Treasury Reveals Director ID Deadline

The new dates come as the government looks to introduce the director ID regime to prevent illegal phoenixing by ensuring directors can be traced across companies, while also preventing the use of fictitious identities.

The new regime will require all directors to provide a number of documents to establish their identity with the Commonwealth Registrar in order to receive a unique director ID, which they will keep permanently, even if they cease to be a director.

The Commonwealth Registrar will now conduct testing of the director ID system by inviting a controlled number of existing directors to ensure the new platform delivers a robust, reliable & consistent user experience.

The testing period is anticipated to end by 31 October.

Once the testing period concludes, existing directors will be required to obtain a director ID by 30 November 2022.

This time frame will apply for both existing directors who were appointed prior to the commencement of the director ID regime and directors appointed during the testing phase.

Individuals who are seeking appointment after 30 November 2022 will be required to obtain a director ID prior to being appointed as a director.

There will be civil and criminal penalties for directors who fail to apply for a director ID within the applicable time frame, and for conduct that undermines the new requirements, including providing false identity information to the Registrar or intentionally applying for multiple director IDs.

Client Alert – April 2021

It’s time to consider FBT

If your business has provided any benefits to your employees, you may be liable for fringe benefits tax (FBT). This includes benefits to current, prospective and former employees,as well as their associates. It’s important to keep in mind that this applies no matter what structure your business has – sole trader, partnership, trustee, corporation, unincorporated association, etc. If a benefit was provided in respect of employment, then it may be a taxable fringe benefit.

Although the Australian income tax year runs from 1 July to 30 June, the FBT year is different, running from 1 April to 31 March the following year – so now is the time to consider your business’s FBT obligations and organise your records for the year 1 April 2020 to 31 March 2021.

In total, there are 13 different types of taxable fringe benefits, each with their own specific valuation rules. The FBT tax rate of 47% may seem fearsome, but there are ways to reduce the amount of FBT your business may have to pay where a benefit has been provided.

One of the simplest ways to reduce the amount of your business’s FBT liability is for your employees to make payments towards the cost of providing the fringe benefit. This is known as employee contribution, and certain conditions still apply.

Your business can also take advantage of various exemptions and concessions to reduce FBT liability, but you’ll need to keep specific and careful records, including employee declarations and invoices and receipts. As a general rule, you should keep these documents for at least five years after the relevant FBT return is lodged.

ATO reminder: lodge your TPAR

The ATO is reminding owners of businesses that provide various services to lodge their taxable payments annual report (TPAR) for the 2019–2020 income year. It estimates that around 280,000 businesses were required to lodge a TPAR for the 2019–2020 financial year, but at the beginning of March around 60,000 businesses still had not complied with the lodgment requirements. The reports were originally due on 28 August 2020. To avoid possible penalties, these businesses are encouraged to lodge as soon as possible.

The ATO notes that many businesses that have engaged delivery services (including food delivery services) though a contractor/subcontractor may not know they have to lodge a report.

The TPAR was introduced to combat the “black economy” which is estimated to cost the Australian community around $50 billion, or 3% of gross domestic product (GDP). It is designed to help the ATO identify contractors or subcontractors who either don’t report or under-report their income (eg through hiding amounts received as “cash in hand”).

The report is required for businesses that make payments to contractors/subcontractors and provide any of the following services:

  • building and construction;
  • cleaning services;
  • courier services, including delivery of items or goods (letters, packages, food, etc) by vehicle or bicycle, or on foot;
  • road freight services;
  • IT services, either on site or remotely; and
  • security, investigation or surveillance services.

For example, during the past year many eateries, grocery stores, pharmacies and other general retailers pivoted to providing home delivery for their customers. As such, they may have needed to engage contractors or subcontactors to provide courier services. If the total income received for these deliveries or courier services amount to 10% or more of their total business income, they will be required to lodge a TPAR even though they may not have needed to do so previously.

If your business is required to lodge a TPAR, the details you’ll need to report about each contractor should be easy to find and are generally contained on the invoice you receive from them. This includes details such as their ABN, name and address, and the gross amount paid for the financial year (including GST).

COVID-19 stimulus and support measures winding back

A number of important COVID-19 related government stimulus and support measures are now coming to an end, and some others have begun phasing out, which will occur over a slightly longer period.

This means that businesses and individuals need to prepare for an environment where the government safety net is not as wide.

The following are, at the time of writing, among the measures that will cease at the end of March 2021:

  • JobKeeper (ends 28 March);
  • Coronavirus Supplement (ends 31 March);
  • the temporary COVID-19 qualification rules for JobSeeker payment and youth allowance (end 31 March);
  • HomeBuilder (ends 31 March); and
  • some apprenticeship wage subsidies (end 31 March).

Life insurance in super: costs on the way up?

Having insurance through superannuation can be a tax-effective and cost-effective way of protecting yourself and your loved ones. Most funds offer three different types of insurance through super, each covering different contingencies: life insurance, total and permanent disability (TPD) insurance and income protection insurance.

Life cover pays a lump sum or income stream to your beneficiaries when you die, or if you are diagnosed with a terminal illness. TPD insurance pays a benefit if you become permanently or seriously disabled and are unlikely to work again. Income protection insurance pays you a regular income for a specified period if you can’t work due to temporary disability or illness.

It’s estimated that around 70% of Australians who have life insurance hold it through their super fund. However, the Australian Prudential Regulation Authority (APRA) has noted new and concerning developments that may see the costs of this insurance go up.

According to the data APRA has collected on life insurance claims and dispute statistics, premiums per insured member within super funds escalated during 2019 and 2020. APRA has likened this trend to what occurred between 2012 and 2016 when, after a period of significant premium reductions, insurers experienced significant losses. This led to large premium increases and more restrictive cover terms for insurance holders.

APRA notes that should this trend continue, super members are likely to be adversely affected by further substantial increases in insurance premiums and/or reductions in the value and quality of life insurance in superannuation. The regulator goes as far as saying that the ongoing viability and availability of life insurance through super may be at risk, which will impact a large proportion of the population.

It’s not time to panic just yet, but it’s important to regularly review what insurance you actually need, what cover you have through your super, and what you’re paying for it, as premiums can add up and erode your super – especially if you’re unnecessarily paying them to multiple funds!

For now, APRA is continuing to monitor the situation to ensure that registrable superannuation entity (RSE) licensees take appropriate steps to safeguard pricing, value and benefits for members that adequately reflect the underlying risks and expected experience.

Explanatory Memorandum – April 2021

It’s time to consider FBT

The ATO has issued a worksheet which summarises the FBT rates and thresholds for 2021–2022 (ie 1 April 2021 to 31 March 2022). Most of the rates have been previously announced, but the worksheet helpfully puts the numbers in one place and does include two previously unannounced thresholds.

New numbers for 2021–2022 include the:

  • record keeping exemption threshold of $8,923 (up from $8,853 for 2020–2021); and
  • statutory or benchmark interest rate of 4.52% (down from 4.8% for 2020–2021).

The housing indexation figures for each state and territory are also provided, and there have been some changes since 2020–2021. However, at the time of writing the car parking threshold for 2021–2022 is still pending – it will be updated once the relevant CPI figure is available.

Other previously announced thresholds include the:

  • cents-per-kilometre rate;
  • living-away-from-home allowances (LAHFA) for Australia and overseas.

Other unchanged rates and thresholds listed in the worksheet include the:

  • FBT rate of 47% (unchanged since 2017–2018);
  • gross-up rates of 2.0802 for Type 1 benefits and 1.8868 for Type 2 benefits (also unchanged since 2017–2018);
  • pay by instalment threshold of $3,000;
  • reportable fringe benefits threshold of $2,000;
  • capping thresholds for the FBT exemption and FBT rebate concessions;
  • car fringe benefits statutory formula rate of 20% (unchanged since 2014–2015); and
  • deemed depreciation rate of 25% for car fringe benefits valued under the operating cost method.
Lodgment dates and instructions

In a separate worksheet, the ATO advises that the due date to lodge the return and pay the liability for the FBT year is 21 May, unless either:

  • the ATO accepts a request for an extension of time to lodge; or
  • a registered tax agent meets the lodgment program requirements for FBT and lodges the return electronically by 25 June.

The ATO has also released its 2021 Fringe benefits tax return instructions.

Historical rates

For the FBT historians out there, the ATO has also released a worksheet that sets out the “historical” rates and thresholds, which date back to 2012–2013.

Source: www.ato.gov.au/Forms/2021-Fringe-benefits-tax-(FBT)-return/

www.ato.gov.au/Forms/2021-Fringe-benefits-tax-return-instructions/

www.ato.gov.au/Rates/FBT/

www.ato.gov.au/Rates/Fringe-benefits-tax—historical-rates-and-thresholds/

Working from home benefits and FBT: updated ATO advice

The ATO has issued an update to its worksheet entitled COVID-19 and working from home benefits.

The advice is not new – much of the material already appears on a worksheet entitled COVID-19 and fringe benefits tax. However, given the new FBT year upon us, it’s worth practitioners reminding themselves of the ATO’s views (which of course they can completely disagree with).

Work laptops, other portable electronic devices and tools of trade

Given the impact of the pandemic, it would be expected that employers have given or loaned certain eligible work-related items to employees to facilitate them working at home. Alternatively, employers may have reimbursed employees for expenditure incurred on these items.

The ATO states that an eligible work-related item is exempt from FBT if it is:

  • primarily for use in the employee’s employment; and
  • not a duplicate of something with a substantially identical function that has already been provided to the employee in the FBT year (unless it is a replacement).

An eligible work-related item is:

  • a portable electronic device;
  • computer software;
  • protective clothing;
  • a briefcase; or
  • a tool of trade.

Examples of portable electronic devices include laptops, tablets, smartphones and calculators. However, the ATO states that it does not consider a desktop computer to be a portable electronic device. The ATO’s reasoning for this is explained in a separate worksheet.

Small businesses

The worksheet states that a small business may be eligible for an exemption and that they can “provide multiple portable electronic devices to an employee, even where the items have substantially identical functions”.

It reminds businesses that, from 1 April 2021, the turnover threshold for businesses to be eligible for this exemption will increase from $10 million to $50 million. Again, there is a separate ATO worksheet discussing how a business determines if it qualifies as a small business.

General office equipment

“General office equipment”, as the term is used by the ATO, includes desks, chairs, cabinets, stationery, computer monitors and peripherals, and other items generally available for use in an office setting. There are different ways employers may provide such equipment to employees, which may have different FBT outcomes.

Lending office equipment

The benefit arising from lending general office equipment to employees during temporary working from home (WFH) arrangements due to COVID-19 may be exempt from FBT. However, for ongoing WFH arrangements, the benefit may also be exempt in some circumstances – and where it is not exempt, the taxable value may be reduced by the otherwise deductible rule.

Temporary WFH arrangements

During periods of temporary WFH arrangements due to COVID-19, the provision of office equipment will be exempt from FBT if it is:

  • property that is ordinarily located on business premises;
  • wholly or principally used directly in connection with business operations.

Office equipment is considered “ordinarily located on your business premises” if:

  • the home use of the equipment by an employee is temporary; and
  • there is an expectation that the equipment will be returned to the business premises when the temporary WFH arrangement ceases.

The equipment does not need to have been physically located on the business premises prior to entering into a WFH arrangement to meet the test, provided it is an item that is expected to be returned to the premises.

Ongoing WFH arrangements

Office equipment that an employer loans to an employee to support a WFH arrangement that will continue on a long-term basis is, in the ATO’s view, unlikely to meet this exemption.

However, it states that the benefit may be exempt if the employer makes a “no-private-use declaration” that covers all office equipment loaned to employees to support their WFH arrangements where both of the following apply:

  • the equipment is subject to a consistently enforced policy in relation to its use; and
  • this use means the benefits would have a taxable value of nil.

The ATO will accept that the requirements of this exemption are met where the employer provides general office equipment to its employees solely to enable them to work from home and has a “consistently enforced policy” documenting this purpose.

In such cases, employers will not be required to provide documentation that demonstrates the employment use of the office equipment. The fact that there may be some incidental use of an item outside of work hours while it is located at an employee’s home “does not prevent the benefit from meeting this exemption”.

If an employee does not complete a no-private-use declaration, the taxable value of that benefit may be reduced under the otherwise deductible rule. The applies if the employee would have received a once-only deduction had they incurred the expenditure themselves to rent the equipment solely to use for work purposes.

If it cannot be shown that the equipment still belongs to the employer and will be returned when the WFH arrangement ceases, then the provision of the equipment may be a property benefit.

Counselling and health care

Counselling services provided to support an employee’s WFH arrangement may be exempt from FBT under the rules for work-related counselling. “Work-related counselling” refers to counselling that seeks to improve or maintain the quality of an employee’s work performance and relates to matters such as health and safety, stress management, relationships, retirement and any other similar matters.

Similarly, health care provided to an employee to support their WFH arrangement may also be exempt from FBT if it is the provision of work-related preventative health care. “Work-related preventative health care” means any form of care that:

  • is provided by or on behalf of a legally qualified medical practitioner, nurse, dentist or optometrist;
  • has the principal purpose of preventing an employee from suffering from injury or disease that is related to their employment; and
  • is available to all employees who are likely to suffer from similar work-related injury or disease.

Source: www.ato.gov.au/law/view/view.htm?docid=%22AFS%2FWFH-FBT-COVID-19%2F00001%22

www.ato.gov.au/General/COVID-19/Support-for-businesses-and-employers/COVID-19-and-fringe-benefits-tax/

www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/Getting-started/FBT-for-small-business/?page=22

www.ato.gov.au/Business/Small-business-entity-concessions/Eligibility/Work-out-if-you-re-a-small-business-for-the-income-year/

ATO reminder: lodge your TPAR

The ATO is reminding owners of businesses that provide various services to lodge their taxable payments annual report (TPAR) for the 2019–2020 income year. It estimates that around 280,000 businesses were required to lodge a TPAR for the 2019–2020 financial year, but at the beginning of March around 60,000 businesses still had not complied with the lodgment requirements. The reports were originally due on 28 August 2020. To avoid possible penalties, these businesses are encouraged to lodge as soon as possible.

The ATO notes that many businesses that have engaged delivery services (including food delivery services) though a contractor/subcontractor may not know they have to lodge a report.

The TPAR was introduced to combat the “black economy” which is estimated to cost the Australian community around $50 billion, or 3% of gross domestic product (GDP). It is designed to help the ATO identify contractors or subcontractors who either don’t report or under-report their income (eg through hiding amounts received as “cash in hand”).

“It’s not fair if an honest business misses out on sales because a competitor is under-cutting them by doing things like under-declaring or not declaring income”, Assistant Commissioner Peter Holt has said. “The information we receive in the taxable payments annual report helps us shed light on this and keep things fair.”

While TPAR obligations originally only encompassed the building and construction industry, the report is now required for any businesses that make payments to contractors/subcontractors and provide any of the following services:

  • building and construction including plumbing, architectural, electrical, plastering carpentry, engineering and a wide range of other activities;
  • cleaning services including interior and exterior cleaning of structures, vehicles, machinery and cleaning for events/COVID-related matters;
  • courier services including delivery of items or goods (ie letters, packages, food, etc) by motor vehicle or bicycle, or on foot;
  • road freight services including transportation of freight by road, truck hire with driver, and road vehicle towing services;
  • IT services including writing, modifying, testing or supporting software, either on site or remotely; and
  • security, investigation or surveillance services including patrolling and guarding people, premises or property, or watching or observing an area or security systems.

The business doesn’t need to provide the services exclusively to be captured under the TPAR system – if it only provides the service for a part of the year, or even if it is only a small part of the business, that business may be required to lodge a TPAR. According to the ATO, if the total payments received from the provision of any of these services equal or exceed 10% of the total annual business income, the business will be required to lodge a TPAR.

For example, during COVID, many eateries, grocery stores, pharmacies and other general retailers pivoted to providing home delivery for their customers. As such, they may have needed to engage contractors or subcontactors to provide courier services, if the total payments received for these deliveries or courier services amount to 10% or more of their total business income, they will be required to lodge a TPAR even though they may not have needed to do so previously.

If a business is required to lodge a TPAR, the details they will need to report about each contractor should be easy to find and are generally contained on the invoice the business receives from them. This includes details such as their ABN, name and address, and the gross amount paid for the financial year (including GST).

Source: www.ato.gov.au/Media-centre/Media-releases/ATO-s-taxable-payments-reporting-system-helps-tradies-compete-on-the-level/

www.ato.gov.au/Business/Reports-and-returns/Taxable-payments-annual-report/

COVID-19 stimulus and support measures winding back

A number of important stimulus and support measures are coming to an end, and some others have begun phasing out, which will occur over a slightly longer period.

The following discussion does not address the status of all Coronavirus Support measures that have been implemented. For example, it does not include the various state-based revenue concessions (eg for payroll tax), nor other measures that have already ended (eg cash flow boost payments, early access to super). Its purpose is to highlight that, as the pandemic (hopefully) recedes, so too government support winds back. Advisors and clients need to prepare for a business environment where the government safety net is not as wide.

JobKeeper ends 28 March 2021

JobKeeper Mark II operated from 27 September 2020 and, at the time of writing, is expected to finish on 28 March 2021.

The Mark II version saw some changes to what had initially been enacted:

  • the introduction of two tiers of payment rates;
  • the reduction in the amount of the JobKeeper payment; and
  • the requirement for businesses to reassess eligibility for the JobKeeper extension with reference to their actual (rather than estimated) turnover.

A further change was that employees hired as at 1 July 2020 were also eligible to receive JobKeeper.

Certain provisions in the Fair Work Act 2009 that were implemented in response to COVID-19 were, at the time of writing, also due to expire on 28 March 2021.

Coronavirus Supplement ends 31 March 2021

The Coronavirus Supplement was extended from 1 January 2021 to 31 March 2021 at reduced rate of $150 per fortnight (it had been paid at $250 from 25 September until 31 December 2020, down from the original $550).

Other social security related measures that, at the time of writing, will stop on 31 March include:

  • the temporary COVID-19 qualification rules for JobSeeker payment and youth allowance; and
  • the ability of the Minister to temporarily modify certain specified provisions of the social security law by disallowable legislative instrument.
HomeBuilder ends 31 March 2021

The HomeBuilder measures are also, at the time of writing, due to end on 31 March 2021.

For all new build contracts signed between 1 January 2021 and 31 March 2021:

  • eligible owner-occupier purchasers could receive a $15,000 tax-free amount; and
  • the property price caps for new builds in NSW and Victoria were set at $950,000 and $850,000 respectively, and $750,000 for the other states and territories.

In addition, the construction commencement deadline was extended from three months to six months for all eligible contracts signed on or after 4 June 2020.

Apprenticeship wage subsidies end 31 March and 30 September

Under the Supporting Apprentices and Trainees wage subsidy, eligible employers could apply for a wage subsidy of 50% of an eligible apprentice or trainee’s wages paid until 31 March 2021. In addition to the existing support for small businesses, medium-sized businesses may have been eligible for the subsidy, for wages paid from 1 July 2020 to 31 March 2021.

Under the Boosting Apprenticeship Commencements wage subsidy, any business or Group Training Organisation that engages an Australian Apprentice between 2 5 October 2020 and 30 September 2021 may be eligible for a subsidy of 50% of wages paid to a new or recommencing apprentice or trainee for a 12-month period from the date of commencement, to a maximum of $7,000 per quarter. There is no cap on the number of eligible trainees/apprentices.

Accelerated depreciation ends 30 June 2021

An accelerated rate of depreciation is currently available, under Subdiv 40-BA of the Income Tax (Transitional Provisions) Act 1997 (TPA), to businesses with aggregated annual turnover less than $500 million.

To be eligible for the accelerated depreciation, the depreciating asset must be:

  • new and not previously held by another entity (other than as trading stock or for the purposes of reasonable testing or trialling) – this excludes most second hand assets, and the exclusion extends to a licence for an excluded intangible second-hand asset the business starts to hold on or after 7.30 pm AEDT on 6 October 2020;
  • first held on or after 12 March 2020; and
  • first used or first installed ready for use for a taxable purpose on or after 12 March 2020 and before 1 July 2021.

Broadly, the accelerated depreciation allows eligible entities to claim 50% of the cost of an asset, in addition to the deduction under the existing depreciation rules. Entities that use the small business pooling provisions (aggregated turnover under $10 million) have a higher accelerated depreciation rate (57.5%).

Enhanced instant asset write-off ends 30 June 2021

A higher instant asset write-off threshold ($150,000) is available to businesses with annual aggregated turnover below $500 million that acquire a depreciating asset after 7.30 pm on 2 April 2019. The asset must be first used, or installed ready for use, between 12 March 2020 and 30 June 2021.

This measure is not to be confused with temporary full expensing, which ends on 30 June 2022 (see below).

JobMaker Hiring Credit eligibility ends 6 October 2021

Broadly, the JobMaker Hiring Credit is available to employers for each new job they create over a specified period for which they hire an eligible young person aged 16 to 35 years old.

Generally, the amount of the JobMaker Hiring Credit payment depends on the age of the eligible additional employee when they commence employment with the entity. An entity may receive up to $200 per week for each eligible additional employee aged 16 to 29 years and up to $100 per week for each eligible additional employee aged 30 to 35 years.

The JobMaker scheme commenced on 7 October 2020 and ends on 6 October 2022, but only applies to eligible individuals who commence employment between 7 October 2020 and 6 October 2021.

Temporary full expensing ends 30 June 2022

Temporary full expensing (under Subdiv 40-BB of the TPA) allows eligible businesses to deduct the full cost of eligible depreciating assets, as well as the full amount of the second element of cost.

A business qualifies for temporary full expensing if it has an annual aggregated turnover under $5 billion. More generous rules apply to small business entities with aggregated turnover under $10 million.

If temporary full expensing applies to work out the decline in value of a depreciating asset, no other method of working out that decline in value applies.

Temporary full expensing will cease to apply on 30 June 2022. Therefore, deductions for the decline in value of depreciating assets after that time will be worked out under the general uniform capital allowance (UCA) rules in Div 40 of the Income Tax Assessment Act 1997 (ITAA 1997).

Loss carry-back ends 30 June 2022

Corporate tax entities with an aggregated turnover of less than $5 billion can carry back a tax loss for the 2019–2020, 2020–2021 or 2021–2022 income years and apply it against tax paid in a previous income year – as far back as the 2018–2019 income year. In terms of the 2019–2020 income year, claims will be processed when income tax returns are lodged for 2020–2021 and 2021–2022. Entities wishing to claim the loss carry-back tax offset prior 1 July 2021 (eg early balancers) need to use a special claim form.

Source: www.dese.gov.au/supporting-apprentices-and-trainees

www.dese.gov.au/boosting-apprenticeship-commencements

Life insurance in super: costs on the way up?

Having insurance through superannuation can be a tax-effective and cost-effective way of protecting yourself and your loved ones. Most funds offer three different types of insurance through super, each covering different contingencies: life insurance, total and permanent disability (TPD) insurance and income protection insurance.

Life cover pays a lump sum or income stream to the insurance holder’s beneficiaries when the holder dies, or if they have a terminal illness. TPD insurance pays a benefit in instances where the holder becomes permanently or seriously disabled and is unlikely to work again. Income protection insurance pays the holder a regular income for a specified period if they can’t work due to temporary disability or illness.

It’s estimated that around 70% of Australians who have life insurance hold it through their super fund. However, the Australian Prudential Regulation Authority (APRA) has noted new and concerning developments that may see the costs of this insurance go up.

According to the data APRA has collected on life insurance claims and dispute statistics, premiums per insured member within super funds escalated during 2019 and 2020. APRA has likened this trend to what occurred between 2012 and 2016 when, after a period of significant premium reductions, insurers experienced significant losses. This led to large premium increases and more restrictive cover terms for insurance holders.

APRA notes that should this trend continue, super members are likely to be adversely affected by further substantial increases in insurance premiums and/or reductions in the value and quality of life insurance in superannuation. The regulator goes as far as saying that the ongoing viability and availability of life insurance through super may be at risk, which will impact a large proportion of the population.

It’s not time to panic just yet, but it’s important for your clients to regularly review what insurance they actually need, what cover they have through their super, and what they’re paying for it, as premiums can add up and erode their super balance – especially if they’re unnecessarily paying them to multiple funds!

Many super funds allow their members you to adjust their insurance cover (either up or down) to suit changes in their situations, with corresponding premiums. And if your clients are not happy with the prices or levels of cover they’re receiving from their fund, they can always consider obtaining insurance outside of super.

For now, APRA is continuing to monitor the situation to ensure that registrable superannuation entity (RSE) licensees take appropriate steps to safeguard pricing, value and benefits for members that adequately reflect the underlying risks and expected experience.

Source:

www.apra.gov.au/news-and-publications/apra-urges-life-insurers-and-superannuation-funds-to-address-sustainability

www.apra.gov.au/sustainability-of-life-insurance-superannuation

ATO on the Hunt for 60,000 TPAR Businesses

The ATO estimates that around 280,000 businesses are required to lodge a taxable payments annual report (TPAR) for the 2019–20 year, following the regime’s extension last year to businesses providing road freight services, information technology services, and security, investigation or surveillance services.

Businesses providing building and construction, cleaning, or courier services are also required to lodge a TPAR.

With the annual 28 August deadline now well overdue, the ATO has confirmed that more than 60,000 businesses have yet to lodge their TPAR, with failure-to-lodge penalties looming.

ATO assistant commissioner Peter Holt has urged these businesses to lodge immediately, noting that the taxable payments reporting system (TPRS) aims to create a level playing field for contractors.

Mr. Holt describes the ATO’s role is to ensure the ‘bubble’ is centered as much as possible to keep things fair for everyone.

Mr. Holt also believes that many more businesses might be captured under the TPRS for the first time ever after COVID-19 forced businesses to pivot to a delivery service model.

This is evident in the many restaurants, cafes, grocery stores, pharmacies and retailers which have begun paying contractors to deliver their products to their customers.

Although these businesses may not have previously needed to lodge a TPAR they will need to lodge, if the total payments for these deliveries or courier services are 10 per cent or more of the total annual business income.

Accountants have also been urged to identify all clients with TPAR obligations after it was reported that the ATO’s automated list of such clients — sent out to tax agents last year — may have been incomplete in some cases.

 

Source: https://www.accountantsdaily.com.au

Client Alert – March 2021

Tax implications of having more than one job

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.

Closely held payees: STP options for small employers

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.

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.

ATO data-matching: JobMaker and early access to super

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.

Super transfer balance cap increase from 1 July 2021

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.

Your Future, Your Super legislative changes

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.

Explanatory Memorandum – March 2021

Tax implications of having more than one job

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. Where your clients are working two or more jobs casually or have overlapping contract work, they may seek your assistance in avoiding an unexpected end of financial year tax debt.

This type of debt usually arises in situations where individuals with more than one job claim the tax-free threshold in relation to multiple employers, resulting in too little tax being withheld overall. To avoid that, you need to help them look carefully at how much they will be making and adjust the PAYG withheld accordingly.

Currently, the tax-free threshold is $18,200, which means that if an employee is an Australian resident for tax purposes, the first $18,200 of their yearly income is not subject to tax. This roughly equates to $350 per week, $700 a fortnight, or $1,517 per month in pay. When an employee starts a job, their employer will give them a tax file number declaration form to complete which will allow them to claim the tax-free threshold on their job income, to reduce the amount of tax withheld from their 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/payers. 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 individuals 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 payer who usually pays the highest salary or wage. The other employer/payer(s) will then be required to withhold tax from their payments at a higher rate (the “no tax-free threshold” rate).

If the total tax withheld from all an individual’s employers or payers is more than needed to meet their year-end tax liability, the withheld amounts will be credited to the individual when their income tax return is lodged, resulting in a tax refund. However, where the tax withheld does not cover the tax they need to pay, they will have a tax debt and need to make a payment to the ATO.

The only situation in which an individual could comfortably claim the tax-free threshold for more than one employer/payer is if they’re certain their total annual income from all payers will be $18,200 or less. If a person decides to claim the tax-free threshold for multiple payers but later realises that their total income will be above $18,200 for the year, they can provide one or more of their employers with a withholding declaration to stop claiming the tax-free threshold on that employer’s payments, which may help to ensure that they won’t have a large tax bill at the end of the year.

Conversely, if the income from a person’s employers/payers was originally expected be more than $18,200 for the year, but a change in circumstances (whether it be the person’s own circumstances or factors affecting their employers) means the income will in fact be less than $18,200, the employee can complete and lodge a PAYG withholding variation application to reduce the amount of tax withheld, helping to avoid them being disadvantaged by the higher withholding rates.

Closely held payees: STP options for small employers

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 commence from 1 July 2021.

For these 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). Those small employers which only have closely held employees are not required to start STP reporting until 1 July 2021, and there is no requirement to advise the ATO that a small employer 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 purposes from 1 July 2021.

Option 1: report actual payments for each pay event

Small employers can report actual payments to closely held payees through STP on or before the date of payment. In other words, whenever the small employer makes a payment to a closely held payee, they report the information on or before each pay event.

Option 2: report actual payments quarterly

Small employers can choose to report payments to any closely held payees on a quarterly basis. However, such employers must continue to report information about all of their other employees via STP on or before pay day.

This quarterly option does not change the due date for:

  • notifying and paying PAYG withholding on activity statements; or
  • making super guarantee (SG) contributions for any closely held payees.
Option 3: report a reasonable estimate quarterly

This reporting option allows small employers to report reasonable year-to-date amounts for their closely held payees quarterly. Not unexpectedly, there is more detail surrounding this option.

The ATO will remit any “failure to withhold” penalty a small employer may incur if it:

  • reports year-to-date withholding amounts and tax withheld for a closely held payee that is equal to or greater than 25% of the payee’s total gross payments and tax withheld from the previous finalised payment summary annual report (PSAR) across each quarter of the current financial year in its quarterly STP reports; and
  • reports and pays the tax withheld on time.

The ATO says it is important that small employers do not underestimate amounts reported for their closely held payees. If a review identifies that a small employer made payments to closely held payees equalling more than 25% of the entity’s total gross payments for the last financial year and did not report this through STP, the entity may:

  • be liable for super guarantee charge and have to lodge SG contribution statements (if it did not make sufficient contributions during a quarter);
  • not be able to deduct the payment for income tax; and
  • be liable for penalties and interest.
Correcting information

Quarterly reporters have until the due date of their next quarterly STP report to correct a closely held payee’s year-to-date information.

If a closely held payee will not be included in a following quarterly STP report, the small employer must either:

  • include them in its current quarterly STP report with corrected year to date amounts; or
  • lodge an Update event by the relevant due date for quarterly activity statement with the corrected year to date amount for the payee.
Finalisation declarations

Small employers with only closely held payees have up until the due date of the closely held payee’s individual income tax return to make a finalisation declaration for a closely held payee.

Small employers can make a finalisation declaration for a closely held payee at any time during the financial year (eg for closely held payees who have ceased employment). They must make a finalisation declaration for arm’s length employees by 14 July.

Source: www.ato.gov.au/Business/Single-Touch-Payroll/Concessional-reporting/Closely-held-payees/.

ATO data-matching: JobMaker and early access to super

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 (COVID-19 condition). While the data collected will mostly be used to identify compliance issues and initiate compliance activities in relation to JobMaker and early access to super, it will also be used where applicable to identify compliance issues relating to other COVID-19 economic stimulus measures including JobKeeper 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 require meeting particular eligibility conditions.

In relation to early access to super, the ATO will acquire confirmation from Services Australia (Centrelink) of government payments made to those who applied to access their super early for the period 19 April 2020 to 31 December 2020. The data acquired will include identification details including names, addresses and dates of birth, as well as transaction details including:

  • the recipients’ payment/benefit type (JobSeeker, Parenting Payment, Youth Allowance, Farm Household Allowance, etc);
  • date access granted/claim for benefit made;
  • any ceased government payments/benefits and their relevant cessation dates.

For JobMaker, the ATO will acquire data from Services Australia (Centrelink) about income support payments made to additional employees who were nominated by businesses seeking the JobMaker Hiring Credit for the period of 7 October 2020 to 6 October 2021. This is to confirm whether the additional employees satisfy the condition of having received income support payments for at least 28 consecutive days within the 84 days prior to commencing employment between 7 October 2020 to 6 October 2021. The data obtained will include:

  • identification details, including names, dates of birth and request and response transaction IDs; and
  • transaction details, including indicator of government income support payments received within the applicable period and the type of government support received (JobSeeker, Parenting Payment, Youth Allowance, etc).

To complement both programs, the ATO will also acquire details of incarcerated individuals for the period 1 March 2020 to 6 October 2021 from state and territory correctional facility regulators. The data will include basic identification details as well as dates of incarceration and expected release (if available).

This data will allow the ATO to identify identity theft and/or incorrect or misleading information included in applications for various COVID-19 economic stimulus measures including JobKeeper, JobMaker, temporary early access to super and the cash flow boost.

The ATO expects that data relating to more than three million individuals will be collected for the temporary early access to super program. It is expected that data collected for the JobMaker data-matching program will relate to around 450,000 positions, and approximately 100,000 individuals’ data will be collected from the state and territory correctional facility regulators.

While the data collected will primarily be used to undertake verification of application, registration and lodgment obligations as well as identify compliance issues and initiate compliance activities, the ATO will also use it to implement treatment strategies 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.

Source: www.ato.gov.au/General/Gen/COVID-19-economic-response-support—2019-20-to-2021-22-data-matching-program/?anchor=Dataprovidersandusers.

Super transfer balance cap increase from 1 July 2021

The superannuation general transfer balance cap is set to increase on 1 July 2021. This follows the release by the Australian Bureau of Statistics (ABS) of the All groups consumer price index (CPI) index number of 117.2 for the December 2020 quarter, which has triggered the indexation of the general transfer balance cap to $1.7 million (up from $1.6 million since 2017–2018).

General transfer balance cap

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.

At the time an individual first commences a retirement phase superannuation income stream, the individual’s “personal transfer balance cap” is set at the general transfer balance cap for that financial year. Therefore, individuals need to be aware that a decision to start their first ever retirement phase superannuation income stream before 1 July 2021 will activate a personal transfer balance cap and effectively set it at the general transfer balance cap of $1.6 million at that time. If their first income stream is started on or after 1 July 2021, their lifetime personal transfer balance cap will be set at $1.7 million instead.

The ATO says individuals can view all their transfer balance cap information via ATO online services. Before 1 July 2021, ATO online services will display a person’s highest ever balance in their transfer balance account. It will also show if the person’s personal transfer balance cap will be proportionally indexed. From July 2021, individuals will be able to see their personal transfer balance cap in ATO online services. The ATO says this will be the only place a person can see their personal transfer balance cap if they had a transfer balance account before 1 July 2021.

Proportional indexation of transfer balance cap

If an individual had a transfer balance account before 1 July 2021, but has not used the full amount of their transfer balance cap, their personal cap will be proportionally increased based on the highest ever balance of their transfer balance account. It is calculated by identifying the highest ever balance in the individual’s transfer balance account, using that to work out the unused cap percentage of their transfer balance account, and then multiplying the unused cap percentage by $100,000. If a person has already used 100% of their available cap space, their personal transfer balance cap will not be subject to further indexation on 1 July 2021.

Defined benefit income cap

The indexation of the general transfer balance cap also means that the “defined benefit income cap” will increase from $100,000 per annum to $106,250 per annum from 1 July 2021 (being the general transfer balance cap divided by 16). Certain amounts of capped defined benefit income stream payments above the defined benefit income cap for a financial year are included in the recipient’s assessable income and subject to additional income tax.

Non-concessional contributions

The “total superannuation balance” threshold for making non-concessional contributions will also increase from $1.6 million to $1.7 million from 2021–2022. This means that individuals with a total superannuation balance of $1.7 million or more on 30 June 2021 will have a non-concessional cap of nil from 1 July 2021. The total superannuation balance limit also determines if an individual is entitled to use the non-concessional bring forward arrangements. When the general transfer balance cap is indexed on 1 July 2021, individuals with a total superannuation balance of $1.7 million or more on 30 June 2021 won’t be eligible for the bring-forward arrangements from 1 July 2021.

The increase in the general transfer balance cap to $1.7 million from 1 July 2021 will also increase the total superannuation balance limit for the purposes of claiming a co-contribution or spouse contribution tax offset.

Source: www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-using-your-super/Indexation-of-Transfer-balance-cap/.

Your Future, Your Super legislative changes

The Treasury Laws Amendment (Your Future, Your Super) Bill 2021 was introduced into the House of Representatives on 17 February 2021 to implement some of the measures announced in the 2020–2021 Federal Budget. It also incorporates the Productivity Commission’s report Superannuation: Assessing Efficiency and Competitiveness.

Treasurer Josh Frydenberg states that the Bill will save $17.9 billion over 10 years by holding underperforming funds to account and strengthening protections around the retirement savings. There are three Schedules to the Bill.

Single default accounts

Schedule 1 to the Bill amends the Superannuation Guarantee (Administration) Act 1992 (SGAA) to limit the creation of multiple superannuation accounts for employees who do not choose a superannuation fund when they start a new job. It applies in relation to an employee’s employment where that employment starts on or after 1 July 2021.

Currently, if an employee does not choose a fund, their employer may comply with the “choice of fund” rules by making contributions on behalf of the employee into the employer’s chosen default fund. However, this means that changing jobs can give rise to multiple accounts. Unintended multiple accounts were identified in the Productivity Commission’s final report as a structural flaw in the system that erodes members’ balances through unnecessary fees and insurance. The same issues were identified through the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Under the amendments, an employer can comply with the choice of fund rules by making contributions to the existing “stapled” fund of an employee who:

  • started their employment on or after 1 July 2021;
  • has a stapled fund; and
  • has not chosen a fund to receive superannuation contributions.

Additionally, if an employee has a stapled fund and started their employment on or after 1 July 2021, the employer cannot comply with the choice of fund rules relating to contributions made to:

  • the default fund chosen by the employer; or
  • a fund specified under a workplace determination or an enterprise agreement.

Employers can continue to make contributions of this kind in compliance with the choice of fund rules if the employee does not already have a stapled fund. Similarly, contributions to these funds could be covered by another of the existing choice of fund rules (eg contributions to a fund specified in a workplace determination would comply with the choice of fund rules in relation to an employee who selected that fund in exercising choice).

A fund is the stapled fund for an employee at a particular time if the requirements prescribed by the regulations are met in relation to the fund at that time. These will cover:

  • basic requirements that must be satisfied for a fund to be a stapled fund, including the requirement that the fund is an existing fund of the employee;
  • tie-breaker rules for selecting a single fund where an employee has multiple existing funds; and
  • when a fund ceases to be the stapled fund for an employee.

For employees starting employment on or after 1 July 2021, an employer cannot comply with the choice of fund rule for contributions made to the employer’s chosen default fund unless:

  • the employer has requested that the ATO identify whether the employee has a stapled fund; and
  • the ATO has notified the employer that there is no stapled fund for the employee.
Addressing underperformance in superannuation

Schedule 2 amends the Superannuation Industry (Supervision) Act 1993 (SIS Act) to require the Australian Prudential Regulation Authority (APRA) to conduct an annual performance test for MySuper products and other products to be specified in regulations. A trustee providing such products will be required to give notice to its beneficiaries who hold a product that has failed the performance test. Where a product fails the performance test in two consecutive years, the trustee is prohibited from accepting new beneficiaries into that product. APRA may lift the prohibition if circumstances specified in the regulations are satisfied.

The amendments made by Sch 2 apply in relation to MySuper products on and after 1 July 2021 and apply in relation to other products specified in the regulations on and after 1 July 2022.

Specifically, the Bill inserts a new Pt 6A into the SIS Act, which will provide that:

  • APRA must conduct an annual performance test, each financial year, on “Part 6A products”;
  • APRA must notify trustees of the superannuation products of the results of the annual performance test;
  • trustees of superannuation products that fail the annual performance test must notify beneficiaries who hold the product that it has failed the annual performance test; and
  • trustees of superannuation products that fail the annual performance test in two consecutive years are prohibited from accepting new beneficiaries into the superannuation product, unless APRA lifts the prohibition (if circumstances specified in the regulations are satisfied).

The Schedule inserts a definition of “Part 6A product”; that is, a MySuper product or a class of beneficial interest in a regulated superannuation fund, if that class is identified by regulations. For example, this could include “trustee directed products”, where the trustee has control over the design and implementation of the investment strategy.

Best financial interests duty

Schedule 3 contains a number of important changes, which apply from 1 July 2021. It amends the SIS Act to:

  • require each trustee of a registrable superannuation entity and each trustee of a self managed superannuation fund (SMSF) to perform the trustee’s duties and exercise the trustee’s powers in the best financial interests of the beneficiaries;
  • require each director of the corporate trustee of a registrable superannuation entity to perform the director’s duties and exercise the director’s powers in the best financial interests of the beneficiaries;
  • allow regulations to be made that prescribe additional requirements on trustees and directors of trustee companies of registrable superannuation entities where failure to comply with these additional requirements would be a contravention of the best financial interests duty;
  • allow regulations to be made to specify that certain payments made by trustees of registrable superannuation entities are prohibited, or prohibited unless certain conditions are met (regardless of whether the payment is considered by a trustee to be in the best financial interests of the beneficiaries);
  • reverse the evidential burden of proof for the best financial interests duty so that the onus is on the trustee of a registrable superannuation entity. The reverse onus does not apply to additional best financial interest duty requirements prescribed by regulations; and
  • allow contraventions of record keeping obligations specified in regulations to be subject to a strict liability offence to provide regulators with an additional option to respond to compliance issues relating to record-keeping requirements.

Schedule 3 also amends the Corporations Act 2001 to remove an exemption from disclosing information about certain investments under the “portfolio holdings disclosure” rules.

Source: https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr6672%22.