ATO extends STP finalisation due date

Employers have been given additional time to complete their Single Touch Payroll finalisation declaration this year as the ATO recognises the ongoing impacts of COVID-19.

Employers with arm’s length employees will now be given until 31 July to make their end-of-year STP finalisation declaration, an extension from the usual 14 July due date.

The ATO said the extension follows the continued “impacts of COVID-19 on the Australian community”, but urged employers who were able to complete the declaration at an earlier date to do so.

“It’s important that you finalise your employees’ data by 14 July if you can, and let your employees know when you have so they can lodge their income tax returns,” said the ATO.

The Institute of Certified Bookkeepers executive director Matthew Addison said it was pleasing to see the ATO provide an extension in light of lockdowns occurring across the country.

“It is a great measure of consideration and support of the immense expectations upon agents and employers in what has been an adversely impacted year,” Mr Addison said.

“Bookkeepers and accountants are reporting significant anxiety and stress on themselves as well as from businesses and their teams with this end of year in particular. 

“Advisers helping business through understanding and coping with different phases of ‘COVID lockdown’ adds to a time of year that is already rife with compliance deadlines.

“The relaxing of this deadline will assist with ensuring that the end-of-year income statements for individuals are prepared correctly.”

The finalisation due date for those with a mixture of closely held payees and arm’s length employees will remain at 30 September for closely held payees. Small employers who only have closely held payees will need to complete the finalisation by the payee’s income tax return due date.

Jotham Lian 
30 June 2021 
accountantsdaily.com.au

Home Office & end of 2021 tax year

In a Covid-ravaged financial year, small business owners need consider what actions now can benefit in saving income tax. Taxpayers with the best records often have the best deductions.

• Home printers
• Monitors
• Cables
• Sit-stand desks and ergonomic seats
• Health and safety products, including social distancing floor decals and so-called sneeze screens

Year-end tax planning

Tax time is here again and pressure is mounting.

Work-related purchases, donations and superannuation are key areas where people can boost their deductions by taking action now.

Prepaying expenses that relate to 12 months cover, before 30 June can create bigger deductions, – for example, professional memberships, professional journals and subscriptions, even insurance premiums for investment properties and income protection.

Prepay the costs of a conference later in the year.

Interest on investment loans can be another prepayment – and combine it with a reduced interest rate.

Need to buy something for your job or home office?  Do it now.

Many people will be able to claim for a number of work-related expenses they wouldn’t otherwise have had to consider, such as home internet and items required for home office.

Donations to most legitimate charities are tax deductible – there are many, many deserving charities in need of help in this covid – ravaged year.

Many taxpayers can contribute up to $25,000 into their super this year – including employer contributions and salary sacrifice, but it must be well before end of June.  The funds must be received and processed by the fund before 30 June, so do it as soon as possible!

Spouse contributions made for low-income partners is sometimes of benefit.

Using a logbook for 12 weeks to map your work-related car expenses in normal years can be the biggest tax deduction.  But this year might calculate a higher percentage because there has been such limited holidays or private use because of lockdowns ( Melbourne taxpayers particularly) out of the total travelled this year.

Many people only claim the cents a kilometre method of 72 cents for up to 5000km travelled, but often cars can deliver bigger deductions, once petrol, maintenance, insurance and other costs are combined, with a log book.

Invest a few moments now, to save more than a few dollars at tax time.!

Post Federal budget reflections

The federal budget 2021–22 was handed down by the Treasurer, the Hon Josh Frydenberg MP, on 11 May 2021. This article considers the key issues as we wait for the legislative amendments to give effect to the budget measures.

At the time JobKeeper was announced on 30 March 2020, I described the scheme as akin to a pot of boiling water on the stove (representing the economy) where the gas levels cannot be maintained (due to COVID-19 lockdowns). Rather than turn the gas off, it was reduced to a low simmer. This would allow the pot to return to the boil more quickly than if the water was allowed to go stone cold.

It worked … the Australian economy has rebounded faster and stronger than expected, as evidenced by the latest budget numbers. For all its minor design flaws, JobKeeper kept businesses afloat and employees in jobs.

While an eye-watering deficit of $106.6 billion has been forecast for 2021–22, the budget measures have been positively received by many observers, containing plenty of good news for most. This budget was undoubtedly prepared with a forthcoming Federal election in mind (expected to be held no later than 21 May 2022) and against the backdrop of an electorate weary from the COVID-19 pandemic.

As I reflect on the package of key tax and superannuation measures announced this year, it is apparent that some of the measures can be classified into one of the following three categories:

• measures which are long overdue and constitute a ‘clean up’;
• measures which are welcome but could go further; and
• measures which are difficult to fault for their intent or purpose, but which require further consultation.

Letting go of LMITO

Before I do so, I’d like to comment on the highly visible Low and Middle Income tax offset (LMITO), thanks to extensive media coverage. If anyone is thinking the LMITO should be further extended (beyond 2021–22) or retained permanently, remember that it was baked into Stage 2 of the Personal Income Tax Plan. Stage 2 was originally legislated to apply from 1 July 2022 which would have subsumed the limited life LMITO.

However, last year’s budget brought forward Stage 2 by two years and unexpectedly extended the LMITO by 12 months to 2020–21. The LMITO’s life will be further extended to 2021–22, meaning it will endure for what will now be four years, as originally intended in the Personal Income Tax Plan, from 2018–19 to 2021–22.

Importantly, the nexus between the LMITO and the Stage 2 tax cuts has been decoupled. The tax cuts package was designed before COVID-19. The continuation of the LMITO for an additional two years has morphed into an economic stimulus measure. Its proposed removal after 2021–22 will visibly cut into family budgets as its recipients have become accustomed to the offset and come to rely on it. Perhaps the ‘bonus’ two years of the LMITO could have been rebadged (even renamed) by the government as a stimulus measure, as its subsumption by the Stage 2 tax cuts on 1 July 2020 seems to have gone unnoticed by most taxpayers and the media.

Long overdue measures

• The proposed removal of the exclusion of the first $250 of deductions for self-education expenses (not likely before 1 July 2022) is a sensible measure. This annoying rule — a legacy of the concessional deduction of the 1960s, the $250 rebate of the 1970s and the removal of that rebate in the early 1980s — imposes an unnecessary compliance burden on taxpayers.
• The proposed removal of the $450 monthly income threshold for superannuation guarantee purposes (not likely before 1 July 2022) is a sensible and long overdue change, particularly in this digital age of electronic payments and reporting. This measure is expected to benefit 300,000 low income employees, of which 63 per cent are women.
• The proposed removal of the active member test for SMSFs and small APRA funds (not likely before 1 July 2022) is also a long overdue measure. This sensible change will allow those temporarily stranded offshore due to our international border closure to continue to contribute to their own funds without having to set up a separate superannuation account managed by a large fund. The increase in the period under the temporary absence rule for fund trustees from two years to five years is also sensible, particularly for those trustees whose temporary absences overseas have been unexpectedly extended by COVID-19.

Welcome measures that could go further

• The proposed removal of the work test for those aged 67–74 making voluntary superannuation contributions (not likely before 1 July 2022) is a pleasing measure but falls short. The work test will be removed for those making voluntary non-concessional contributions or concessional contributions under a salary sacrifice arrangement but will remain for those aged 67–74 who cannot access salary sacrifice arrangements or earn solely investment income and seek to make personal deductible contributions. At a time when all efforts should be made to encourage superannuation savings, it is curious why this unnecessary restriction on the making of some concessional contributions remains.
• Temporary full expensing and loss carry back are economic stimulus measures from last year’s budget. These will be extended for a further 12 months, to 30 June 2023 and 2022–23 respectively. While this is welcome, the annual extension and/or expansion of the asset write-off mechanism (in one form or another since 12 May 2015), in particular, is inefficient and confusing for taxpayers and practitioners. It is high time the government decides on the appropriate asset and business turnover settings and makes these mechanisms a permanent feature of the law, for once and for all.
• The introduction of a patent box — a concessional corporate tax rate of 17 per cent on income derived from Australian patents in the medical and biotechnology sectors — is an innovative response from the government. There is enormous scope to expand the concept to other industries (noting that the clean energy sector has already been flagged).

Awaiting further detail

• The changes to the corporate tax residency rules — announced in last year’s budget — will now be sensibly extended to include trusts and corporate limited partnerships. However, we await further detail on the new ‘significant economic connection to Australia’ test for companies incorporated outside Australia announced in last year’s budget.
• The introduction of a new individual tax residency ‘bright line test’ should, theoretically, replace the current ‘resides test’ and the three statutory tests. However, the proposed secondary ‘Factor test’ may present new challenges for those who fail the primary ‘bright line test’, particularly when taxpayers try to navigate the ‘Australian economic connections’ factor. It is hoped that the government will look to consult further with the profession before finalising its policy position on the detail of this measure. We need to be careful we are not effectively replacing one set of complex tests with another, without gaining any ground.

Other significant measures

Other notable measures announced in the budget include the following:

• the eligible age for making downsizer superannuation contributions will be reduced from 65 to 60 (not likely before 1 July 2022);
• the maximum releasable amount under the First Home Super Saver Scheme will be increased from $30,000 to $50,000 (not likely before 1 July 2022);
• taxpayers will be allowed to self-assess the effective life of intangible assets rather than being required to use the statutory effective lives set out in s 40-95(7) of the ITAA 1997 (but not until 1 July 2023);
• the cessation of employment will be removed as a taxing point for tax deferred employee share scheme interests; and
• small business entities (aggregated turnover of less than $10 million) will be provided with the ability to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery action until the underlying dispute is resolved by the AAT, rather than applying through the courts.

The start date of the measures

The government released the budget for 2021–22 on 11 May 2021, yet none of the key tax and superannuation measures commence on 1 July 2021 (noting the continuation of temporary full expensing and loss carry back until 2023). Most of the measures start on the first 1 July following Royal Asset of the enabling legislation. While this acknowledges the reality of the inevitable passage of time between the date of announcement and the date of Royal Assent (allowing time for the measures to be passed by Parliament), it means that, ironically, most of the tax and superannuation measures contained in the federal budget 2021–22 will not commence until 1 July 2022 at the earliest.

This timing places the commencement of these measures beyond the next Federal election. If the measures are enacted before then, any changes could only be effected by further legislative amendment. If any of the measures are still unenacted when the Parliament is dissolved and:

• the Coalition is re-elected — presumably the policies would be retained and any unenacted measures contained in bills lapsing on the dissolution of the Parliament would be reintroduced;
• the Opposition forms government — it would be a matter for the Australian Labor Party to set out their policies and confirm whether the Coalition’s budget measures will be adopted.

As usual, we shall wait and see what transpires.

A final word on tax reform…

The budget did not contain any commitment to a holistic tax reform agenda. We still hope that the government will commit to tax reform to improve the efficiency and equity, and reduce the complexity, of the tax and superannuation system.

The government could take up opportunities set out in The Tax Institute’s pre-budget submission on expediting dispute resolution and dealing with some of the penalty issues raised in our submission, including the draconian 200 per cent penalty imposed under the superannuation guarantee regime for failure to lodge an SG statement.

Robyn Jacobson
The Tax Institute 
28 May 2021 
accountantsdaily.com.au

ATO sheds light on crypto compliance focus

The Tax Office has urged advisers and taxpayers alike to heed its guidance on accounting for cryptocurrency come tax time, when it will be looking to ensure that all capital gains events are accurately reported — not just gains.

Speaking at a tax-time tips seminar on Thursday, ATO assistant commissioner Adam O’Grady warned tax agents and taxpayers that his office will be closely watching all capital events related to cryptocurrency come tax time. 

“It is really important for all capital assets; we will be looking to ensure that the people have reported the capital gains events — and this is for both gains and losses,” Mr O’Grady said. 

Mr O’Grady urged tax agents to make use of data pre-filled by the ATO. He said that in addition to using pre-filled data to assist agents submit accurate returns, it will also be using data supplied by Australian cryptocurrency exchanges to cross-reference returns.

“We get information and data on property sales from all the state and territory revenue offices,” he said. “We have very good shares data as well and it’s available as a pre-filled service [where] you can download different shares transactions for your clients. 

“We are also getting cryptocurrency information from Australian scientists as well. So we’ll be using that information to look at returns as they come in.

“And when people have had significant capital gains events according to that data, if it’s not reported in the return, we’ll be looking to hold those returns and again enquire with you and with your clients as to where those transactions are.”

Mr O’Grady stressed the importance of reporting all capital gains events — whether they be losses or earnings — to avoid unwanted attention from the Tax Office. 

“One of the emerging themes we are seeing in the capital gains space is losses not being reported through the tax return. It’s really important to still report those losses through the return,” he said. 

“Not only does it avoid us having to follow up as to why you haven’t done that for the year, and while it may not be a financial impact to you, or the clients this year, because those losses are quarantined. It applies for future years.”

Mr O’Grady’s warnings follow the beginnings of an ATO crypto compliance crackdown last year, as the pandemic prompted a marked increase in consumer investment. 

The Tax Office has since allocated substantial resources into cryptocurrency data matching and the promotion of taxpayer obligations for those buying, selling and holding crypto assets. 

The ATO last year said that it would work with designated service providers, or DSPs, to obtain data used to identify buyers and sellers of crypto assets and quantify related transactions. 

The Tax Office then uses data provided by DSPs and cross-references them against ATO records to identify individuals who may not be meeting their registration, lodgement or payment obligations. 

Last year, the ATO took a good-faith approach to those who had failed to meet their crypto asset tax obligations, but it isn’t expected to last much longer, according to H&R Block director of tax communications Mark Chapman.

Mr Chapman in February said that now is time for those involved in cryptocurrencies to pay attention to the “tax side of things”, before the ATO ramps up enforcement of undeclared crypto assets.

“I think the first thing to say is that the ATO has, within the last year or so, started gathering data from cryptocurrency exchanges, the actual providers,” he said. “As a result of that, I think the ATO now has a much better understanding of who’s involved in this market.” 

While the ATO has been expected to ramp up auditing around cryptocurrencies for the past three years, and hasn’t, its “light touch” isn’t expected to last much longer. 

The ATO first showed signs of cracking down on compliance in March last year, when an undisclosed number of letters were sent to taxpayers, warning them to come clean with their capital gains or losses.

“Quite a few clients and non-clients have received these letters from the ATO, flagging that there’s a mismatch in their data,” Mr Chapman said. “And I think that’s prompting a lot of people to come in to see their tax agent, or maybe to see a tax agent for the first time if they’ve been doing it themselves.

“But I’m not convinced that [the ATO’s light-touch approach] will necessarily last forever.

“I think, as the data comes in, as the ATO has a greater awareness of how many people are in this space, they will start to take a slightly firmer line.”

John Buckley 
24 May 2021 
accountantsdaily.com.au

ATO Small Business Newsroom – May / June

The ATO provides information on a large number of business related topics, issues, rules and regulations.  We hope this article will help quickly you keep up to date.

Visiting the ATO's website can be daunting but here is a page that links to information important to small businesses everywhere. 

For example:

• Upcoming dates
• Grow your business with the JobMaker Hiring Credit
• Budget 2021–22
• Farewell Business Portal, make the switch today
• JobKeeper and cash flow boost eligibility
• More ….

Click here to access this resource.

ATO

Videos to help understand accounting topics.

Often watching a short video is a quicker way to understand what can otherwise be quite confusing. The following titles have just been added to our website and can be accessed at any time and by anyone.

In our site's menu you will find a link to our updated range of videos on the following topics.

1. Understanding SMSFs
2. Tips for getting your client bills paid on time
3. Managing redundancy
4. Update your will
5. Planning to succeed.
6. Individual Trustees vs Corporate Trustees

Closely held payees: STP options for small employers

Small employers with closely held payees have been exempt from reporting through single touch payroll (STP).

However, they must begin STP reporting from 1 July 2021.

Small employers must continue to report information about all of their other employees (known as “arm's length employees”) via STP on or before each pay day (the statutory due date). Small employers that only have closely held employees are not required to start STP reporting until 1 July 2021, and there’s no requirement to advise the ATO if you’re a small employer that only has closely held payees.

If your business will need to lodge through STP soon, we can help you find an easy and cost-effective STP-enabled solution, or we can lodge on your behalf. Whatever you choose, remember that STP reports can’t be lodged through ATO online services and isn’t a label on your Business Activity Statement, so early preparation is needed.

AcctWeb

End of year financial strategies

With the end of the financial year approaching there may be some valuable opportunities worth discussing for you or your family, depending on your personal circumstances.

Contributions review

As always there are two concerns here, especially if you wish to maximise the contributions made and the dangers of going over concessional (CC) or non-concessional contribution (NCC) caps.

For concessional contributions, there is a universal standard cap of $25,000 that applies if you qualify. But if the total super balance (TSB) on 30 June 2020 is less than $500,000, you can have the benefit of carrying forward any unused concessional contributions. These are the concessional contributions under the cap that haven’t been fully used since 1 July 2018.

Time frames are always important if you wish to claim a tax deduction for personal concessional contributions. An election must be made within your SMSF, setting out the amount being claimed, and must be lodged with the fund. This must be done before personal tax returns are sent to the ATO for the 2021 financial year and no later than the end of the financial year after the contribution was made. Remember, there’s a bit of a twist as you need to lodge the notice with the fund before any part of the contribution is withdrawn or used to start a pension. The SMSF also needs to acknowledge its election before you lodge the income tax return.

A major consideration in making non-concessional contributions (NCC), which are not tax-deductible, is the amount of an investor’s TSB. The TSB determines the amount that can be contributed to an SMSF without facing a tax penalty. If a TSB is more than $1.6 million, a penalty will apply to any NCC made and this may mean even having to withdraw any excess.

If you have a TSB of less than $1.6 million, and qualify to make an NCC into your SMSF, you may be able to immediately make up to $300,000 over a fixed three-year period. The standard NCC is $100,000, but for anyone under 65 it is possible to bring forward up to the next two years’ standard NCC if you have a TSB of less than $1.5 million. If a TSB is less than $1.4 million, you can bring forward the next two years’ standard NCC and if it is between $1.4 million and $1.5 million, you can bring forward just one year’s standard NCC.

If you have triggered the bring-forward rule in either 2018/19 or 2019/20, then the total NCC may be either $300,000 or $200,000 respectively, provided the maximum TSB has not been exceeded as at 30 June 2020.

Indexation of caps – strategy 

From 1 July 2021, the TSB will increase to $1.7 million and the standard NCC will rise to $110,000. Those under 65, thinking of using the bring-forward provisions this financial year, may wish to seek further advice to see what can provide the greatest benefit. Where the amount of the caps changes, there are nearly always strategic advantages from the timing of NCCs. For example, there may be advantages in making some contributions in late June and taking advantage of the indexed amounts from 1 July this year.

Accessing the Government co-contribution

Individuals with assessable income (2) of below $54,838 may qualify for the government co-contribution of up to $500 if they make a non-concessional contribution of $1,000 before 30 June 2021. To qualify for the co-contribution:

• at least 10% of assessable income must be received from employment or a self-employment arrangement
• the individual must be below age 71 at the end of the financial year
• they must have Total Superannuation Balance of less than $1.6m on 30 June 2020 and;
• they must lodge a tax return for the 2020/21 income year

Make a spouse contribution

Couples with one spouse earning a low income or no income, may benefit from the spouse tax offset if the high-income earner makes a spouse contribution into the low-income earner spouse’s superannuation. The maximum offset that can be claimed is $540 where the low-income earner spouse’s income is below $37,000 (3) and $3,000 is contributed before 30 June. As well as the tax benefit available to the high-income earner spouse, the strategy can also help to build up superannuation savings for the low-income earner spouse.

Contributions splitting

Another way to increase a spouse’s super is implementing the contribution splitting strategy. The strategy allows eligible spouses (married or de facto) to split up to 85% of concessional contributions (including mandatory employer contributions) made in the prior financial year. The split must occur before the end of the following year, i.e. 30 June 2021 is the deadline for splitting concessional contributions made in the 2019/20 income year.

First Home Super Saver Scheme

Individuals saving for their first home may benefit from making voluntary contributions to super before 30 June. The FHSS Scheme allows first home buyers to make voluntary contributions of up to $15,000 to superannuation per financial year while saving towards the deposit in a tax-effective environment. After contributing for a couple of years, they can withdraw these contributions (up to $30,000 per individual being increased to $50,000 from 1 July 2022) and use the proceeds towards the acquisition of their first home.

SMSF Contribution Reserving

This strategy allows SMSF members to make personal deductible contributions over the annual cap in June and claim larger tax deduction for the current year.

SMSF meeting the minimum pension requirement

SMSF Trustees with members in the retirement income phase must ensure the minimum pension requirement is met before the 30th of June. Otherwise, the income stream will be taken to have ceased for income tax purposes at the start of the year and the SMSF will lose the eligibility to claim the tax-free earnings for that year.

Downsizer Contributions

This strategy allows people who are aged over 65 (reducing to 60 from 1 July 2022) who are selling a residence they have lived in for ten years to contribute $300,000 each to superannuation within 90 days of settlement without the normal restrictions on contributions. There is no age limit.

Investment strategy review

Ensuring an investment strategy accurately reflects a SMSF’s current asset allocation is an important compliance responsibility. While there is a degree of flexibility with respect to movements in overall asset allocation, it is good practice to review the current asset allocation against the documented strategy. If the fund’s current allocation falls outside the documented strategy, you may wish to make an adjustment to either so they fall back into line.

Some of the more common situations where SMSF investment strategies should be reviewed include:

• trustees purchasing property for their fund, but not updating the investment strategy to reflect the purchase,
• an asset class, such as listed shares, being over the fund’s target position due to significant rises or falls in the underlying holdings,
• trustees moving from accumulation to pension phase and changing asset allocation due to cash-flow needs, but neglecting an investment strategy update, and
• trustees choosing to invest in predominantly one asset or asset class – 90 per cent or more of the fund – can lead to concentration risk.
• In this situation, a fund’s investment strategy needs to document how the trustees have considered the risks associated with a lack of investment diversification. This should include how high concentrations of assets can meet the fund’s investment objectives, including predicted returns and cash-flow requirements.

Asset concentration risk is heightened in leveraged funds, especially where the fund has used a limited recourse borrowing arrangement to acquire the asset. This can expose members to a loss in the value of their retirement savings should the asset decline in value. It could also trigger a forced asset sale if loan covenants (for example, the loan-to-valuation ratio) are breached.

Capital gains tax review

In the lead-up to the end of the financial year, trustees or advisers may wish to undertake tax planning to minimise the capital gains tax position of their SMSF. This is usual where an SMSF has assets with an unrealised loss position. Trustees may seek advice on whether it is worthwhile to crystallise the unrealised losses to reduce any of the fund’s realised gains. It’s important to understand there may be tax consequences from simply selling an asset and buying it back immediately.

Asset revaluation

One of your most important obligations is to ensure, for the purposes of preparing a fund’s financial accounts, that assets are valued at market value each year. This is a legal requirement and ensures the value of the fund assets and member balances are accurate. There are valuation implications for each member’s TSB, as well as taxing the fund’s income if it is paying pensions.

The value of some of a fund’s investments may be easy to obtain, such as listed company shares and bank account balances. However, when it comes to real estate and other fund investments, market value may not be that obvious and a valuation may be required from an appropriately qualified person, such as an independent registered valuer or real estate agent.

For assets where a valuation is not easy to determine, it is necessary to obtain evidence to support whatever value you decide on as this will assist when the fund is audited. For more exotic assets, such as privately held unlisted shares, unit trust holdings or artworks and collectables, the matter can always be raised with a fund’s auditor to see whether the fund is on the right track.

Pension review

Make sure at least the minimum pension is paid for any existing pensions and the maximum level is not exceeded for transition-to-retirement income streams. A pension that does not satisfy the payment rules will mean any income on assets supporting the pension will be taxed at 15 per cent rather than be tax-exempt.

When deciding to draw more than the minimum pension, a client may wish to consider taking any amount over the minimum as a pension payment or as a lump sum. The reason is that lump sum commutations of a client’s pension balance will result in a reduction of their transfer balance account and can be used to access additional pension benefits in future.

Taxation

Prepay income protection premiums

Individuals holding income protection insurance outside of superannuation can prepay premiums for the next 12 months to bring forward the tax deduction to the current financial year. This may be beneficial where individual has larger than expected taxable income for the current year.

Prepay interest on an investment loan

Similar to prepaying income protection premiums, prepaying deductible interest on an investment loan before 30 June 2021 will bring forward the tax deduction to the current financial year.

Social Security

Gifting

Social security recipients wishing to gift an amount or an asset within the allowable disposal amount can do so before 30th June. These individuals can gift up to $10,000 before the 30th of June and another $10,000 after 1 July 2021, a total of up to $20,000 over June and July. Individuals in receipt of government benefits can gift up to $10,000 in a single financial year or up to $30,000 over 5 rolling financial years. However, the amount gifted in any given financial year cannot exceed $10,000 or the deprivation rules will be applied.

These are just some of the things you should be considering as you wrap up this financial year. We encourage you to contact our office to discuss if any of these strategies might suit your personal circumstances, goals and objectives.

———————————————

IMPORTANT: Certain eligibility requirements may apply to strategies listed. To avoid penalties, we strongly recommend seeking advice from your financial planner before implementing any of the strategies explained in this article. The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we do not accept responsibility for any action that you take without confirming with us that it is suitable for your personal circumstances.

(1) Up to 30% if you earn $250,000 or more.
(2) Assessable income for this purpose includes assessable income plus reportable fringe benefits plus reportable employer contributions less business deductions.
(3) Income for this purpose includes assessable income plus reportable fringe benefits plus reportable employer contributions.

A compilation based in information from Graeme Colley (SuperConcepts) and AcctWeb, the latter being for added general EOY accounting topics.

10% Super Guarantee from 1st July 2021

Business leaders should turn their attention to how they plan on managing the government’s increase to the superannuation guarantee, set to come into effect from 1 July, to avoid penalties, says one tax expert.

An increase to the superannuation guarantee (SG) is set to go ahead from 1 July which will see the base rate rise from 9.5 per cent to 10 per cent, followed by incremental half percentage point increases each year to 12 per cent on 1 July 2025.

John Jeffreys, tax counsel at Tax & Super Australia, warns that businesses should establish their approaches to the increase early, because non-payment, underpayment and late payments of as little as 24 hours are likely to attract the attention and penalty from the ATO.

“We haven’t had guidance from the ATO about any grace period or lenience for employers who don’t meet this new SG obligation,” Mr Jeffreys said.

He said that businesses are likely to act in the interest of their bottomline, but warned that regardless of how they approach the change, they should do so with transparency and clearly communicate how their approach will impact their employees’ payslips. 

“While the policy of the legislation is for the employer to contribute the extra half a per cent without impacting take-home wages, this may not be the case across all workplaces,” Mr Jeffreys said.

“As well as considering how much room they have within their profit margins, business products or activities to best cater for this increase, employers should keep in mind that this is not a one-off increase.

“They’ll need to prepare for the SG to go up 0.5 [of a percentage point] annually until it reaches 12 per cent in 2025.”

The warnings follow the release of a survey conducted by consultancy firm Mercer which looked at the steps Australian businesses are taking to prepare for the SG increase. 

The results showed that, of the 145 firms surveyed, 46 per cent of respondents were still establishing a position and continue to assess the full cost of the SG increase to their organisation. 

Of the businesses currently offering their staff a base-plus-super package, 62 per cent of respondents said they’d meet the full cost of the SG increase and maintain their employees’ take-home pay. 

Meanwhile, almost two-thirds of the firms surveyed who have a total package arrangement in place — one where superannuation is bundled in with an employee’s salary — said that their staff would be left to bear the brunt of at least some of the cost imposed by the increase. 

Australian Council of Trade Unions secretary Sally McManus told a panel discussion at an Australian Institute of Superannuation Trustees conference on Tuesday that the changes would offer employers a legal opportunity to cut the take-home salaries of their staff. 

However, she expects the cohort of employees to suffer a pay cut to be small.

“There would only be some very discrete circumstances where employers could unilaterally cut people’s take-home pay on 1 July,” Ms McManus said. “That would be a very small circumstance where employers could do that, just straight out legally do that.

“The issue of low wage growth is a big structural problem unrelated to the super issue, and it would be if super was going up or if it was not going up.”

While the increase has been legislated for some time, Minister for Superannuation, Financial Services and the Digital Economy Jane Hume wavered on whether the increase could be held back by further delays as recently as March. 

Speaking to ABC News Breakfast in March, Ms Hume said the SG would come “at a cost” and could result in slowed wage growth. 

“Money doesn’t grow on trees and there is a good chance that if there is an additional cost to employers when they pay that extra 0.5 [of a percentage point] that it will come at the expense of potentially wage rises in the future,” Ms Hume said.

“The Prime Minister has said that he will assess the situation closer to the time based on the best information available to him at the time, the best economic information available to him at the time.”

The Morrison government’s 2021–22 federal budget didn’t include any changes to the legislated SG increase, which is set to come into effect from 1 July.

John Buckley 
20 May 2021 
accountantsdaily.com.au