Author: Karen Lau

02 Mar

Posted at 15:38h in News, SMSF

The Treasury Laws Amendment (Your Future, Your Super) Bill 2021 has been introduced to Parliament to implement some of the “Your Future, Your Super” measures announced in the 2020–2021 Federal Budget. Treasurer Josh Frydenberg has said the measures are intended to save $17.9 billion over 10 years by holding underperforming super funds to account and strengthening protections around people’s retirement savings. The changes include:

  • “stapling” your chosen super fund so it follows you when you change jobs, and you don’t end up paying fees for multiple accounts;
  • requiring funds to pass an annual performance test, and report underperformance to fund regulators and members;
  • strengthening trustees’ obligations to only act in the best financial interests of fund members; and
  • creating an interactive online YourSuper comparison tool which will encourage funds to compete harder for members’ super.

01 Mar

Posted at 14:50h in News, SMSF

If you’re nearing retirement and have a large amount in your transfer balance account, it may be wise to delay until 1 July 2021 to take advantage of the upcoming pension transfer cap increase from $1.6 million to $1.7 million due to indexation.

At the time you first commence a retirement phase superannuation income stream, your “personal transfer balance cap” is set at the general transfer balance cap for that financial year.

Essentially, the transfer balance cap is a lifetime limit on the total amount of super that you can transfer into retirement phase income streams, including most pensions and annuities, so a larger cap amount means you can have a bit more money in your pocket throughout your retirement.

This cap amount takes into account all retirement phase income streams and retirement phase death benefit income streams, but the age pension and other types of government payments and pensions from foreign super funds don’t count towards it.

The ATO has confirmed that when the general transfer balance cap is indexed to $1.7 million from 1 July 2021, there won’t be a single cap that applies to all individuals. Rather, every individual will have their own personal transfer balance cap of between $1.6 million and $1.7 million, depending on their circumstances.

Tip: Commencing a pension is a complex area and care needs to be taken to get it right for a comfortable retirement. You may wish to seek advice from a licenced financial advisor for more information.

28 Feb

Posted at 14:47h in Business Advisory, News

The ATO is kicking into gear in 2021 with another two data-matching programs specifically related to the JobMaker Hiring Credit and early access to superannuation related to COVID-19. While the data collected will mostly be used to identify compliance issues in relation to JobMaker and early access to super, it will also be used to identify compliance issues surrounding other COVID-19 economic stimulus measures, including JobKeeper payments and cash flow boosts.

As a refresher, the temporary early access to super measure allowed citizens or permanent residents of Australian or New Zealand to withdraw up to two amounts of $10,000 from their super in order to deal with adverse economic effects caused by the COVID-19 pandemic. The JobMaker Hiring Credit is a payment scheme for businesses that hire additional workers. Both measures have particular eligibility conditions to meet for access.

The ATO expects that data relating to more than three million individuals will be collected from Services Australia (Centrelink) for the temporary early access to super program, as well as data about around 450,000 positions related to JobMaker. Approximately 100,000 individuals’ data will also be collected from the state and territory correctional facility regulators.

While the data collected will primarily be used to verify application, registration and lodgment obligations as well as identify compliance issues and initiate compliance activities, the ATO will also use it to improve voluntary compliance, and to ensure that the COVID-19 economic response is providing timely support to affected workers, businesses and the broader community.

27 Feb

Posted at 14:44h in Accounting, Business Advisory, Related Services

Small employers with closely held payees have been exempt from reporting these payees through single touch payroll (STP) for the 2019–2020 and 2020–2021 financial years. However, they must begin STP reporting from 1 July 2021.

Tip: STP is a payday reporting arrangement where employers need to send tax and superannuation information to the ATO directly from their payroll or accounting software each time they pay their employees.

For STP purposes, small employers are those with 19 or fewer employees.

A closely held payee is an individual who is directly related to the entity from which they receive a payment. For example:

  • family members of a family business;
  • directors or shareholders of a company; and
  • beneficiaries of a trust.

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.

The ATO has now released details of the three options that small employers with closely held payees will have for STP reporting from 1 July 2021:

  • option 1: report actual payments through STP for each pay event;
  • option 2: report actual payments through STP quarterly; or
  • option 3: report a reasonable estimate through STP quarterly – although there are a range of details and steps to consider if you take this option.

Tip: 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 BAS, so early preparation is needed.

26 Feb

Posted at 14:39h in Accounting, Tax

With insecure, contract and casual work becoming increasingly common, particularly in the current COVID-19 affected economy, it’s no surprise that many young and not-so-young Australians may have income from more than one job. If you are working two or more jobs casually or have overlapping contract work, you need to be careful to avoid an unexpected end of financial year tax debt.

This type of debt usually arises where a person with more than one job claims the tax-free threshold in relation to multiple employers, resulting in too little tax being withheld overall. To avoid that, you need to look carefully at how much you’ll be making and adjust the pay as you go (PAYG) tax withheld accordingly.

Currently, the tax-free threshold is $18,200, which means that if you’re an Australian resident for tax purposes, the first $18,200 of your yearly income isn’t subject to tax. This works out to roughly $350 a week, $700 a fortnight, or $1,517 per month in pay.

When you start a job, your employer will give you a tax file number declaration form to complete. This will ask whether you want to claim the tax-free threshold on the income you get from this job, to reduce the amount of tax withheld from your pay during the year.

A problem arises, of course, when a person has two or more employers paying them a wage, and they claim the tax-free threshold for multiple employers. The total tax withheld from their wages may then not be enough to cover their tax liability at the end of the income year. This also applies to people who have a regular part-time job and also receive a taxable pension or government allowance.

The ATO recommends that people who have more than one employer/payer at the same time should only claim the tax-free threshold from the employer who usually pays the highest salary or wage. The other payers will then withhold tax from your payments at a higher rate (the “no tax-free threshold” rate).

If the total tax withheld from of your employer payments is more than needed to meet your year-end tax liability, the withheld amounts will be credited to you when your income tax return is lodged, and you’ll get a tax refund. However, if the tax withheld doesn’t cover the tax you need to pay, you’ll have a tax debt and need to make a payment to the ATO.

Tip: If you have two or more incomes, for example from casual or contract jobs or because you get a pension and have part-time employment income, we can help you figure out your tax withholding arrangements and avoid a surprising bill at tax time.

04 Feb

Posted at 16:45h in Accounting, News

Important changes to Australia’s insolvency laws commenced operation on 1 January 2021. The Federal Government has called these the most important changes to Australia’s insolvency framework in 30 years.

The measures apply to incorporated businesses with liabilities less than $1 million. The intention is that the rules change from a rigid “one size fits all” model to a
more flexible “debtor in possession” model, which will allow eligible small businesses to restructure their existing debts while remaining in control of their business. For those businesses that are “unable to survive”, a new simplified “liquidation pathway” will apply for small businesses to allow faster and lower-cost liquidation.

The measures are expected to cover around 76% of businesses currently subject to insolvency, 98% of which have fewer than 20 employees. The new rules do not apply to partnerships or sole traders.

To be eligible to access this new process a company must:

  • be incorporated under the Corporations Act 2001;
  • have total liabilities which do not exceed $1 million on the day the company enters the process – this excludes employee entitlements;
  • resolve that it is insolvent or likely to become insolvent at some future time and that a small business restructuring practitioner should be appointed; and
  • appoint a small business restructuring practitioner to oversee the restructuring process, including working with the business to develop a debt restructuring plan and restructuring proposal statement.

03 Feb

Posted at 16:16h in Accounting, News, Tax

If you own a small business still recovering from the COVID-19 induced downturn, remember that you can take advantage of FBT concessions to lower the amount of FBT you may need to pay. The concessions include exemptions for car parking in some instances, and work-related portable electronic devices.

All this could mean more cash to invest in the revitalisation and ultimate success of your business.

Tip: Even if your business was not considered a “small business entity” a few years ago, it may be worth a reassessment, because the turnover threshold has recently changed, and will soon increase once more.

For small business employers, the car parking benefits provided to employees could be exempt if the parking is not provided in a commercial car park and the business satisfies the total income or the turnover test. This is the case if the business is not a government body, listed public company or a subsidiary of a listed public company.

The second exemption relates to work-related devices. Small businesses can to provide their employees with multiple work-related portable electronic devices that have substantially identical functions in the same FBT year, with all devices being exempt from FBT. Note, however, that this only applies to devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigations receivers and mobile phones.

02 Feb

Posted at 16:12h in News, Tax

With a range of government COVID-19 economic supports such as the JobKeeper and JobSeeker schemes winding down in the next few months, businesses that are seeking to employ additional workers but still need a bit of help can now apply for the JobMaker Hiring Credit Scheme. Unlike the JobKeeper Payment, where the money has to be passed onto your employees, the JobMaker Hiring Credit is a payment that your business gets to keep. Depending on new employees’ ages, eligible businesses may be able to receive payments of up to $200 a week per new employee.

TIP: The scheme started on 7 October 2020, and employers will be able to claim payments relating to employees hired up until 6 October 2021. The first claim period for JobMaker starts on 1 February 2021 and businesses must first register with the ATO. To claim the payment in the first JobMaker period, your business must register by 30 April 2021.

To be eligible for the scheme, you need to satisfy the basic conditions of operating a business in Australia, holding an ABN, and being registered for PAYG withholding. Your business will also need to be up to date with its income tax and GST obligations for two years up to the end of the JobMaker period you claim for, and satisfy conditions for payroll amount and headcount increases. Non-profit organisations and some deductible gift recipients (DGRs) may also be eligible.

Beware, however, that businesses receiving the JobKeeper Payment cannot claim the JobMaker Hiring Credit for the same fortnight.

For example, businesses that wish to claim the payment for the first JobMaker period must not have claimed any JobKeeper payments starting on or after 12 October 2020, and employers currently claiming other wage subsidies – including those related to apprentices, trainees, young people and long-term unemployed people – cannot receive the JobMaker subsidy for the same employee.

If you think your business may be eligible, the next step is to determine whether you are employing eligible additional employees.

Generally, the employee needs to:

  • be aged 16–35 when their employment started (payment rates are $200 per week for 16 to 29 year-olds and $100 for 30 to 35 year-olds);
  • be employed on or after 7 October 2020 and before 7 October 2021;
  • have worked or been paid for an average of at least 20 hours per week during the JobMaker period;
  • have not already provided a JobMaker Hiring Credit employee notice to another current employer; and
  • received a JobSeeker Payment, Parenting Payment or Youth Allowance (except if they were receiving Youth Allowance due to full-time study or as a new apprentice) for at least 28 consecutive days in the 84 days before to starting employment.

Since the aim of JobMaker is to subsidise an increase in the number of employees a business hires – not to reduce the cost of replacing employees – businesses wishing to claim the payment must also demonstrate increases in both in headcount and employee payroll amount.

This is meant to reduce instances of rorting by businesses that might replace existing non-eligible employees with eligible employees. Employers will need to send information such as their baseline headcount and payroll amounts to the ATO for compliance purposes.

01 Feb

Posted at 16:10h in Accounting, News, Related Services, Tax

The ATO advises that the “shortcut” rate for claiming work-from-home running expenses has been extended again, in recognition that many employees and business owners are still required to work from home due to COVID-19. This shortcut deduction rate was previously extended to 31 December 2020, but will now be available until at least 30 June 2021.

Eligible employees and business owners therefore can choose to claim additional running expenses incurred between 1 March 2020 and 30 June 2021 at the rate of 80 cents per work hour, provided they keep a record (such as a timesheet or work logbook) of the number of hours worked from home during the period.

The expenses covered by the shortcut rate include lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in value and repair of home office items such as furniture and furnishings in the area used for work, phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.

Tip: This shortcut rate will suit many people, but if you choose to use it for your additional work-from-home running expenses, you can’t also claim any further deductions for the same items. We can help you decide whether the shortcut rate is the best option for your situation.

31 Jan

Posted at 16:07h in Business Advisory, News, Tax

The Federal Minister for Families and Social Services has now registered the legal instrument that ensures the COVID-19 Supplement will continue to be paid until 31 March 2021 for recipients of:

  • JobSeeker Payment;
  • Parenting Payment;
  • Youth Allowance;
  • Austudy Payment;
  • Special Benefit;
  • Partner Allowance; and
  • Widow Allowance.

It will be paid at the rate of $150 a fortnight (down from the previous $250 a fortnight) from 1 January 2021 to 31 March 2021.

The period for which people are considered as receiving a social security pension or benefit at nil rate, meaning they keep their access to benefits such as concession cards, has also been extended until 16 April 2021.

A number of other temporary social security measures will also remain until 31 March 2021, including waivers of waiting periods for certain payments, some requirement changes and exemptions, and more permissive income-free areas and payment taper rates.