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This year has seen a lot of amendments and changes to the rules governing superannuation funds and their providers by the Federal Government that may have an impact on how you as an employer deal with super.
Are you aware of the changes to “choice of fund” rules that you might need to be aware of as an employer of new to the workforce employees?
Currently, as an employer, you may be paying contributions to your new employees into a default superannuation fund of your choice if they have failed to provide you with their own choice of superannuation fund details. This may be due to not having a superannuation fund (as in, the employee is new to the workforce), or as a result of other circumstances.
As an employer, you must provide all new employees with a Superannuation standard choice form within 28 days of their start date. They may also be provided with one if:
- They as an employee request one
- You are not able to contribute to their chosen fund, or it is no longer a complying fund
- You change the employer-nominated fund into which you pay the employee’s contributions.
If the employee holds a temporary working visa or their super fund undergoes a merger or acquisition, they will not be able to choose their super fund themselves.
From 1 November 2021, if you have new employees start and they don’t choose a specific super fund, you may need to request their ‘stapled super fund’ details from the Australian Taxation Office.
A stapled super fund is an existing account that is linked, or ‘stapled’ to an individual employee, so it follows them as they change jobs. This change aims to reduce the number of additional super accounts opened each time they start a new job. If a new employee does not have a stapled fund and they do not choose a fund, the employee’s super can be paid into the employer’s default fund.
With fewer superannuation funds being opened, employees are less likely to generate ‘lost super’ as they transition through their employment periods and various careers leading up to their retirement.
As an employer, you’ll be able to request stapled super fund details for new employees using the ATO’s Online services for business.
To get ready for this change, you can check and update the access levels of your business’ authorised representatives (such as your accountant or bookkeeper) in Online services. This will mean you’re ready to request stapled super funds if needed. It will also assist in protecting your employees’ personal information.
As an employer, you legally cannot provide your employees with recommendations or advice about super unless you are licensed by ASIC to provide financial advice. You can give your employees information about choosing a fund however, including:
- Why do they need to choose a super fund?
- The process of choosing a super fund.
- Your obligations as an employer to pay the super guarantee and provide a default fund to pay into
- How they can nominate their chosen fund
Remember, registered tax agents and BAS agents like us can help you with your tax and super queries. Come and speak with us about your options, and to ensure that you are compliant with your super requirements as an employer.
If you are a new employee entering into the workforce, and you’d like to know more about your options when it comes to superannuation, you should have a serious discussion with providers and conduct your own independent research on the funds available.Read more. "
There is a proverb that says that it is better to ask for forgiveness than to ask permission.
Generally speaking, the idea behind this saying is that if you ask for permission and you do not receive it, then the punishment will be a lot harsher than if you do the thing that you asked to do and get caught afterwards.
For example, if your children were to ask you if they could go to the local pool, and you deny them that request, the chances are that they would be in more trouble than if they simply circumvented you, and went anyway. It may also be said that you may never get caught doing the wrong thing, but asking for permission to do the act could have someone keeping watch over you.
The same cannot be said for Self Managed Superannuation Funds.
It is never a good idea to break the rules and then ask for forgiveness in that instance (or at least not intentionally). SMSF laws are complex. Breaking the rules could be thought of as being quite easy, but is not an excuse.
The Australian Taxation Office (ATO) makes each and every person appointed as a trustee sign a declaration that they are aware of the rules and enforce that that declaration must be witnessed.
Then, after signing a declaration that you are aware and know the rules, they also force you to appoint an independent auditor to thoroughly check everything you have done and to make sure that you have not breached any of the rules.
If they find out that you have breached the rules then that auditor must then report the breach to the Tax Office.
Once it has been reported, this breach must be addressed as quickly as possible. It is even better if you rectify the breach before the auditor reports the breach. Your attitude towards rectifying the breach has a lot of impact on the action that the Tax Office will take against you as a trustee.
Where you can show that this was an inadvertent breach and you fixed it immediately upon realising you made the breach then most likely you will not receive any type of punishment.
Conversely, where the breach was made knowingly and you show hesitancy in rectifying it you should expect to feel the full wrath of the regulator. The ATO does not take lightly to a person not administering their super to the letter of the law.
What Punishments Can The ATO Give You?
There are a number of sticks the ATO has to punish wayward SMSF trustees. The most common punishment used is a direction to do something. For example, you might have acquired an asset off a member that was against the rules. In this case, the ATO would direct you to sell that asset back to the members.
Further on the next level of punishment would be education directives. The ATO has the authority to force you to do some formal SMSF Trustee training. There are a number of providers of these training courses.
That is the extent of the punishments that do not incur monetary penalties. However, the next level of punishment is significant fines for each individual trustee or director of the corporate trustee. These fines can be up to $10,000 per person.
The biggest punishment that can occur is to classify the SMSF as “non-complying,” where the cost of this will be 47% of the accumulated taxable component of the whole fund.
Essentially, that’s half of your super taken from you.
That’s why we always recommend complying with the rules. When you are unsure of the rules, then you should seek further clarification from an expert (and keep off of the ATO’s naughty list while you’re at it).Read more. "
Retirement might seem like a far off dream for many in the workforce, but it’s never too early to start thinking about how much money you might require to live comfortably in your golden years.
Your super balance will most likely fund your retirement, so knowing how well it is performing at your current age is a critical way to address performance issues and optimise its path going forward. You want to make sure you’ll be getting the most out of your super so that when it comes to retiring, you can afford the lifestyle you want.
The amount of super that you may need to live comfortably during your retirement may depend on a range of factors, such as expenses that you may incur, outstanding debts you may have and whether you will be eligible for other types and forms of income (such as through investments, savings, an inheritance or the Age Pension).
According to figures set out in March 2021, those who are looking to retire today (regarding individuals and couples around the age of 65) would need an annual budget of around $44,412 or $62,828 to fund a comfortable lifestyle. For a modest lifestyle, they would need an annual budget of $28,254 or $40,829 respectively.
Everyone’s situation is different, and their super balance will likely reflect those differences.
Men and women may have different super balances due to pay gaps, salary differences and potentially the amount of time they have actually spent working (maternity leave, working part-time versus full-time etc, taking time off work for travel, etc.). As an example, a woman in the 20-24 age bracket may have an average super balance of $8,051, while a man in the same bracket is expected to have an average balance of $9,481. In the 40-44 age bracket, the average super balance for men is $134,992, while women in that same age group may only possess $98,572.
So how can you make certain that your superannuation gets the boost it needs to fund your retirement? We can suggest the following:
- Track down lost super to make sure that you’re not paying for multiple fees on different accounts.
- Consider whether consolidating your funds might be a worthwhile option, to keep easier track of them.
- Review your investment options (you may want to consider switching to a more growth-focused super investment option, for example).
- Review your super at least once a year, and check the fund’s performance, fees that you are paying, what insurance you might have inside your super and if it is still suitable for your current needs.
If you’re looking towards your future, and want more advice on how to plan for your retirement with regard to your superannuation, you can speak with us or your super provider.Read more. "
A family trust is a great structure. It provides tax flexibility whilst giving you asset separation in two directions. But what does asset separation in two directions mean? And why might we suggest it to you as a recommendation?
First of all, why do you want asset separation? If there are multiple assets, you want to make sure that if someone makes a claim against the owner of a particular asset that your other assets can be quarantined from that claim. This isolation will mean that they can’t gain access to the assets that are yours and separate from the claim.
If you own a business and have a successful financial claim made against your business where the claim is for an amount that is more than the assets of the business, you will first need to use the business to cover the claim, and then find something additional to supplement the shortfall. In this case, if you also own your own home, and its worth is enough to cover that shortfall, it may be used to meet the claim by combining the business assets’ worth and the family home’s value. You could lose your family home!
However, if we structure your business in a particular way then the person making that claim will only have access to the assets in the business and you will be able to keep your family home.
This is what is called asset separation. Generally, it’s a good thing to employ, but it does have one flaw – it usually only goes one way.
If someone claims on your business, they won’t get the house but if they successfully make a financial claim against you, they will successfully get all of the assets that you own, including those of your business. This is a risk that you must be willing to take if you own a business.
When you operate a business through a family trust instead of owning that business, you will merely “control” it, and have but a “mere expectancy” of being considered in the distribution of any profits or capital from that business.
The good part here is that although you only have a mere expectancy to be considered, we would set it up so it is YOU that “considers” who gets the money. This means that if someone makes a claim against you then they can’t get access to assets in the family trust. What this does is give you two-way asset protection.
There is a bit of an issue with family trusts though – although you will see the debts of the trust as debts of the trust at law, they are in actual fact the debts of the trustee. If you are the trustee, all of the debts of the trust are your personal debts. You can use the trust assets to pay down those debts, but if the trust assets are insufficient to pay the debts, it will be up to you to pay off the rest.
When you’re an individual trustee of a trust, you lose the perk of asset separation, which is why a company may be used as a trustee, as the company does nothing other than act as the trustee of the trust. If there are insufficient funds in the trust to cover the debts of the trust, then those debts fall on the trustee and the creditors have no access to your personal assets because you have no individual debts owing.
Want to know more about asset separation? Interested in trusts? We’re here to help.Read more. "
There were a few changes to superannuation that were passed by the Senate recently.
You can now use the bring-forward rule to make three years’ worth of non-concessional contributions (where you don’t claim a tax deduction) up until the age of 67.
Last year the rules had changed to permit a person to make non-concessional contributions up to the age of 67 but the use of the bring forward rule had stayed at an age limit of 65 years old, as it required a full Bill to be passed by both Houses of Parliament.
This new age limit will apply to contributions made on or after the 1st July 2020. This is particularly good news for people that turned 67 during the year and utilised the three year bring forward rule in anticipation of the law being passed.
From the first quarter after receiving royal assent (most likely to occur from 1st July), Self Managed Superannuation Funds will be allowed to have up to six members. The limit is currently four members. For larger families, this will be of particular use and relevance, as the parents involved in the fund may wish to include more than two children (this could potentially be up to four children involved in this case).
Pauline Hanson’s One Nation Party also passed through an amendment into the changes that will remove a charge on excess concessional contributions. Concessional contributions are those where you or your employer can claim a tax deduction on a contribution.
If you or your employer currently contribute over the allowable caps (usually limited to $25,000 but moving to $27,500 on 1 July) to your super, you are charged an amount of around 3% of the excess you contributed and it is calculated from the 1st of July in the year that you made the contribution up until the day your assessment is due.
There are still other charges that will apply to exceeding contribution allowable caps, such as Shortfall Interest Charge and General Interest Charge. The biggest is usually the Excess Concessional Contributions Charge.
This change was never announced and was not part of government policy but made it through anyway. One Nation also tried to increase the maximum allowable tax-deductible contributions for persons aged over 67 years old, but that amendment did not go through.
Another change that had not been previously announced was that if you had an amount released from super under the Covid Relief package ($10,000 per year for two years) then you will not be able to claim a tax deduction for the same amount that you contribute back into super up until 2030.
For example, Peter took his $20,000 under the Covid Release package. Peter contributes $1,000 per month into his superannuation fund and usually claims a tax deduction for that amount.
The first $20,000 that Peter contributes after 1st July 2021 will not be able to be claimed as a tax deduction. This only applies to personal contributions, so if your employer contributes on your behalf this will not impact you.
Want more information about super contributions, but not sure where to start? Come speak with us – we can help you with any questions you may have about superannuationRead more.
Many years ago Julia Gillard’s government announced increases in the Superannuation Guarantee rate from 9% at the time, up to 12%. The impact of the Global Financial Crisis has led subsequent governments to continually postpone these increases. So far, Australia has only received two increases, back in 2013 and 2014, when the superannuation rate went up to 9.5% over two years. It has remained at 9.5% since 2014.
Now it is time for the next increase. This will happen on 1 July 2021 when the rate of superannuation that you have to pay for most of your employees will be 10% of their salary or wage instead of the current 9.5%.
For most employers that are using payroll software, this change will happen automatically. You should however confirm with your software provider (either directly or through someone like us) that this will happen to ensure that you remain compliant without needing further action.
For most employees, this will mean an extra 0.5% added to their current salary plus super. But where an employee is on a contract where their salary is superannuation inclusive it could be that they will receive a corresponding reduction in their salary to offset the extra superannuation. Employers and employees will need to have a discussion about this so that everyone knows the situation they will be in for the new financial year.
The proposed increase to 12% is still scheduled to happen in 0.5% increments each financial year until the 2025-26 year when the Superannuation Guarantee rate will peak at 12%. The rates applicable to each financial year are proposed to be:
1 July 2021 to 30 June 2022 10%
1 July 2022 to 30 June 2023 10.5%
1 July 2023 to 30 June 2024 11%
1 July 2024 to 30 June 2025 11.5%
1 July 2025 onwards 12%
It is also possible that the government will delay the increases as it has done in the past, but you will be kept informed regarding that information.Read more.
The ATO’s Tax, Super + You competition is a fun and engaging way for Australian high school students to learn about tax and super, unleash their creativity and potentially win some great prizes.
Working as a part of a team or individually, students are invited to write, make or film an entry for their topic:
* Junior (Year 7–9) are asked to highlight the value of tax or super (or both) in the community
* Senior (Year 10–12) must discuss your first job and what you need to know about tax and super.
Shortlisted entries in 2019 included raps, songs, animations, video skits and even a board game. If you’re a high school student interested in competing this year or are the parent of one, this resource is a great way to see how people have gotten involved previously (and that you can draw inspiration from as well).
The competition opened on 24 May, but entries will be accepted until 13 August. The winners will be decided by a judging panel, including guest judge Effie Zahos who is one of Australia’s leading personal finance commentators. The public can also vote for their favourite entry in the People’s Choice Awards.
Tax Office Assistant Commissioner Sally Bektas said she was thrilled to be back on the judging panel.
“Our Tax, Super + You competition has really shown that building financial literacy can be fun and bring out the best in students. I’m so excited to see the entries for 2021,” Sally said.
You can watch Sally explain how to get involved on ATOtv.
Winners of the 2021 Tax, Super + You competition will be announced in September.
Looking for more information about the 2021 Tax, Super + You competition? Visit www.taxsuperandyou.gov.au/competition to find out more details.Read more.
Each year we are entitled to a tax deduction for a certain amount of superannuation contributions. The tax deduction is available to your employer if they contribute on your behalf but it can also be available to you personally when you make extra contributions to super.
The amount that you can claim as a tax deduction is limited to what is known as your Concessional Contributions Cap. There is a standard Cap of $25,000, though that is increasing to $27,500 on 1st July 2021. There are certain people that can add amounts that haven’t been used in previous years to this cap amount.
If you go over your Concessional Contributions Cap, the excess contributions are merely added to your taxable income so you don’t get any tax benefits out of the contribution.
For example, let’s say your Concessional Contributions Cap is $25,000 but you make $35,000 in concessional contributions. The extra $10,000 will be added to your taxable income but you will receive a credit for the $1,500 in contributions tax paid by the super fund.
But there is a little known trick to allow you to “bring forward” a tax deduction for your concessional contributions. This “hack” is commonly known as a Contributions Reserving Strategy and it has been approved by the Tax Office. If done correctly it allows you to take some of next year’s Concessional Contributions Cap and bring it into this financial year. But it must be done correctly and if you take advantage of it, you need to lodge a specific form with the Tax Office to let them know. The ATO will almost certainly audit what you have done.
It is also important to note that it is really only achievable to do this strategy with a Self Managed Superannuation Fund. It is also important to note that you are merely bringing forward your contribution (using it this year) and that you won’t be able to use that amount next year, so careful planning is also needed.
This type of strategy is used by people who will have an unusually higher taxable income this year than they will next year. So, for example, you might have a large capital gain this year or you might be retiring and have no taxable income next year.
Leaving it until the new year to discuss this strategy is way too late and it absolutely cannot be done after late June so it is essential that you talk to us if you feel next year’s taxable income will be a lot lower than this year.
If you are aged 65 years or older, you are currently able to make downsizer contributions of up to $300,000 into your superannuation fund from the sale of your main residence (as of 1 July 2018).
The Federal Budget recently announced that the age limit for downsizer contribution payments will be reduced from 65 to 60 once the relevant legislation has been passed.
This means that you can increase your super fund’s balance without impacting on your contribution caps (as it is not a non-concessional contribution), and this contribution can still be made even if your superannuation balance exceeds $1.6 million. It does however count towards your transfer balance cap, which is currently set at $1.6 million (increasing to $1.7 million for most people on 1 July 2021).
The downsizer contributions scheme can only be accessed once, so it can only apply when you sell or dispose of one home, including selling a part interest in a home. It is a one-time deal essentially and is not a tax-deductible amount.
You can however make multiple downsizer contributions from the proceeds of a single sale, but the total of the contributions cannot exceed $300,000 less than any other downsizer contributions that you have made.
You and your spouse can (in certain circumstances) both make downsizer contributions from the sale of the home even if the house was only owned by one of you, provided you both meet all the requirements.
These contributions will also come into account for determining whether or not you are eligible to receive the age pension.
If you would like more information on how to proceed with downsizer contributions, are looking to sell your home and wanting to continue with downsizer contributions from the sale, or just looking for guidance, we can help. Come speak with us.Read more.
From 1 July 2022 employees will no longer need to meet the monthly minimum income threshold of $450 to receive superannuation guarantee payments from their employers due to the Federal Budget’s recently announced changes to superannuation.
Previously, employers did not need to pay employees superannuation guarantee payments if they did not earn $450 per month. Employees who worked for multiple employers but did not earn the same amount from a single employer were not eligible for superannuation guarantee payments.
Close to $125 million of contributions was not being made due to employees not satisfying the minimum income threshold of $450. An estimated 300,000 Australians were reported to have been missing out on those contributions each year.
For employees who worked in lower-income jobs or in part-time or casual employment that may not reach that minimum income threshold, this meant that they were missing out on critical payments to their super. With women making up a more significant proportion of these workers, it also caused the gender gap in superannuation already present to widen further.
The removal of the minimum income threshold means now that these employees will be able to accrue super through the payments made by their employer and help address a long-term equity issue that had been in place in superannuation for years.
These changes should come into effect by July 2022 and, though they may not necessarily improve the retirement outcomes of individuals, the savings resulting from these payments into super will be boosted and all workers will as a result be provided with superannuation coverage, regardless of whether or not they earn more than $450.
Supposing that you are an employer who will now have to pay superannuation guarantee payments to your employees and did not have to do so before. In that case, you can speak with us to ensure that you are meeting your compliance requirements with super for your employees.Read more. « Older Entries Recent Entries »