.
Click on the links below to find out more about the grants and how to access them.
Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
Following years of mixed messaging, Labor has bowed to economic pressure and announced changes to its stage three tax cuts.
.
Only those earning less than $150,000 will benefit from the impending tax cuts, which were originally slated to abolish the 37 per cent tax bracket applied to income between $120,000 and $180,000 and reduce the 32.5 per cent tax rate to 30 per cent for all incomes between $45,000 and $200,000.
However, with rising inflation and consequent increases to interest rates, Labor has pivoted to make room for cost-of-living ease for middle Australia, effectively scrapping the already legislated stage three rollout – something Prime Minister Albanese said he would not do going into the last election.
This means that those earning $200,000 or more will receive a $4,529 cut, instead of the legislated $9,075 they were due to receive from 1 July.
Under the changes, the 19 per cent tax rate that applies to incomes between the $18,200 tax-free threshold and $45,000 will be lowered to 16 per cent.
Those earning between $45,000 and $135,000 will be taxed at 30 per cent, while the 37 per cent tax rate will be reinstated and apply to incomes between $135,000 and $190,000, after which the 45 per cent rate will apply.
This means that someone on $73,000 will receive a tax cut over $1,500, more than double the amount under the previous plan, while somebody on $100,000 will have their tax cut increased from $1,375 to $2,179.
On Thursday before the National Press Club, Prime Minister Albanese said: “Our government will deliver a tax cut for every Australian taxpayer”.
“This is a plan for middle Australia that delivers for every Australian taxpayer, right up and down the income ladder,” he said.
The tax cuts won't hurt inflation, he said.
“This option is broadly revenue neutral and will not add to inflationary pressures,” the PM cited a Treasury report and added that there are no implications for the Reserve Bank’s forecasts.
“Some would say that we should stay the course, even if it means going to the wrong destination.
“To them I say, we are choosing a better way forward given the changed circumstances.”
The PM also added that his government will increase the low-income threshold at which the Medicare levy applies.
According to media reports, the government plans to launch an ad campaign to help sell its obvious backflip.
‘Different position for best reason’
Doing the media rounds on Thursday morning, Treasurer Jim Chalmers defended Labor’s surprise move, noting that the government has “come to a different position” for “the best possible reason”, which is “we can provide more tax relief for more people to help them with the cost‑of‑living”.
“Now we are being upfront with people and saying we have come to a different view. We've come to a different view because what we're proposing today is better for middle Australia, better for cost‑of‑living pressures, better for women and workforce participation and better for the economy, without adding to the inflationary pressures that we are dealing with,” Mr Chalmers told ABC Radio.
Questioned about whether these broken promises could be costly for Labor, Mr Chalmers said “what we're doing here is we're putting people before politics”.
“Of course, these will be politically contentious. Our opponents will play their usual mindless, nasty, negative politics over this.
“We understand that but I believe you build trust by making the right decisions for the right reasons in the interests of the people and when you come to a different view, as we have, you front up and explain why the circumstances have changed, why our position has changed and how people will benefit from what we are proposing today”.
In the lead-up to last year’s May budget, Treasurer Chalmers was, however, selling a different story, reinforcing at the time that the government would push ahead with stage three tax cuts.
This story would later shift to suggest that Labor was prepared to re-evaluate the tax cuts if inflation remained an issue.
Maja Garaca Djurdjevic
29 January 2024
smsfadviser.com
Does your business have a company Power of Attorney?
An individual power of attorney gives an attorney legal authority to manage a person’s assets and financial affairs.
.
A company power of attorney authorizes a person or persons to act on behalf of a company and/or sign certain documents on its behalf.
When granting a company power of attorney, it could be:-
- Limited power, for routine transactions
- For specific purposes
- General powers
And, be aware the director will remain liable for an attorney’s actions. The company may want to consider appointing two persons to act jointly as attorney.
A complete estate plan for a family should consider a power of attorney for all companies in the group, in addition to the personal and financial affairs of the individuals involved.
AcctWeb
Accessing superannuation benefits.
Common conditions of release include the fund member having reached preservation age and retired, or commenced a transition-to-retirement income stream; ceasing an employment arrangement on or after the age of 60; being 65 years old even though they haven’t retired; or having died.
.
Alternatively, under special circumstances, some benefits may be available where the fund member: –
• has terminated gainful employment;
• is temporarily or permanently incapacitated;
• is suffering severe financial hardship;
• meets conditions for compassionate grounds;
• has a terminal medical condition; or
• is taking part in the first home super saver scheme.
The Australian Taxation office is aware of scams and improper access, and will continue targeting Self-Managed Super Funds and their trustees.
It is the trustees responsibility to take care and always be prudent.
Acctweb
The Countries that Export the Most Wine in the World
Check out the countries that export the most wine in the world
.
.
.
.
.
.
.
.
.