Employers are reminded that the SG obligation for the 1 January 2023 to 31 March 2023 quarter is due by 28 April 2023.
If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which includes a penalty and interest component.
As a reminder, from 1 July 2022, the compulsory SG rate increased to 10.5% (previously 10%). We note the compulsory SG rate will increase again to 11% for the period 1 July 2023 to 30 June 2024.
In another recent legislative change, the eligibility age to make a downsizer contribution into superannuation has been reduced to 55 from 1 January 2023.
This further reduces the downsizer eligibility age, which changed from 65 to 60 from 1 July 2022.
From 1 January 2023, eligible individuals aged 55 years or older can choose to make a downsizer contribution into their super fund of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home that has been held for at least 10 years and qualifies for at least a partial main residence exemption.
There are no changes to the remaining eligibility criteria.
Key dates for downsizer contributions:
Other important information to consider for 55-59 year olds:
Unlike most other contributions into superannuation, there is no upper age limit for being eligible to make a downsizer contribution. For example, a 95 year old could make a downsizer contribution, and there is no need to satisfy the work test!
The ATO is reminding employers that the holiday season is fast approaching, and their holiday casual employees may now be eligible for super.
From 1 July 2022, employers need to pay super for employees at a rate of 10.5%, regardless of how much they are paid, because the $450-per-month threshold for super guarantee (‘SG’) eligibility has been removed.
This change doesn’t affect other eligibility requirements for SG. In particular, workers who are under 18 still need to work more than 30 hours in a week to be eligible.
We recommend employers check their payroll and accounting systems with regards to the correct calculation of their employees’ SG payments.
We are available to assist clients if they are uncertain of their obligations.
We would like to bring to the attention of clients the implications of holding residential property in a discretionary trust.
Various states and territories impose stamp duty and land tax surcharges associated with residential properties, and the treatment of any potential foreign beneficiaries in a discretionary trust deed can be applied differently across the jurisdictions.
We will assist clients in updating their Trust Deeds to expressly exclude any ‘foreign’ beneficiaries. For those clients potentially impacted, we will be in contact early in the New Year to advise of the necessary amendments and any consequences.
If you have any queries in relation to this please contact our office.
All trustees of SMSFs have a responsibility for ensuring their fund complies with Australian superannuation legislation. While there are various courses of action available to the ATO when a SMSF is non-complying, one course of action is the application of administrative penalties. With the Government recently proposing to increase the value of a penalty unit for contravention offences committed from 1 January 2023, it is timely to revisit the application of these penalties.
A number of factors determine the amount of the administrative penalty, including:
For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320. This could be even more if there are multiple contraventions.
From 1 January it is proposed to increase the penalty per unit from $222 to $275, an increase in excess of 20 per cent.
With the ATO imposing total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions, it is a reminder of the importance of superfund compliance.
In addition, just because a trustee receives an administrative penalty doesn’t mean the ATO won’t undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.
Small businesses with an annual turnover of less than $50 million will be able to claim a ‘bonus’ 20% deduction for eligible expenditure on:
Under the technology investment boost, small businesses will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support the adoption of digital technologies such as portable payment devices, cyber security systems and subscriptions to cloud based services. An annual cap of $100,000 will apply to each qualifying income year.
While these incentives are not yet law and are subject to decisions from the new Government, it is expected that the legislation will be passed. For more information please access the following link: Small Business Boost
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.
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:
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:
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.
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:
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’.
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.