The minimum rate of superannuation to be paid for employees over the age of 18 is now 11% (up from 10.5%).
Some awards and agreements may require a higher rate to be paid.
We encourage all employees to check their payslips and also their superannuation funds to see if the correct contributions are being made on at least a quarterly basis.
In response to COVID-19, the government temporarily reduced superannuation minimum drawdown requirements for account based pensions by 50% until 30 June 2023.
For this current 2023-24 financial year, the 50% reduction in the minimum pension drawdown rate will no longer apply.
On 1 July 2023, the following rates will apply:
| Age | 2023–24 income year | |
| Under 65 | 4.0% | |
| 65–74 | 5.0% | |
| 75–79 | 6.0% | |
| 80–84 | 7.0% | |
| 85–89 | 9.0% | |
| 90–94 | 11.0% | |
| 95 or more | 14.0% |
The member’s age is determined at either:
Most income streams paid from a super account held in an individual member’s name are account-based pensions. These pensions are required to meet minimum standards, including not being able to increase the capital supporting the pension using contributions or rollover amounts once the pension has commenced, and paying a minimum amount at least once a year.
In general, minimum payments need to be made at least once a year and are determined by the age of the beneficiary and the value of the account balance as at 1 July each year. For example, people aged between 65 and 74 will need to apply a 5% standard percentage factor to work out the minimum pension amount for 2023–2024.
While the minimum annual payments are mandated, there are no maximum annual payments, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year. This means that retirees can draw a pension above the minimum pension payment amount, which may be especially welcome given the current cost of living pressures.
Thank you to all our company director clients who applied for their Director Identification Number (DIN) by the due date.
If you have not applied for your DIN yet, please do this as soon as possible to avoid the possibility of penalties being applied. Anyone intending to become a director of a company for the first time will need to apply before being appointed as a director.
The fastest way to apply is online at abrs.gov.au, which will issue a director ID instantly once the application is complete.
The Australian Business Registry Services (ABRS), will take a reasonable compliance approach focusing on educating, creating awareness and helping directors do the right thing.
ASIC are tasked with enforcing director ID offences, which can include criminal and civil penalties.
In a bid to encourage home ownership in NSW, the state government has introduced the First Home Buyer Choice scheme, which allows eligible first home buyers a choice between paying an annual property tax or the traditional stamp duty. Eligible first home buyers of residential properties valued at up to $1.5 million or vacant land of up to $800,000 will be able to access the scheme, provided other conditions are met.
Eligible buyers can access the scheme from 12 November 2022. These buyers are required to pay stamp duty on purchases made until 15 January 2023, but will be able to apply for a refund of their stamp duty if they choose to opt into the annual fee. From 16 January 2023, purchasers can opt in to the annual fee directly.
As its name suggests, the First Home Buyer Choice scheme is only available to individual first home buyers over 18 years of age who haven’t previously owned residential land in Australia. For individuals with a spouse, it’s also a requirement that the spouse has not at any time owned residential land in Australia. Generally, occupation of the property must occur within 12 months of the first home buyer taking possession and must continue for at least six months.
If the option to pay the annual property tax is elected by the eligible individual, the rate of tax will differ depending on whether the property is owner-occupied or used as an investment after the initial six months occupation requirement. For owner-occupiers, the property tax rates per annum will be $400 plus 0.3% of the home’s land value.
In cases where the property is rented out, the property tax rates per annum will be $1,500 plus 1.1% of land value. While the NSW government has committed to not increasing these rates for the first two financial years of operation, from the 2024–2025 financial year property tax rates will be indexed each year, capped at a 4% maximum.
Tip: A first home buyer choice calculator is available on the Service NSW website at www.service.nsw.gov.au/transaction/calculate-your-property-tax.
Treasury has released draft legislation which proposes two new grounds under which the Registrar of the Australian Business Register may cancel an Australian Business Number (ABN).
The government had earlier announced its intention to “strengthen” the ABN system by imposing new compliance obligations for ABN holders to retain their ABN. Currently, ABN holders are able to retain their ABN regardless of whether they are meeting their income tax return lodgment obligations or the obligation to regularly update their ABN details.
It’s worth noting that there are over nine million active ABN holders on the Australian Business Register.
The proposed changes would allow the Registrar of the Australian Business Register to cancel a person’s ABN if they haven’t lodged their required income tax returns for two or more income years where the period for lodgement has ended. These wouldn’t need to be consecutive income years.
This ground for cancellation would apply for failures to lodge tax returns beginning with income years commencing on 1 July 2022, so the earliest the Registrar could cancel an ABN would be in the second half of 2024, if the ABN-holder failed to lodge tax returns for the income years beginning on 1 July 2022 and 1 July 2023.
The proposed changes would also allow the Registrar to cancel an ABN if the holder hadn’t given a notification within the past 12 months that they still require the ABN and that the information on the Register is current and correct.
This power would be available to the Registrar after 1 July 2024. In effect, this would require ABN holders to check their ABN details and notify the Registrar at least once in the period between the commencement of these provisions and 1 July 2024, and then at least once annually.
Taxpayers could soon be dealing with more paperwork at tax time, or facing the prospect of a lower tax deduction for work from home (WFH) expenses. The ATO has recently proposed a new revised fixed rate method of calculating WFH expenses for the purposes of claiming a tax deduction from 1 July 2022.
The proposed new rate of 67c per hour would replace the previous shortcut method of 80c per hour (which many people have been using during the COVID-19 pandemic) as well as the previous fixed rate method.
Tip: It’s important to note that this proposal comes from the ATO (which does not itself create the tax law) and is still at the draft stage. The ATO is asking for submissions from interested parties.
Before 1 July 2022, people working from home could use one of three methods for calculating a tax deduction for the expenses incurred:
Given the continual increase in energy bills and other inflationary pressures, this new proposed fixed rate method is likely to yield consistently lower deductions than if the actual cost method was used. Coupled with the abolition of the shortcut method, this seems to mean that taxpayers would either have to accept a lower WFH deduction in the coming years or deal with increased paperwork to be able to claim WFH deductions under the actual costs method.
Yes, it’s that time of year again! As the so-called “silly season” gets underway, and with many employers reverting to pre-pandemic norms around meal entertainment, it is the perfect time to consider what benefits your business is going to provide to staff and how, with a little planning, employers might be able to avoid an FBT hangover.
During this time of the year, in addition to the typical end-of-year party, we generally see a marked increase in expenditure across meal and recreational entertainment, as well as gifts.
Employers must choose how they calculate their FBT meal entertainment liability. Most use either the “50/50” method or the “actual” method.
Rather than apportioning meal entertainment expenditure based on the proportion received by employees (and their associates) and non-employees (who aren’t associates of employees) and by reference to where food and drink is actually consumed under the actual method, many employers choose to use the simpler “50/50” method. Under this method, irrespective of where the meal entertainment occurs or who attends, 50% of the total expenditure is subject to FBT and 50% is deductible for income tax purposes.
Under the “actual” method, only the entertainment provided to employees and their associates is subject to FBT. In addition, where food and drink are consumed by employees on the employer’s premises, there will be no FBT due to the property exemption -– this takes care of Friday night drinks in the office! But usually, the greatest reduction in FBT when using the actual method will come from the “minor benefits” exemption. Outside of a handful of exceptions, where a benefit with a notional taxable value of less than $300 (including GST) is provided to an employee or an associate, the minor benefits exemption will generally apply to exempt the benefit from FBT.
Usually, employers would save a considerable amount of FBT using the “actual” method; however, they usually don’t have the time to determine precisely who received the benefit in order to apply the exemption.
A common trap is where an employer has an employee who is considered a “frequent entertainer” for meal entertainment purposes and then is automatically considered a frequent entertainer for recreational entertainment, such that the minor benefits exemption doesn’t apply.
Accordingly, we recommend reassessing which employees should be eligible for the minor benefits exemption with respect to recreational entertainment.
Gifts provided to employees, or their associates, will typically constitute a property fringe benefit and therefore be subject to FBT unless the minor benefits exemption applies.
Gifts, and indeed all benefits associated with the end-of-year function, should be considered separately to the party itself in light of the minor benefits exemption. For example, the cost of gifts such as vouchers, bottles of wine or hampers given at the function should be looked at separately to determine if the minor benefits exemption applies.
Gifts provided to clients are outside of the FBT rules, but may be deductible if they are being made for the purposes of producing future assessable income.
In good news for trustees of self managed superannuation funds (SMSFs) and after much community consultation, transfer balance account event-based reporting (TBAR) will soon be streamlined for convenience.
The TBAR allows the ATO to record and track an individual’s balance for both their transfer balance cap and total superannuation balance. That information is not extracted from the SMSF annual return, or any information shared through a rollover. Under the existing framework, an SMSF must report common events that affect a member’s transfer balance account when they happen.
An SMSF may be required to report earlier if a member has exceeded their personal transfer balance cap. For individuals who start their first retirement phase income stream on or after 1 July 2021, their personal transfer balance cap will be $1.7 million.
From 1 July 2023, the TBAR will be streamlined by removing the total super balance threshold and requiring all SMSFs to report 28 days after the end of the quarter in which a reportable event occurred. Some obligations to report earlier will continue.
Under the new streamlined framework, trustees of SMSFs will still be allowed to report transfer account balance events more frequently if they wish. This may be beneficial in instances where members are close to their personal transfer balance cap, and will avoid excess transfer balance determinations.
McGregor West takes care of your TBAR reporting requirements for you as part of our SMSF service offerings.
Insurance within super is usually the most cost-effective way for an individual to cover themselves in the event of a mishap. Most super funds typically offer three types of insurance for their members: life cover, total and permanent disability (TPD) and income protection insurance (or salary continuance cover).
Life cover (death cover) pays a lump sum or income stream to beneficiaries upon your death, or in the event of a terminal illness. TPD insurance pays you a benefit if you become seriously disabled and are unlikely to work again. Income protection insurance pays a regular income for a specified period, ranging from two years to five years, or up to a certain age, if you can’t work due to temporary disability or illness.
Recently, the Australian Securities and Investments Commission (ASIC) reviewed the practices of five large super funds that provide default income protection insurance on an opt-out basis to their members, accounting for around 2 million MySuper member accounts.
Overall, ASIC found that most income protection insurance policies contain “offset” clauses, which mean that the insurance benefit is reduced or “offset” if you receive other kinds of income support. This is used as a way to reduce incentives for you to delay your return to work as a result of receiving more income while disabled than when working.
The review also found large variations between super funds in the types of income offset against income protection benefits.
ASIC found that trustees were not proactively giving members clear explanations about when insurance benefits would or would not be paid as a result of offsets. This information is obviously relevant when you’re considering whether to opt out of default income protection insurance, and if you make an insurance claim.
ASIC’s concern isn’t that the offset clauses exist, but that relevant information to explain the clauses was not available in website communications or in welcome packs, and the clauses were only described in technical and legalistic language in insurance guides.
TIP: You can get more information on ASIC’s MoneySmart website about what to look for when considering income protection insurance through super: see https://moneysmart.gov.au/how-life-insurance-works/income-protection-insurance.
Amidst the Omicron COVID-19 wave and with our governments shortening booster dose intervals, many businesses are encouraging their employees and customers to get either vaccinated or get their booster dose by offering rewards or incentives. While this is an effective way to help employees and customers stay safe and businesses to stay open, it’s important to consider that there may be some tax consequences involved.
If your business provides free or discounted goods, services, vouchers, gift cards, rewards points or other non-cash benefits to everyone who has had their COVID-19 vaccinations, those benefits will not be subject to FBT, even if your employees take part in the program. This is because the benefit isn’t provided in respect of your employees’ employment. Providing these types of non-cash benefits only to your employees may be subject to FBT; however, a benefit with a value under $300 may qualify for a minor benefit exemption.
If a non-cash benefit provided to your employees doesn’t qualify for the minor benefit exemption, a reduction in taxable value of FBT may be available if the benefit is an “in-house” one. Generally, an in-house benefit is something identical or similar to the benefits you provide to customers in the ordinary course of business – for example, clothes given by a clothing retailer.
TIP: If your business provides transport or pays for an employee’s transport to get their COVID-19 vaccination or booster, the travel would be considered work-related preventative health care, which is exempt from FBT.
If you give your employees a cash payment for getting vaccinated, your business will need to report it via Single Touch Payroll (STP) as part of each employee’s salary or wages, withhold tax from the amount under PAYG withholding, and include the amount in each employee’s ordinary time earnings for the purposes of determining super contributions.
TIP: If you’ve already given vaccination-related benefits or payments to your employees, it’s likely the ATO will need to know. We can assist – contact us today.