Explanatory Memorandum – October 2021

Federal COVID-19 support developments

Additional financial support for child care providers

On 23 August the Prime Minister and the Minister for Education and Youth issued a joint media release announcing new support measures for child care providers impacted by extended COVID-19 lockdowns.

Child care services in Commonwealth-declared hotspots will be eligible for new fortnightly payments of 25% of their pre-lockdown revenue, while outside school hours care (OSHC) services will be eligible for fortnightly payments of 40% of pre-lockdown revenue.

This measure will apply to services seven days after the hotspot is declared, where state and territory governments have directed families to keep their children at home. Where children are still allowed to attend child care, the supports will kick in four weeks after the hotspot declaration.

The new payments will immediately benefit child care services in affected areas of Sydney and the ACT and OSHC services in metropolitan Melbourne. All other services in metropolitan Melbourne, regional Victoria and regional NSW will become eligible after seven days of lockdown, with payments to be backdated to 23 August 2021.

The supports will also be available for services who meet the criteria in any future extended lockdowns. The measure is in addition to the existing Commonwealth supports – including gap fee waivers, which allow the Commonwealth Child Care Subsidy to continue even when children are not attending a child care service.

Payments will be contingent on providers:

  • expecting attendance below 50%;
  • waiving gap fees for all families whose children are not attending;
  • maintaining staffing levels;
  • agreeing to a fee freeze for the duration of support; and
  • not accessing other Commonwealth Government funded supports.

Payments are made available directly to providers. Families in affected areas are not required to do anything.

Source: www.pm.gov.au/media/targeted-assistance-child-care-services-during-covid-lockdown.

Non-assessable non-exempt income status of New South Wales and Victorian programs

The Federal Treasurer has issued the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 2) 2021.

Its effect is to declare certain grant programs administered by NSW and Victoria as “eligible grant programs”. This means that a payment received by an entity from a specified program is non-assessable non-exempt (NANE) income.

For those who have an interest in these things, the Treasury Laws Amendment (2020 Measures No 5) Act 2020 inserted s 59-97 into the Income Tax Act 1997 (ITAA 1997) to give the eligible Minister power to declare certain grant programs as eligible for NANE treatment. Following that, a legislative determination in 2020 set out which programs were eligible for NANE treatment in the 2019–2020 year.

Earlier this year, the Treasury Laws Amendment (COVID-19 Economic Response) Act 2021 extended the tax-free status of state recovery grants to the 2021–2022 year (because s 57-97(1)(c) of ITAA 1997 only otherwise applied to grants received in 2020–2021).

Accordingly, it should be noted that the latest Declaration does not create anything new, but rather extends the status quo to the current income year (and applies it to programs that may not have earlier existed).

New South Wales

The following NSW programs now qualify as eligible grant programs, meaning payments received under them are NANE income:

  • the 2021 COVID-19 business grant;
  • the 2021 COVID-19 JobSaver payment;
  • the 2021 COVID-19 micro-business grant; and
  • the NSW Performing Arts COVID Support Package.
Victoria

The following Victorian programs now qualify as eligible grant programs, meaning payments received under them are NANE income:

  • the Alpine Resorts Support Program (Streams 1, 2 and 3);
  • the Business Continuity Fund;
  • the Business Costs Assistance Program Round Two – July Extension;
  • the Licenced Hospitality Venue Fund 2021 – July Extension; and
  • the Small Business COVID Hardship Fund.

As a reminder, the first Determination, the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 1) 2021, listed the following Victorian grants as declared eligible grant programs:

  • the Alpine Support Program;
  • the Business Costs Assistance Program Round Two;
  • the Impacted Public Events Support Program;
  • the Independent Cinema Support Program;
  • the Licensed Hospitality Venue Fund 2021;
  • the Live Performance Support Program; and
  • the Sustainable Event Business Program.

Source: www.legislation.gov.au/Details/F2021L01178.

State and territory COVID-19 support developments

Australian Capital Territory: support extended and expanded

The Federal Treasurer and the ACT Chief Minister have issued a joint media release announcing expanded and additional support for businesses affected by COVID-19 lockdowns. The support takes the form of two tranches.

COVID-19 Business Support Grants

The two governments had already agreed to jointly fund ACT “COVID-19 Business Support Grants”, which take the form of one-off grants of up to $20,000 for employing businesses and $7,500 for non-employing businesses where those businesses’ turnover has declined by 30% or more as a result of the COVID-19 health restrictions.

There will be an additional ACT “COVID-19 Business Grant Extension” payment of $10,000 for all employing businesses and $3,750 for non-employing businesses, to be paid to all businesses who were eligible for the COVID-19 Business Support Grant in industries that are “still significantly impacted by the health restrictions”.

Additional one-off top-up payments will also be made for larger businesses at the following rates:

  • $10,000 for employing businesses with a turnover greater than $2 million and less than $5 million;
  • $20,000 for employing businesses with a turnover greater than $5 million and less than $10 million; and
  • $30,000 for employing businesses with a turnover greater than $10 million.

Both governments have agreed to discuss any additional extensions under the COVID-19 Business Support Grant program on 1 October.

COVID-19 Tourism, Accommodation Provider, Arts and Events and Hospitality Grants

Further one-off grants to businesses in the tourism, accommodation provider, arts and events and hospitality industries will be provided at the following rates:

  • $1,000 for non-employing businesses;
  • $3,000 for employing businesses with turnover less than $2 million;
  • $10,000 for employing businesses with turnover greater than $2 million and less than $5 million; and
  • $20,000 for employing businesses with turnover greater than $5 million.

The eligibility criteria will match the eligibility criteria for the COVID-19 Business Support Grant.

Details are still being finalised. These payments will not be administered until October, pending an assessment of the COVID-19 Business Support Grants. Approximately 2,000 businesses could be eligible for this additional one-off grant.

Businesses can find further information and apply for the grants on the ACT Government’s website.

Source: www.act.gov.au/business/business-support/covid-19-economic-support-for-business

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/further-support-act-businesses-impacted-covid-19

Queensland: support for New South Wales border businesses

The Federal Treasurer and the Queensland Premier have issued a joint media release outlining details of business support packages aimed at businesses on the NSW and Queensland border affected by the COVID-19 economic downturn.

The $52.8 million emergency support package is stated to help Queensland businesses suffering due to the border restrictions between the two states and to provide targeted support to tourism and hospitality businesses facing significant hardship.

The joint Federal–State package includes:

  • $40 million for the “Tourism and Hospitality Sector Hardship Program” to deliver one-off grants of $15,000, $25,000 and $50,000 for small, medium and large employing businesses across Queensland that have experienced a reduction in turnover of at least 70% for at least seven consecutive days between 1 July and 30 September;
  • $6.3 million to extend the existing “COVID-19 Business Support Grants” program; and
  • $6.5 million to provide one-off “Hardship Scheme” grants of $5,000 for employing businesses and $1,000 for non-employing sole traders to recipients of the “COVID-19 Business Support Grants” in the border zone in the event of an extended border closure.

The state-funded elements include:

  • up to $1 million to match City of the Gold Coast Council and Destination Gold Coast’s “Play Money” campaign, encouraging Gold Coasters to patronise border businesses;
  • $50,000 support for marketing campaigns in Coolangatta; and
  • $700,000 for additional mental health support for business owners and their families in the border zone.

These special hardship grants will be available from mid-October 2021. Further details are available on the Queensland Business webpage.

Source: www.business.qld.gov.au/

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/queensland-businesses-new-south-wales-border-benefit

South Australia: support for tourism and hospitality industries; hardship grants

The Federal Treasurer and the SA Premier have issued a joint media release outlining details of business support packages aimed at SA businesses affected by the COVID-19 economic downturn.

As seems to be the case with these announcements, this package involves a tinkering of already announced measures mixed in with some new measures.

The programs will deliver support to an estimated 3,500 local businesses and will be administered by the SA state government. The SA Treasury website has a useful tabular summary of grants, but also sets out other business support measures (eg land tax, payroll tax) which have been implemented during the pandemic.

The “COVID-19 Tourism and Hospitality Support Grant” is aimed at businesses in eligible tourism and hospitality sectors (and other sectors such as performing arts, creative artists, taxis and car rental) that have already received the “COVID-19 Additional Business Support Grant”, as follows:

  • a grant of $3,000 for employing businesses with turnover less than $2 million;
  • a grant of $10,000 for employing businesses with turnover of greater than $2 million;
  • a grant of $20,000 for employing businesses with turnover of greater than $5 million; and a grant of $1,000 for non-employing businesses.

There is also a new “COVID-19 Business Hardship Grant” of $6,000 for employing businesses with annual payrolls below $10 million and $2,000 for non-employing businesses that have experienced a minimum 50% reduction in turnover over the eligible period and haven’t been eligible for previous business grant support since July 2021.

In addition, the SA government is increasing its state-funded “Major Events Support Grant”, to provide grants of up to $100,000 for large cancelled or postponed events where attendee numbers at the event were expected to be greater than 10,000, in recognition of the significant costs incurred with large events. Eligible events that have already applied for the $25,000 grant will now receive a top-up of up to a further $75,000, bringing total assistance to $100,000.

Source: www.treasury.sa.gov.au/Growing-South-Australia/COVID-19

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/further-support-south-australian-small-businesses

Tasmania: support increased

The Federal Treasurer and the Premier of Tasmania have issued a joint media release outlining details of an expanded business support package aimed at operators impacted by border closures.

The existing Business Support Package will be boosted from $20 million to $50 million, with grants of up to $50,000 to be available to eligible businesses across two funding rounds.

In addition, the Tasmanian government will provide support including:

  • payroll tax relief for tourism and hospitality industry businesses where there has been a 30% reduction in turnover in the September 2021 quarter;
  • waiving vehicle registration and passenger transport accreditation fees for vehicles including taxis, luxury hire cars, tour operator buses and rental car operators for renewal notices received between 1 July and 31 December 2021; and
  • waiving the license fees payable to Parks & Wildlife, which removes a significant burden for tourism businesses operating within Tasmania’s parks.

Full details about the program can be accessed on the Business Tasmania website, and eligible businesses can apply immediately.

Source: www.business.tas.gov.au/home

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/supercharge-business-support-package-way-tasmanian

Victoria: Commercial Tenancy Relief Scheme

The Victorian Premier has announced that new regulations have been made to provide relief for commercial tenants struggling with rent payments.

The Commercial Tenancy Relief Scheme was implemented via the Commercial Tenancy Relief Scheme Act 2021, which received assent on 10 August 2021. The Act came into operation on 10 August 2021 but will sunset on 30 April 2022 (with the Regulations remaining in force until 30 October 2022).

The scheme is designed to assist small and medium-sized businesses with an annual turnover of less than $50 million that have experienced a loss in turnover of more than 30% during the pandemic. Eligibility for rent relief has been broadened, with tenants now able to choose three consecutive months between 1 April and 30 September 2021 to compare to their turnover in the same three months in 2019.

Businesses will get financial relief in the form of a proportionate reduction in rent. For example, a business with a turnover of 40% of pre-pandemic levels can only be charged 40% of its rent. Of the balance, at least half must be waived, with the remainder to be deferred.

As part of the scheme, the Victorian Small Business Commission will provide information so that landlords and tenants can negotiate an agreement, and free mediation for those who need assistance.

New businesses are also protected under the scheme, with any business which has opened since April 2019 eligible for assistance.

The scheme will apply retrospectively from 28 July 2021 and will run until 15 January 2022.

To help landlords that are doing the right thing by eligible tenants, the Victorian government will provide land tax relief of up to 25%, in addition to any previous relief, with the support worth up to $100 million.

Small landlords who can demonstrate acute hardship will be eligible to apply for payments as part of a $20 million hardship fund.

More details can be found on the VSBC website.

Source: www.vsbc.vic.gov.au

Western Australia: assistance grants for tourism businesses

The Federal Treasurer and the WA Premier (among others) have issued a joint press release announcing that WA tourism businesses impacted by COVID-19 will soon be able to apply for funding support under a new joint Commonwealth–state program.

It is anticipated about 3,500 businesses will be eligible for grants of up to $10,000 under the program – including tourism operators, accommodation providers and travel agents.

To be eligible for support, applicants must demonstrate at least a 30% reduction in turnover (by comparing the period 15 May to 25 June with 10 July to 20 August). The following funding amounts will be made available to eligible businesses:

  • $2,000 grant for all sole traders and for employing businesses with an annual turnover between $50,000 and $100,000;
  • $5,000 grant for employing businesses with an annual turnover between $100,000 and $1 million; and
  • $10,000 grant for employing businesses with an annual turnover between $1 million and $10 million.

In order to be eligible, a business must be:

  • registered with Tourism WA as a previous grant recipient or as part of the agency’s marketing campaigns in 2020 or 2021;
  • a member of, or accredited through, a relevant tourism organisation; or
  • a travel agent that has been offering domestic product to travellers.

More information should be available on the WA COVID-19 coronavirus: support for business website.

Source: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/assistance-grants-wa-tourism-businesses-impacted

www.wa.gov.au/organisation/department-of-the-premier-and-cabinet/covid-19-coronavirus-support-business

https://treasury.gov.au/

Closing a business? Don’t forget the GST registration

If the current prolonged lockdowns and economic conditions have prompted your clients to sell or close their business, it’s important they are aware of the need to cancel the related GST registration within a certain period, unless the business is in a specific industry or performs a specific role.

Typically, unless the business is taxi driving/ride-sourcing, you represent an incapacitate entity (ie an individual who is bankrupt or a company in liquidation and that entity is registered for GST), or you are an Australian resident who acts as an agent for a non-resident that is registered (or required to be registered) for GST, you must cancel your GST registration within 21 days if you sell or close your business.

Remember, cancelling a GST registration will also cancel other registrations such as fuel tax credits, luxury car tax and wine equalisation tax, even if the ABN is not cancelled. If you’re registered for PAYG, PAYG instalments or have FBT obligations, you will need to keep lodging business activity statements (BASs) even if you cancel your GST registration.

While you can usually cancel your GST registration from a date that you choose (which should be the last day you want your previous business to be registered), you cannot cancel the registration retrospectively if you were still operating on a GST-registered basis after the date you chose.

Similarly, if you choose a cancellation date and then continue to operate on a GST-registered basis, you will not be able to cancel the registration.

When you cancel your business’s GST registration, you’ll be required to lodge any outstanding BASs and complete a final GST activity statement which should include all sales, purchases and importations made in the final tax period. This should include the sale of the business, sale of any of business assets, adjustments for any assets held after cancellation, and/or any other adjustments. For taxpayers operating on a cash basis, all the sales and purchases that still need to be attributed from a previous tax period will need to be recorded.

For taxpayers who are cancelling their GST registration because the business has been restructured, sold or closed, the associated ABN must also be cancelled. However, if a company was not restructured, sold or closed, but simply no longer carries on a business, then there is a choice for the business owner to keep the ABN registration. Nevertheless, the GST registration must be cancelled in those circumstances.

Overseas businesses that have been hit by lockdowns in various states may have seen their taxable supplies drop below the GST turnover threshold (ie $75,000) – in those instances, cancellation of GST registration or associated ABNs need to be carefully considered, as the business may still have Australian income tax obligations. This also applies if overseas businesses’ taxable supplies fall below the GST threshold due to not being connected to the Australian Indirect Tax Zone.

New stapled super changes coming for employers

Employers get ready – there’ll soon be an extra step involved when it comes to hiring new employees. From 1 November 2021, employers will need to determine if a new employee has a “stapled” fund and request such details from the ATO in the event that the new employee has not chosen a super fund. A stapled super fund is essentially an existing super account that is linked – or “stapled” – to an individual and follows them throughout their job changes. The change aims to reduce unnecessary account fees for super members by avoiding having a new super account opened every time an employee starts a new job.

Currently, when a new employee starts a new job they are eligible to choose the super fund that their super guarantee contributions will go to. If they do not choose their own fund, the super contributions will be paid into the employer’s default fund.

With the recent passing of legislation to make it easier for employees to take their existing super funds with them when they move jobs, from 1 November if a new employee doesn’t choose a super fund, employers may be required to request their “stapled super fund” details from the ATO. A stapled super fund is essentially an existing super account which is linked or “stapled” to an individual and follows them throughout their job changes.

To ensure you’re ready for this change, your business should check ATO online services to confirm that you have the requisite access levels. If your business does not have full access in ATO online services, you’ll need to have the “Employee Commencement Form” permission in order to request a stapled fund.

From 1 November, you will still need to offer your eligible employees a choice of super fund and pay their super into the account they nominate – that part of your obligations doesn’t change. However, if your employee doesn’t choose a super fund, you will need to request the stapled fund details from the ATO. In most cases, a request can be made after you’ve submitted a TFN declaration or a Single Touch Payroll (STP) pay event linking the new employee to your business. There is no limit to the number of requests you are able to make.

Responses will usually be received through the online portal in minutes. The ATO will also notify the associated employee of the stapled fund request and the fund details provided. If the resulting stapled fund cannot accept new contributions from the employee for some reason, the employer will need to make another request for the employee’s stapled super fund through the online portal.

In the event that this new request returns the same stapled super fund, the employer will be required to call the ATO to obtain an alternative stapled super fund account. At the same time, the ATO will be able to advise whether contributions can be made to a default fund or another fund that meets the “choice of fund” rules in that situation.

Businesses that have over 100 new employees starting can make a bulk stapled fund request to the ATO. Bulk requests will need to be in a particular format and can be made through the secure mail function within online services for businesses. Once the file is processed, a response will be sent through the secure mail function, and can take up to five business days.

Remember, a business/an employer cannot provide recommendations or advice about super to its employees, unless the business/employer is licensed by the Australian Securities and Investments Commission (ASIC) to provide financial advice. Further, if businesses/employers fail to meet the choice of super fund obligations, penalties may apply.

MySuper performance test results and new super comparison tool

This year marks the beginning of annual performance tests on MySuper products, run by the Australian Prudential Regulation Authority (APRA). The requirement was introduced as part of the Federal government’s Your Future, Your Super reforms, and aims to hold super funds to account for underperformance and enhance industry transparency. The first annual test of 76 (out of 80) MySuper products from various super funds or registrable superannuation entities (RSEs) found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make the improvements needed to ensure they pass next year’s test.

Other changes introduced as part of Your Future, Your Super include access to a new interactive online super comparison tool, YourSuper, hosted by the ATO.

APRA notes that there are around 80 MySuper products from various super funds or RSEs in the Australian market. It assessed 76 out of the total 80 products with at least five years of performance history against an objective benchmark, and found that 13 products failed to meet the benchmark.

“It is welcome news that more than 84 per cent of products passed the performance test”, said APRA Executive Board Member Margret Cole, “however, APRA remains concerned about those members in products that failed … Trustees of the 13 products that failed the test now face an important choice: they can urgently make the improvements needed to ensure they pass next year’s test or start planning to transfer their members to a fund that can deliver better outcomes for them.”

Trustees of failed products are required to write to members by 27 September 2021 advising them of their performance test outcome and providing details of the ATO’s YourSuper comparison tool. If the product fails the performance test in two consecutive years, the RSE licensee will be prohibited from accepting new beneficiaries into that product.

The YourSuper comparison tool – available on the ATO website and via your MyGov account – allows users to display a table of MySuper products ranked by fees and net returns (updated quarterly), as well as compare up to four MySuper products at a time in more detail. When comparing products, the investment performance is listed in an easy-to-understand form. A “Performing” result indicates that the product has met or exceeded the performance test benchmark. “Underperforming” means the product has not met the benchmark and “Not assessed” means the product has had less than five years of performance history, so has not yet been rated by APRA.

The data used by APRA for the performance test includes:

  • net investment return;
  • strategic asset allocation;
  • total investments;
  • administration fees;
  • indirect cost ratio and administration costs;
  • administration-related tax expense/benefit;
  • advice fees;
  • indirect cost ratio advice costs; and
  • advice-related tax expense/benefit.

The performance test itself has two parts. It involves the assessment of investment performance relative to a benchmark portfolio created using the product’s strategic asset allocation, and an assessment of administration fees charged in the last financial year relative to the median fee charged for the category of product. If the product underperforms the combined test by more than 0.5%, the product is deemed to have failed the test.

Remember, the results of performance tests conducted by APRA only relate to MySuper products, which are basic super accounts without unnecessary features and fees. RSEs usually offer multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund (RSE) on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the fund you’re in has failed the performance test, it may be time to investigate the reasons why or switch to a different product.

Source: www.ato.gov.au/Calculators-and-tools/YourSuper-comparison-tool

www.apra.gov.au/news-and-publications/apra-releases-inaugural-your-future-your-super-performance-test-results

Client Alert – October 2021

Federal COVID-19 support developments

Additional financial support for child care providers

The Prime Minister and the Minister for Education and Youth recently announced new support measures for child care providers that are impacted by extended COVID-19 lockdowns.

Child care services in Commonwealth-declared hotspots will be eligible for new fortnightly payments of 25% of their pre-lockdown revenue, and outside school hours care (OSHC) services will be eligible for fortnightly payments of 40% of pre-lockdown revenue.

This measure will apply to services seven days after the hotspot is declared, where state and territory governments have directed families to keep their children at home. Where children are still allowed to attend child care, the supports will kick in four weeks after the hotspot declaration.

The new payments will immediately benefit services in affected areas of Sydney, the ACT and Melbourne. Other services will become eligible after seven days of lockdown, with payments backdated to 23 August. The support will then be available for services that meet the criteria in any future extended lockdowns.

Payments are made available directly to providers. Families in affected areas are not required to do anything.

State and territory COVID-19 support developments

Australian Capital Territory

Expanded and additional support will be available for businesses affected by COVID-19 lockdowns, in the form of two grant programs:

  • COVID-19 Business Support Grants: An additional COVID-19 Business Grant Extension payment of $10,000 for employing businesses and $3,750 for non-employing businesses will be available to businesses eligible for the existing Business Support Grants and in industries “still significantly impacted by the health restrictions”.
  • COVID-19 Tourism, Accommodation Provider, Arts and Events and Hospitality Grants: Further one-off grants will be available in October to eligible businesses in the tourism, accommodation provider, arts and events and hospitality industries.
Queensland

Federal and state funded emergency support packages worth $52.8 million will be available to assist Queensland businesses suffering due to the NSW–Queensland border restrictions, and to provide targeted support to tourism and hospitality businesses facing significant hardship. These special hardship grants will be available from mid-October.

South Australia

The COVID-19 Tourism and Hospitality Support Grant will be available for businesses in eligible tourism and hospitality sectors, and other sectors such as performing arts, creative artists, taxis and car rental, that have already received the COVID-19 Additional Business Support Grant.

There is also a new COVID-19 Business Hardship Grant for certain employing businesses that haven’t been eligible for previous business grant support since July 2021.

In addition, the SA government is increasing its Major Events Support Grant, to provide up to $100,000 for large cancelled or postponed events where more than 10,000 attendees were expected.

Tasmania

The existing Business Support Package will be boosted from $20 million to $50 million, with grants of up to $50,000 available to eligible businesses across two funding rounds.

In addition, the Tasmanian government will offer eligible tourism and hospitality industry businesses payroll tax relief, waived vehicle registration and passenger transport accreditation fees and waived Parks & Wildlife license fees. Businesses can apply immediately.

Victoria

New regulations have been made to provide relief under the Commercial Tenancy Relief Scheme for small and medium-sized commercial tenants struggling with rent payments. Eligibility has been broadened, and businesses will get relief in the form of a rent reduction proportionate to the amount of turnover lost due to COVID-19.

The Victorian Small Business Commission will provide information so that landlords and tenants can negotiate an agreement, and free mediation for those who need assistance.

Land tax relief will be available to help landlords that are doing the right thing by eligible tenants, and eligible small landlords can apply for payments from a $20 million hardship fund.

Western Australia

WA tourism businesses impacted by COVID-19 will soon be able to apply for funding support under a new joint Commonwealth–State program. About 3,500 businesses will be eligible for grants of up to $10,000, including tourism operators, accommodation providers and travel agents.

Closing a business? Don’t forget the GST registration

If the current prolonged lockdowns and economic conditions have prompted you to sell or close your business, it’s important to be aware of the need to cancel the related GST registration within a certain period, unless your business is in a specific industry or performs a specific role.

Cancelling a GST registration will also cancel other registrations such as fuel tax credits, luxury car tax and wine equalisation tax, even if the ABN is not cancelled. If you’re registered for PAYG, PAYG instalments or have FBT obligations, you will need to keep lodging business activity statements (BASs) even if you cancel your GST registration.

While you can usually cancel your GST registration from a date you choose (which should be the last day you want your previous business to be registered), you cannot cancel the registration retrospectively if you were still operating on a GST-registered basis after that date. Similarly, if you choose a cancellation date and then continue to operate on a GST-registered basis, you will not be able to cancel the registration.

When you cancel your business’s GST registration, you’ll need to lodge any outstanding BASs and complete a final GST activity statement which should include all sales, purchases and importations made in the final tax period. This should include the sale of the business, sale of any of business assets, adjustments for any assets held after cancellation, and/or any other adjustments. If you operate on a cash basis, all the sales and purchases that still need to be attributed from a previous tax period must be recorded.

If you’re cancelling a GST registration because the business has been restructured, sold or closed, the associated ABN must also be cancelled. If a company was not restructured, sold or closed, but simply no longer carries on a business, the GST registration must still be cancelled but there’s a choice to keep the ABN registration active.

New stapled super changes coming for employers

Employers get ready – there’ll soon be an extra step involved when it comes to hiring new employees. From 1 November 2021, employers will need to determine if a new employee has a “stapled” super fund and request the details from the ATO where a new employee has not nominated a super fund.

A stapled super fund is essentially an existing super account that is linked – or “stapled” – to an individual and follows them throughout their job changes.

Currently, when a new employee starts a new job they are eligible to choose the super fund that their super guarantee contributions will go to. If they do not choose their own fund, the super contributions will be paid into the employer’s default fund. The stapling change aims to reduce unnecessary account fees by avoiding having a new super account opened every time a person starts a new job.

To ensure you’re ready for this change, check ATO online services to confirm that your business has the required access levels. You’ll need to have the “Employee Commencement Form” permission in order to request a stapled fund.

After 1 November you’ll still need to offer your eligible employees a choice of super fund and pay their super into the account they nominate – that part of your obligations doesn’t change. However, if your employee doesn’t choose a fund, you’ll need to request the stapled fund details from the ATO. In most cases, a request can be made after you’ve submitted a TFN declaration or a Single Touch Payroll (STP) pay event linking the new employee to your business.

Responses will usually be received through the online portal in minutes. The ATO will also notify the associated employee of the stapled fund request and the fund details provided.

Remember, an employer cannot provide recommendations or advice about super to its employees, unless the business is licensed by the Australian Securities and Investments Commission (ASIC) to provide financial advice. Penalties may apply if your business fails to meet the “choice of super fund” obligations.

MySuper performance test results and new super comparison tool

This year marks the beginning of annual performance tests on MySuper products, run by the Australian Prudential Regulation Authority (APRA). The tests were introduced as part of the Federal government’s Your Future, Your Super reforms, aiming to hold super funds to account for underperformance and enhance industry transparency. The first annual test of 76 MySuper products from various super funds or registrable superannuation entities found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make the improvements needed to ensure they pass next year’s test.

A new interactive online super comparison tool, YourSuper, is also now available on the ATO website and via MyGov. It displays a table of MySuper products ranked by fees and net returns (updated quarterly), and you can compare up to four MySuper products at a time in more detail.

The performance tests conducted by APRA only relate to MySuper products, which are basic super accounts without unnecessary features and fees. Registrable superannuation entities usually offer multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the fund you’re in has failed the APRA performance test, it may be time to investigate the reasons why or switch to a different product.

The ATO is targeting side hustlers: Here’s what you need to know

This is an interesting article for those of you who have started a side business.

Starting a side business can open a path towards financial freedom, but that opportunity comes with the risk of falling afoul of the Australian Taxation Office.

Director of tax communications at H&R Block Mark Chapman said that starting a side business comes with tax obligations that have to be met.

The first tip offered when it comes to side businesses is to remember that every extra dollar your business earns will count against your annual taxable income.

Even if you get paid in cash, you’ll need to declare that additional income. Not doing so comes with significant risks, so it’s much better to err on the side of caution.

If the annual turnover of your business is greater than $75,000, you’ll also have to register your small business for GST and apply that tax to transactions. Having to do adopt this extra tax obligation can sometimes work in your favor.

The GST you pay on your purchases or expenses can be offset against the GST you owe; only the net figure is paid to the taxman.

Keeping track of just how much extra income you need to declare can be messy.

Investing in professional bookkeeping software can help alleviate this.

There are plenty of accounting software packages out there that can help you stay on top of your figures.

Having the right records in place is also an important step when it comes to deductions.

Handling this aspect of the tax system correctly can usually be time-consuming, but it’s usually worth the trouble. The total extra income of your side business is going to be dependent not just on the amount earned, but also the amount of deductions made.

Be sure to claim all business expenses whether that’s the cost of buying stock, heating your office or any of the many other expenses you might incur.

Additionally, a common pitfall for new business owners is failing to put aside money to pay their taxes.

Proactive management of your cash flow to set money aside for future tax bills is necessary.

If your customers are slow to pay your invoices, you’ll struggle to pay your debts and you definitely don’t want to be in debt to the ATO.

 

Source: https://www.nestegg.com.au/earn-money/tax-refund 

Explanatory Memorandum – September 2021

Single Touch Payroll update

Phase 2 coming soon

The ATO is expanding the information that businesses send through Single Touch Payroll (STP). From 1 January 2022, most employers will be required to send additional information such as the commencement date of employment and cessation date of employment for employees, their reasons for leaving employment and work type (eg full-time, part-time). The basic information about salary and wages and super liability information in Phase 1 of the STP rollout will also be further drilled down in Phase 2, moving away from just reporting the gross amounts.

STP was originally introduced in 2016 as a way for employers to report their employees’ tax and super information to the ATO in real time. Most employers, regardless of the number of their employees, were required to start reporting from 1 July 2021 – this included small employers with closely held/related payees. However, employers with a withholding payer number (WPN) have until 1 July 2022 to start reporting payments through STP.

In Phase 1, the information sent to the ATO through STP included basic salaries and wages, PAYG withholding and super liability information. The amount of information sent to the ATO is being expanded in Phase 2, which has a mandatory starting date of 1 January 2022. From that date, each employee included in the STP report will need to have either a TFN or an ABN attached, as well as an employment commencement date.

Additional information will also need to be provided on the employment basis of employees according to their work type. Types include, for example, full-time, part-time, casual, labour hire, voluntary agreement (ie a contractor to bring work payments into the PAYG withholding system), death beneficiary or non-employee (ie a contractor who is included for voluntary reporting of super liabilities only).

According to the ATO, the Phase 2 report will also include a six-character tax treatment code for each employee. The code will be automatically generated by the STP software and is an abbreviated way of outlining the factors that can influence amounts withheld from payments. For example, it’ll let the ATO know whether they are regular employees that have the tax-free threshold applied or not. It will also let the ATO know if they are in special categories of employee, such as actors, horticulturists/shearers, working holiday makers, seasonal workers, foreign residents or seniors.

The basic information about salary and wages and super liability information will also be further drilled down. Instead of reporting the gross amount, employers will need to report the following separately:

  • gross salary and wages;
  • paid leave – including annual, long service, personal/carer, rostered days off (RDOs), study leave, compassionate leave, family and domestic leave, paid parental leave, workers’ compensation, ancillary and defence leave, and cash-out of leave in service;
  • allowances – including cents-per-kilometre, award transport payments, laundry, overtime meal allowance, domestic or overseas travel, tool allowances, qualification and certification allowances, task allowances and other allowances;
  • overtime – including on-call, stand-by or availability allowances, call-back payments, excess travel etc;
  • bonuses and commissions;
  • directors’ fees – including remuneration paid to both working and non-working directors;
  • lump sum W – return to work payment; and
  • salary sacrifice – including reporting pre-sacrifice amounts as well as separate reporting of salary sacrifice.

While most of this increase in information will be automatically taken care of in most employers’ software solutions, the increased stratification of reporting requires more attention to be paid to payroll to ensure all the information entered into the system is correct.

Closely held employees reporting exemption through STP

The ATO registered legislative instrument Taxation Administration – Single Touch Payroll – 2019-20 and 2020-21 Income Years Closely Held Payees Exemption 2021 on 28 July 2021. This instrument exempts certain entities from the requirement to report through STP on payments made to closely held payees. The exemption applies in the 2019–2020 and 2020–2021 income years, and the instrument is taken to have commenced on 1 July 2019. It had earlier been issued in draft form.

Small employers with closely held payees have already been exempt from reporting these payees through STP for the 2019–2020 and 2020–2021 financial years via ATO administration, and this is what the instrument now formally implements.

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.

The ATO offers the following three options for reporting payments made to closely held payees 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 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 payday.

This quarterly option does not change the due date for:

  • notifying and paying PAYG withholding on activity statements;
  • making super guarantee 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;
  • report and pay the tax withheld on time.

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

  • be liable for super guarantee charge (SGC) and have to lodge SGC 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.

Tax time 2021: rental property pitfalls

This tax time, the ATO is again closely monitoring claims in relation to rental properties. As with previous years, it’s on the lookout for rental property owners who do not declare all their income and capital gains from selling property. Other areas of concern include claims for interest charges on personal loans, and deductions for capital works.

The ATO has data-matching programs in place that collect detailed information about properties and owners for income years all the way from 2018–2019 to the 2022–2023. These programs expand the rental income data collected directly from third-party sources, including sharing economy platforms, rental bond authorities and property managers.

“People should remember that there’s no such thing as free real estate when it comes to their tax returns”, Assistant Commissioner Tim Loh has said. “Our data analytics scrutinise returns for rental deductions that seem unusually high. We will ask questions, and this may lead to a delay in processing your return.”

According to the ATO, in the 2019–2020 financial year over 1.8 million taxpayers owned rental properties and claimed $38 billion in deductions. While the ATO acknowledges that most taxpayers do the right thing and are able to justify their claims, it notes that over 70% of the 2019–2020 returns selected for review of rental information have subsequently had adjustments made.

The most common mistake that rental property owners and holiday homeowners make is not declaring all their income and capital gains from selling the property. This shortfall will obviously be tackled with information obtained from data-matching programs, but also sophisticated data analytics which will single out tax returns with unusually high rental deductions.

Another area of concern this tax time includes claims for interest charges on personal loans. For example, if you take out a loan to buy a rental property and rent it out at market rates, the interest on the loan is deductible. However, if you redraw money from that mortgage for personal use (eg to buy a car, pay off the mortgage of the house you’re living in etc), then you cannot claim interest on that part of the loan.

Taxpayers should also be careful when claiming deductions for capital works. While the cost of repairs for wear and tear to the property are immediately deductible if they’re replacing or fixing an existing item (eg a broken toilet or showerhead), the cost of upgrading the property or areas of the property (eg a kitchen or bathroom renovation) would be considered capital works and any deduction needs to be spread over a number of years.

For short-term stay property owners who have been affected by COVID-19 and travel restrictions, the ATO notes that if your plans to rent out the property in 2020–2021 were the same as in previous years, you will be able to claim the same proportion of expenses, although taxpayers can only do this if the property was not used privately. For example, if you, your family members, or friends have stayed at the property for free or at a reduced rate, you will not be able to claim some or all of the expenses relating to that period.

Rental property owners who have provided rental concessions to their tenants in the form of either reduced or deferred rent due to COVID-19 impacts will only need to declare the rent that has been received. Normal expenses can still be claimed on the property as long as the reduced rent was determined at arms’ length and in line with current market conditions.

New sharing economy reporting regime proposed

The government is seeking to legislate compulsory reporting of information for sharing economy platforms in order to more easily monitor the compliance of participants, while at the same time reducing the need for ATO resources. This would encompass any platforms that allow sellers and buyers to transact in a variety of sectors, although the reporting requirement would not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, title of real property is transferred, or the supply is a financial supply.

As the sharing economy becomes more prevalent and fundamentally reshapes many sectors of the economy, the government is scrambling to contain the fall-out. While there no standard definition of the term “sharing economy”, it is usually taken to involve two parties entering into an agreement for one to provide services, or loan personal assets, to the other in exchange for payment. Examples of platforms in a wide variety of sectors include Uber, Airbnb, Car Next Door, Menulog, Airtasker and Freelancer, to name a few.

With the rapid expansion of various sharing economy platforms, the government’s Black Economy Taskforce has noted that without compulsory reporting, it would be difficult for the ATO to gain information on compliance of sharing economy participants without the use of targeted audits. Putting formal reporting requirements in place would align Australia with international best practice.

On the back of the Taskforce’s report, the government has now released draft legislation for consultation to define the scope of compulsory reporting requirements in order to ensure integrity of the tax system and reduce the compliance burden on the ATO.

This new compulsory reporting regime would apply to all operators of an electronic service, including websites, internet portals, apps, gateways, stores and marketplaces. Any platforms that allow sellers and buyers to transact will be required to report information on certain transactions. However, the reporting requirement will generally not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, where title of real property is transferred, or the supply is a financial supply.

Based on the draft legislation, platform operators will be required to report transactions that occur on or after 1 July 2022 if they relate to a ride-sourcing or a short-term accommodation service, unless an exemption applies. From 1 July 2023 all other categories of sharing economy platforms will be required to report, unless an exemption applies.

While the ATO will ultimately be responsible for determining the exact information to be reported, at a minimum, the following information is expected to be required once reporting commences:

  • seller’s identification information, including full legal name, date of birth, primary address, bank account details, ABN, TFN, telephone and email details; and
  • consideration and transaction information, including total gross and net payments to seller, GST attributable to gross payments, total fees/commissions withheld, GST attributable to total fees/commissions, property address (if a transaction relates to rental of real property), and period for which property is booked during the reporting period.

It is expected only the aggregate or total transactions relating to a seller over the reporting period will need to be provided; that is, information will not need to be provided on a transactional basis. Again, while the ATO will ultimately determine the frequency of reporting, the initial reporting is expected to be on a biannual basis (ie 1 July to 31 December, and 1 January to 30 June) with the relevant information to be reported by 31 January and 31 July respectively.

The government is hoping that with the introduction of this new reporting regime it is able to boost tax receipts, and by extension government coffers, by stamping out tax non-compliance (whether deliberate or unintentional) by those participants in the sharing economy.

Reminder: super changes for the 2021 financial year

The government’s long-slated “flexibility in superannuation” legislation is finally law. This means from 1 July 2021, individuals aged 65 and 66 can now access the bring-forward arrangement in relation to non-concessional super contributions. The excess contributions charge will also be removed for anyone who exceeds their concessional contributions cap, and individuals who received a COVID-19 super early release amount can now recontribute up to the amount they released without it counting towards their non-concessional cap.

Previously, if you made super contributions above the annual non-concessional contributions cap, you were able to automatically gain access to future year caps if you were under 65 at any time in the financial year. The bring-forward arrangement allows you to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.

With the passing of the flexibility in super legislation, individuals aged 65 and 66 who were previously unable to access the bring-forward arrangement in relation to non-concessional contributions are now permitted to do so.

For the 2021 income year, the non-concessional contributions cap is $110,000, which means that individuals aged 65 and 66 can access a cap of up to $330,000 under the bring forward arrangement.

From 1 July 2021, the excess contributions charge is also removed. Previously, any individual who exceeded their concessional contributions would have been liable to pay the excess concessional contributions charge as well as the additional tax due when the excess contributions were withdrawn and included in their assessable income. The charge was approximately 3%, and was calculated from the start of the income year in which the excess contributions were made up until the day before the tax was due to be paid.

Individuals who make concessional contributions exceeding their cap on or after 1 July 2021 will no longer be liable to pay the excess concessional contributions charge. They will, however, still be issued with a determination and be taxed at their marginal tax rate on any excess concessional contributions amount, less a 15% tax offset to account for the contributions tax already paid by their super fund.

Recontributions of COVID-19 early released super

With the fast-moving COVID-19 situation last year, many individuals lamenting a lack of financial support from the government early on opted to withdrawal money from their super as a lifeline. Under the COVID-19 early release measures, individuals could apply to have up to $10,000 of their super released during the 2019–2020 financial year and another $10,000 released between 1 July and 31 December 2020. Between 20 April 2020 and 31 December 2020, the ATO received 4.78 million applications for early release, totalling $39.2 billion worth of super.

Not all of the individuals who applied to have their super released ended up needing to use it once the government ramped up its financial support programs (including JobKeeper, JobSeeker and the cash flow boosts). From 1 July 2021, those individuals who received a COVID-19 super early release amount can recontribute to their super up to the amount they released, and those recontributions will not count towards their non-concessional contributions cap. The recontribution amounts must be made between 1 July 2021 and 30 June 2030 and super funds must be notified about the recontribution either before or at the time of making the recontribution.

COVID-19 recontribution amounts are not a new type of contribution; rather, they are a personal contribution that receives a treatment to exclude it from an individual’s non-concessional contribution cap. Individuals can make COVID-19 recontributions to any fund of their choice where the fund rules allow. Each COVID-19 recontribution amount must be detailed on a separate approved form and cannot exceed $20,000 per approved form.

COVID-19 recontribution amounts will need to be reported by super funds to the ATO via MATS as a personal contribution. The ATO has requested that super funds record and hold the required information until it finalises the functionality to enable funds to use the Bulk Data Exchange facility via the Business Portal. The ATO is working through the process for self managed super funds (SMSFs) and will advise about that in due course.

Client Alert – September 2021

Single Touch Payroll update

Phase 2 coming soon

The ATO is expanding the information that businesses send through Single Touch Payroll (STP). From 1 January 2022, most employers will be required to send additional information such as the commencement date of employment and cessation date of employment for employees, their reasons for leaving employment and work type. The basic information about salary and wages and super liability information in Phase 1 of the STP rollout will also be further drilled down in Phase 2, moving away from just reporting the gross amounts.

According to the ATO, the Phase 2 report will also include a six-character tax treatment code for each employee. The code will be automatically generated by the STP software and is an abbreviated way of outlining the factors that can influence amounts withheld from payments.

STP was originally introduced in 2016 as a way for employers to report their employees’ tax and super information to the ATO in real time. Most employers, regardless of the number of their employees, were required to start reporting from 1 July 2021.

Employers with a withholding payer number (WPN) have until 1 July 2022 to start reporting payments through STP, and small employers that make payments to closely held payees are exempt from reporting these payees through STP for the 2019–2020 and 2020–2021 financial years.

While the Phase 2 increase in information will be automatically taken care of in most STP software solutions, the increased stratification of reporting may require you to pay more attention to your business’s payroll, to ensure all the information you enter into the system is correct.

Tax time 2021: rental property pitfalls

This tax time, the ATO is again closely monitoring claims in relation to rental properties. The ATO has data-matching programs in place that collect detailed information about properties and owners for income years all the way from 2018–2019 to the 2022–2023. These programs expand the rental income data collected directly from third-party sources, including sharing economy platforms, rental bond authorities and property managers.

In the 2019–2020 financial year over 1.8 million taxpayers owned rental properties and claimed $38 billion in deductions. While most taxpayers do the right thing and are able to justify their claims, the ATO notes that over 70% of the 2019–2020 returns selected for review of rental information needed adjustments.

The most common mistake that rental property owners and holiday homeowners make is not declaring all their income, and their capital gains from selling property.

Another area of concern involves claims for interest charges on personal loans. For example, if you take out a loan to buy a rental property and rent it out at market rates, the interest on the loan is deductible. However, if you redraw money from that mortgage for personal use (eg to buy a car or pay off the mortgage of the house you’re living in), then you can’t claim interest on that part of the loan.

You should also be careful when claiming deductions for capital works. While the cost of repairs for wear and tear are immediately deductible if you’re replacing or fixing an existing item (eg a broken toilet), the cost of upgrading the property or areas of the property is considered capital works and any deductions need to be spread over a number of years.

New sharing economy reporting regime proposed

The government is seeking to legislate compulsory reporting of information for sharing economy platforms in order to more easily monitor the compliance of participants, while at the same time reducing the need for ATO resources.

As the sharing economy becomes more prevalent and fundamentally reshapes many sectors of the economy, the government is scrambling to contain the fall-out. While there no standard definition of the term “sharing economy”, it’s usually taken to involve two parties entering into an agreement for one to provide services, or to loan personal assets, to the other in exchange for payment. Examples of platforms include Uber, Airbnb, Car Next Door, Menulog, Airtasker and Freelancer, to name a few.

With the rapid expansion of various sharing economy platforms, the government’s Black Economy Taskforce has noted that without compulsory reporting, it is difficult for the ATO to gain information on compliance without undertaking targeted audits. Putting formal reporting requirements in place will align Australia with international best practice.

The government has now released draft legislation for consultation to define the scope of compulsory reporting requirements in order to ensure integrity of the tax system and reduce the compliance burden on the ATO.

This new compulsory reporting regime would apply to all operators of an electronic service, including websites, internet portals, apps, gateways, stores and marketplaces. Any platforms that allow sellers and buyers to transact will be required to report information on certain transactions. However, the reporting requirement will generally not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, where title of real property is transferred, or the supply is a financial supply.

Based on the draft legislation, platform operators will be required to report transactions that occur on or after 1 July 2022 if they relate to a ride-sourcing or a short-term accommodation service, unless an exemption applies. From 1 July 2023 all other categories of sharing economy platforms will be required to report, unless an exemption applies.

The initial reporting is expected to be biannual (1 July to 31 December, and 1 January to 30 June) with electronic service operators required to report the relevant information by 31 January and 31 July respectively.

Reminder: super changes for the 2021 financial year

The government’s long-slated “flexibility in superannuation” legislation is finally law. This means from 1 July 2021, individuals aged 65 and 66 can now access the bring-forward arrangement in relation to non-concessional super contributions. The excess contributions charge will be removed for anyone who exceeds their concessional contributions cap, and individuals who received a COVID-19 super early release amount can now recontribute it without hitting their non-concessional cap.

Previously, if you made super contributions above the annual non-concessional contributions cap, you could automatically access future year caps if you were under 65 at any time in the financial year.

The bring-forward arrangement allows you to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.

Previously, individuals who exceeded their concessional contributions cap would have to pay the excess contributions charge (around 3%) as well as the additional tax due when excess contributions were re-included in their assessable income. However, people who exceed their cap on or after 1 July 2021 will no longer pay the charge, but will still receive a determination and be taxed at their marginal tax rate on any excess concessional contributions amount, less a 15% tax offset to account for the contributions tax already paid by their super fund.

Recontributions of COVID-19 early released super

Under the COVID-19 early release measures, individuals could apply to have up to $10,000 of their super released during the 2019–2020 financial year and another $10,000 released between 1 July and 31 December 2020. Between 20 April 2020 and 31 December 2020, the ATO received 4.78 million applications for early release, totalling $39.2 billion worth of super.

Not everyone who applied to have super released ended up needing to use it once the government ramped up its financial support programs. From 1 July 2021, people who received a COVID-19 super early release amount can recontribute to their super up to the amount they released, and those recontributions will not count towards their non-concessional contributions cap. The recontribution amounts must be made between 1 July 2021 and 30 June 2030 and super funds must be notified about the recontribution either before or at the time of making the recontribution.