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The 2022/23 Federal Budget

Former Federal Treasurer, Josh Frydenberg handed down the Coalition Government’s 2022/23 Budget in March.  The budget included a number of announcements, of which some were legislated prior to the federal election.  The major tax-related measures announced in the Budget and now legislated include:

 Increase to Low and Middle Income Tax Offset (‘LMITO’)

The Government has announced a once-off $420 ‘cost of living tax offset’ for the 2022 income year, which will be provided in the form of an increase to the existing LMITO.  This will increase the maximum LMITO benefit to $1,500 for individuals and $3,000 for couples, and will be paid from 1 July 2022 when Australians submit their tax returns for the 2022 income year.

Other than those who do not require the full offset to reduce their tax liability to zero, all LMITO recipients will benefit from the full $420 increase.  All other features of the LMITO remain unchanged.

Tax Deductibility of COVID-19 Test Expenses

The costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021.  In making these costs tax deductible, the Government will also ensure FBT will not be incurred by businesses where COVID-19 tests are provided to employees for this purpose.

No Changes to the Personal Tax Rates for 2022-23

The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.

Temporary Reduction in Pension Drawdown Rates Extended

The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for the 2022/23 financial year.

As part of the response to the coronavirus pandemic, the Government reduced the superannuation minimum drawdown rates by 50% since the 2019/20 financial year.

Temporary Reduction in Fuel Excise

The Government will help reduce the burden of higher fuel prices by halving the excise and excise-equivalent customs duty rate that applies to petrol and diesel, and all other fuel and petroleum-based products except aviation fuels, for six months.  This measure will commence from 12.01am on 30 March 2022 and will remain in place for six months.

Apprentice Wage Subsidy Extension

The Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies has been extended by three months to 30 June 2022.

 

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Year End ATO Reporting Reminders for Employers

Finalise STP data for 2022

We remind employers reporting through Single Touch Payroll (‘STP’) – which should be all employers, unless an exemption of deferral applies – they will need to finalise payroll information for the 2022 income year by lodging a STP Finalisation Event with the ATO.  The finalisation declaration can be completed once the STP information for all employees is confirmed as correct.  The due date for the finalisation declarations is 14 July 2022.

Employers that finalise through STP are not required to provide payment summaries to employees or lodge a payment summary annual report to the ATO.  Instead, employees will be able to access their payroll information (for the preparation of their 2022 tax return), through a registered tax agent or via myGov.

We will be in touch with our payroll clients in relation to completing finalisation declarations.

Employers need to Prepare for Changes under STP Expansion

Single Touch Payroll (‘STP’) reporting has been expanded.

This expansion, known as ‘STP Phase 2’, means that employers will need to start reporting extra information to the ATO each time they run their payroll.

Some digital service providers (‘DSPs’) needed more time to update their products and applied for deferrals, which cover their customers – therefore, when an employer can start Phase 2 reporting depends on when their payroll product is ready.

Employers that have not already started Phase 2 reporting should ask their DSP when their product will be ready (if they don’t already know).

Employers need to be across the changes and get ready to start Phase 2 reporting.  This includes:

  • checking if changes need to be made to payroll pay codes/categories so they align with Phase 2 requirements;
  • reviewing allowances employers pay and how they need to be reported in Phase 2;
  • understanding changes to salary sacrifice reporting; and
  • understanding how to assign an income type to each payment.

The ATO is also reminding employers that amounts paid to ‘closely held payees’ should now be reported through STP.

A ‘closely held payee’ is an individual directly related to the entity they receive payments from. For example, family members of a family business, directors or shareholders of a company and beneficiaries of a trust.

There are concessional reporting options for closely held payees reporting which include the following:

  • Reporting actual payments on or before the date of payment (along with arm’s length employees).
  • Reporting actual payments quarterly.
  • Reporting a reasonable estimate quarterly.

Should you have any questions, or require any assistance about any of the issues raised in this update, please feel free to contact our office.

 

 

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Year End Superannuation Considerations

Employer contribution deadlines to ensure a tax deduction for 2021/22

We remind employers that superannuation contributions are only considered to have been paid for the purpose of claiming a tax deduction once they have been received by the super fund.

If you wish to claim a tax deduction for your contributions in the 2021/22 financial year, payments must be received by your employees’ super funds by 30 June.

Please allow sufficient time for the payment to reach the employees’ super fund account.

To meet this deadline, payments will need to be made well in advance to allow for processing time, particularly if there is a clearing house involved. The ATO Small Business Superannuation Clearing House has stipulated that they must accept payments on or before 25 June 2022 to ensure payments reach employees’ super funds on time.

Please note, our QBO clients using Beam must have their super payment successfully uploaded by 3.30pm on 23 June.

Removal of the $450 per month threshold for superannuation guarantee eligibility

The Government recently removed the $450 per month threshold on the superannuation guarantee eligibility.  From 1 July 2022, employers will be required to make super guarantee contributions to their eligible employee’s super fund regardless of how much they earn.

Employers only need to pay super for workers under 18 when they work more than 30 hours in a week.

Employers should check their payroll and accounting systems to ensure they have been updated for super payments made after 1 July 2022 to ensure they correctly calculate their employee’s super guarantee entitlement.

Super guarantee rate rising from 1 July 2022

The super guarantee rate will increase to 10.5% on 1 July 2022, so businesses with employees will need to ensure their payroll and accounting systems are updated to incorporate the increase to the super rate.

It is important for employers to note that the new 10.5% rate will apply to ordinary times earnings paid after 30 June, irrespective of when those amounts accrued. Accordingly, payroll paid on or after 1st July will incur the 10.5% rate, even if some of the payroll period relates to the month of June.

Employers should also be aware that the increasing super guarantee rate has implications for employees remunerated through a superannuation inclusive package. In the absence of a remuneration review, an employee’s take home payments will likely reduce from 1 July.  To remedy this situation a pay increase may need to be considered to ensure the consistency of employee take-home payments.

No change to super contribution caps for 2022/23

The ATO has confirmed that the superannuation concessional and non-concessional contribution caps will remain unchanged for the 2022/23 financial year.  The caps for the 2022/23 year will be:

  • Concessional Cap:  $27,500
  • Non-Concessional cap:  $110,000 (or $330,000 over 3 years)

The total superannuation balance limit that determines if an individual has a non-concessional contributions cap of nil will be $1.7 million, effective from 1 July 2022.

However, as we approach a new financial year it will be important, particularly given the increasing super guarantee rate, for clients to review their arrangements to ensure contribution caps are not exceeded.

Re-contribution of COVID-19 early release super amounts

Individuals can now re-contribute amounts they withdrew under the COVID-19 early release of super program without the re-contribution counting towards their non-concessional contributions cap.

These contributions can be made between 1 July 2021 and 30 June 2030.

Individuals can make COVID-19 re-contribution amounts to any fund of their choice where the funds’ rules allow.

COVID-19 re-contribution amounts are reported as personal contributions. If the fund member is found to be ineligible to make the re-contribution (for example, the fund member may be required to satisfy the work test and does not do so at the time of a re-contribution) it may result in that member exceeding their non-concessional contributions cap.

It should be noted that once an amount originally withdrawn under the

COVID-19 early release of super program has been re-contributed into a superannuation fund, it will not be able to be released from that fund until the fund member satisfies a condition of release – such as obtaining the age of 65 or having met their preservation age and they have ‘retired’.

 

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ATO Issues Guidance on Family Trust Distributions

In a significant development, the ATO has released a draft taxation ruling and draft practical compliance guideline setting out the ATO’s new compliance approach with respect to section 100A of the ITAA 1936, which is an anti-avoidance provision that has been around for over four decades.

The ATO’s new guidance will challenge traditional family trust distribution strategies and impact the required thinking around resolutions as early as from 30 June 2022.

As we await finalisation of the ruling, we do remind clients that the guidance is in draft form at this stage. Prior to the closure of the draft ruling on 8th April, accounting and industry leaders are expected to lodge submissions with the ATO, expressing concerns in relation to various aspects.

Please be assured that we will continue to monitor developments in relation to the family trust measures and will address them in relation to your individual circumstances when we conduct your pre 30 June tax planning.

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Single Touch Payroll Update

Single Touch Payroll Extension – STP Phase 2

With the expansion of the requirements of Single Touch Payroll (STP) to include additional reporting of employee and earnings data, employers are reminded of their responsibility to ensure payroll files are ‘STP Phase 2’ compliant.

If you are unsure whether you are currently meeting your responsibilities under the expanded requirements, please check with your accountant. Clients using our bookkeeping service are advised that their payroll records have been updated and are Phase 2 compliant. Detailed instructions for our QBO users have been emailed directly and are available on our website.

Small Employers & STP – The ATO Gets Serious

With the expansion of STP reporting to ‘Phase 2’, the ATO advised it has begun a ‘failure to lodge’ penalty process in relation to small business employers (i.e., those with 19 or fewer employers) who have yet to commence STP reporting, despite STP being mandatory for most small employers since 2020.

The ATO advised that all remaining non-compliant small employers (i.e., those not subject to any appropriate reporting extensions or exemptions) will have been issued pre-penalty warning letters from 18 February 2022. Where an employer receives a pre-penalty warning letter, they will have a further 28 days to take action by either starting to lodge or contacting the ATO before a failure to lodge penalty will be imposed.

If you require any STP assistance please contact our office.

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Director Identification Number

All directors of Australian companies are required by law to verify their identity with the Australian Business Registry Services (ABRS) and apply for a Director Identification Number (DIN).

A DIN is a unique 15-digit identifier that a director will apply for once and will keep forever.  A director can only have one DIN that they must use for all companies. 

Unfortunately, we are unable to apply for a DIN on your behalf. You must apply for your own DIN to verify your identity.

The quickest way to apply for a DIN is digitally using a smart device. Please refer to the 3-step process set out below.

 If you are unable to apply using a smart device, you can apply by phone or with a paper form.

To apply by phone, you will need a Tax File Number (TFN) and information needed to verify your identity (listed in Steps 1 and 2 below).  The phone number is 13 62 50 and is available between 8:00 am and 6:00 pm Monday to Friday.

If you are unable to apply online or over the phone, you can apply using the paper form ‘Application for a director identification number’ available from the ABRS website (abrs.gov.au).  This is a slower process, and you will also need to provide certified copies of your documents to verify your identity.

Please note that failure to comply with the DIN requirements or providing false or misleading information may result in both civil and criminal penalties.

Please also take care if applying digitally with a smart device.  You should only apply once via the ABRS website, a secure site that will keep your information safe. Please forward your DIN to our office as soon as it is received.

If you require assistance applying for or understanding your DIN obligations, please contact our office.

 

Director Identification Number: How to Apply Using a Smart Device

Step 1 – Set-up myGovID

Download the myGovID application on a smart device and set-up an account using a personal email address.  (Please note that the myGovID app is different to a myGov account).

You are required to set-up a standard or strong identity strength by using any 2 of the following Australian identity documents:

  • Driver’s licence or learner’s permit
  • Passport
  • Birth certificate
  • Visa (using foreign passport providing still in Australia)
  • Citizenship certificate
  • ImmiCard
  • Medicare Card

 

Step 2 – Gather your Documents

To assist in applying for a DIN, you will need your TFN and your residential address as held by the ATO.

You will also need to refer to 2 of the following documents:

 

Document Information that will be requested
Bank account details

(per your most recent tax return)

BSB, account number
ATO Notice of Assessment Date of issue, reference number
PAYG Payment Summary

(issued in last 2 years)

Gross income in whole dollars
Superannuation account details Member account number, super fund’s ABN
Dividend Statement

(issued in last 2 years)

Investment reference number
Centrelink Payment Summary

(issued in last 2 years)

Taxable income in whole dollars

 

Step 3 – Complete your Application

Visit the ABRS website (abrs.gov.au).

Scroll down to select ‘Apply now with myGovID’.

Login with your myGovID credentials and accept a code on your smart device.

The application process should take less than 5 minutes and once complete, you will instantly receive your DIN.

Please print or save your DIN and forward to our office.

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Single Touch Payroll Expansion – STP Phase 2

The reporting requirements of Single Touch Payroll are expanding from 1 January 2022.  The benefits of the ‘STP Phase 2’ expansion include the streamlining of reporting obligations of payers and payees, and removing the need for manual reporting to other government agencies.

Employers will need to report additional payroll information in their STP reports including:

  • disaggregation of gross amounts (including separate reporting of paid leave, allowances, overtime, directors’ fees and salary sacrifice amounts);
  • employment and taxation conditions (including information from the TFN declaration); and
  • income types (for example, salary and wages, working holiday maker income, foreign employment income).

To support employers with the move to STP Phase 2 reporting, the ATO will take the following approach:

  • Employers that can start Phase 2 reporting by their digital service provider’s deferral date (if applicable), do not need to apply to the ATO for more time.
  • If an employer’s software will be ready for 1 January 2022 and they are able to start reporting before 1 March 2022, they do not need to apply to the ATO for more time (that is, an automatic extension applies).

The ATO has also advised that penalties will not be applied for genuine mistakes in the first year of Phase 2 reporting until 31 December 2022.

We advise QBO payroll users that the program will be STP Phase 2 compliant from the 1 January start date.  To implement Phase 2 reporting, payroll officers will need to review and update various settings and employee details within the program.

Please contact our office if you require assistance preparing your program for STP Phase 2!

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Super is Now Following New Employees

The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

A stapled super fund is an existing super account which is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs.

When a new employee starts, employers need to:

  • offer eligible employees a choice of super fund;
  • if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
  • pay super contributions into one of the following:

–  the super fund they choose;

–  the stapled super fund the ATO provides if they have not chosen a  fund; or

–  the employer’s default fund (or another fund that meets the choice of fund rules) if the employer cannot pay into the two above.

If a new employee does not choose a super fund, most employers will need to request the employee’s ‘stapled super fund’ details from the ATO to avoid penalties.

Please be aware that we are also able to request stapled super fund details for your new employees.  Please contact our office if you require assistance.

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Victorian Business COVID Support Update

With continuing COVID restrictions in place across Victoria, grants and other support measures are available for eligible Victorian businesses, particularly those most affected by the current restrictions.  The Federal and Victorian Governments have committed to continuing financial support, in line with the reopening road map, during the next four to six week period at which point Victoria is expected to reach 80% vaccination rates.

In this section we outline the business support measures considered most relevant to our clients.  Please contact our office if you require further assistance to assess your eligibility for the support measures outlined.  The COVID Update section of our website may also be of assistance and provides a source of current and up-to-date information regarding grants and support measures.

Business Costs Assistance Program – Round Five

In a jointly funded program from the Commonwealth and Victorian Governments, grants will be provided to small and medium-sized businesses, in sectors affected by the current COVID restrictions until the 80% vaccination target is reached.  The 80% vaccination target is expected to be reached in early November.

Only those businesses that have previously received or been approved for the Business Costs Assistance Program Round Two or July Extension grant will be eligible for the Business Costs Assistance Program Round Five.

The Business Costs Assistance Program Round Five payments will range from between $1,000 to $8,400 per week, depending on the businesses’ employment status and annual payroll size for the 2019-20 financial year.

Payments are made automatically and eligible businesses do not need to apply for the payment.   Businesses that remain closed or continue to be severely restricted over the first two weeks of November will also receive automatic payments for that period.

Licensed Hospitality Venue Fund Payments

In another jointly funded initiative from the Commonwealth and Victorian Governments, eligible cafes, restaurants, hotels and bars across Victoria will receive automatic Licensed Hospitality Venue Fund payments of between $5,000 and $20,000 per week until the end of October, and continue into November at reduced rates.

Please note these payments are automatic and hospitality businesses that have previously received grants do not need to apply.

Grants Available for the Construction Industry

Construction businesses impacted by the two-week shutdown in Victoria from 21 September to 4 October may be eligible for support under the Business Costs Assistance Program Round Four – Construction.  Under this assistance program, one-off grants of $2,000 are available for eligible sole trader construction industry businesses, and one-off grants of between $2,800 and $8,400 for eligible employing construction industry businesses depending on their annual payroll.

Notably, eligible businesses must have incurred direct costs due to the two-week shutdown which have not been partially or fully recovered, and must not have received a Business Costs Assistance Program Round 2, Business Costs Assistance Program Round 2 – July extension payment or Small Business COVID Hardship Fund payment.

Applications for this grant open mid October 2021.

Commercial Landlord Hardship Fund 3

The Commercial Landlord Hardship Fund 3 program offers grants to commercial landlords, with total taxable landholdings under $3 million, who are waiving rent for their tenants as part of the Commercial Tenancy Relief Scheme.

The rent waiver must occur between 28 July 2021 and 15 January 2022 under the Commercial Tenancy Relief Scheme and landlords are required to demonstrate that commercial rent represents more than 50 per cent of their total gross income for the 2019-20 financial year.

Those eligible commercial landlords can apply for grants of up to $6,000 per tenancy, although in cases of acute hardship, landlords may be eligible for grants of up to $10,000 per tenancy.

Applications are now open for the Commercial Landlord Hardship Fund 3.

Expansion of Support for SME’s to Access Funding

The Government is providing additional support to small and medium sized businesses (‘SMEs’) by expanding eligibility for the SME Recovery Loan Scheme.

Specifically, in recognition of the continued economic impacts of COVID‑19, the Government will remove requirements for SMEs to have received JobKeeper during the March quarter of 2021, or been a flood affected business, in order to be eligible under the SME Recovery Loan Scheme.

As with the existing scheme, SMEs who are dealing with the economic impacts of the coronavirus with a turnover of less than $250 million will be able to access loans of up to $5 million over a term of up to 10 years.

Other key features include:

  • The Government guarantee will be 80% of the loan amount.
  • Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.
  • Loans can be used for a broad range of business purposes, including to support investment, as well as to refinance any pre-existing debt of an eligible borrower.
  • Loans can be either unsecured or secured (excluding residential property).

The loans will be available through participating lenders until 31 December 2021.

Small Business Digital Adaptation Program

The Victorian Government Small Business Digital Adaptation Program offers reimbursements of up to $1,200 for digital improvements initiated between  15 November 2020 and 5 December 2021.

Small businesses interested in accessing digital tools to help with, for example, building or upgrading a website, improving cash flow, engaging in online marketing, introducing job or project management systems and keeping track of stock, may benefit from this program.

Products are available from 14 approved suppliers who have partnered with the Victorian Government for the program.  The program begins with participating small businesses examining the free product trials and workshops before choosing one or more of the digital products to purchase.  Once a purchase has been made, businesses can then apply for the rebate.

The rebate provides access to a product for a period of up to 12 months.  Hardware associated with products from approved vendors may be eligible, providing a business purchases the relevant digital licence or subscription.

To be eligible for the rebate, products chosen by a business should be either a new product, involve the upgrade of an existing product with additional features, or the resumption of a product after a minimum twelve-month break.

There are a limited number of rebates in this program and clients are encouraged to explore their digital tool requirements as soon as possible.

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Winding Back the COVID Disaster Payments

The Federal Government has announced the COVID disaster payment, that provides support for workers unable to earn income due to a public health order, will be wound back as States and Territories achieve vaccination targets.

According to the agreed National Plan, once 70% of the eligible population (16 years and older) of a State or Territory is fully vaccinated, the automatic renewal of the disaster payment will cease.  Individuals will need to reapply each week thereafter to confirm their eligibility.

Further, when a State or Territory reaches full vaccination of 80% of it’s eligible population, the temporary payment will step down over a two-week period, from $450 per week to $320 per week, before the payment ceases entirely.

Once the COVID disaster payment has ended, the social security system will support those workers who have not already returned to the workforce.

For further information regarding the pending changes to the disaster payment please refer to our website or contact our office.

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