Archive for category: Newsletter

COVID-19 vaccination rewards: tax implications

Amidst the Omicron COVID-19 wave and with our governments shortening booster dose intervals, many businesses are encouraging their employees and customers to get either vaccinated or get their booster dose by offering rewards or incentives. While this is an effective way to help employees and customers stay safe and businesses to stay open, it’s important to consider that there may be some tax consequences involved. Ordinarily, non-cash benefits provided to the general public are not subject to FBT, while non-cash benefits provided exclusively to employees may be, and cash payments to employees need to be reported through Single Touch Payroll (STP).

Non-cash benefits provided to the general public

Where businesses provide free or discounted goods, services, vouchers, gift cards, rewards points or other non-cash benefits (for example, entries into a draw to win prizes) to everyone who has had their COVID-19 vaccinations, those benefits will not be subject to FBT, even if employees take part in the program. This is because the benefit is not provided in respect of the employee’s employment. “Public” in this case denotes both members of the public in general, and those who make up a more specific section of the public (for example, all members of a particular club).

Non-cash benefits provided to employees

Providing non-cash benefits specifically to employees, such as goods and services, vouchers and gift cards or points in a rewards scheme may be subject to FBT. However, a benefit that has a value of less than $300 may qualify for a minor benefits exemption provided that:

• the benefit is provided infrequently and irregularly;
• the value and total value of the minor benefit and other similar or identical benefits are low;
• it is difficult to calculate the taxable value of the benefit and any associated benefits; and
• the benefit is provided as a result of an unexpected event.

In the event that the non-cash benefit provided to employees does not qualify for the minor benefit exemption, the business may be entitled to a reduction in taxable value of FBT if the benefit is an in-house benefit. Generally, an in-house benefit is one that is identical or similar to the benefits provided to customers in the ordinary course of business (for example, clothes provided by a clothing retailer, or electronics provided by an electronic retailer). Businesses can reduce the aggregate taxable value of these benefits by $1,000 if the benefits are not provided under a salary packaging arrangement.

Where a business provides transport or pays for an employee’s transport to get their COVID-19 vaccination or booster, the travel would be considered work-related preventative health care, and is therefore exempt from FBT.

For businesses that offer their employees entry into a draw to win prizes as a reward for vaccination, there will be no FBT consequences when the entry to the draw is given to the employee; however, FBT may apply when the winner receives their prize, unless an exemption or reduction applies.

Cash payments

Where a business gives its employees a cash payment for getting vaccinated, the business will need to report the payment via Single Touch Payroll (STP) as part of each employee’s salary or wages, withhold tax from the amount under PAYG withholding, and include the amount in each employee’s ordinary time earnings for the purposes of determining super contributions for the employees.

Businesses that have already made cash payments to their employees and have inadvertently failed to withhold tax should make contact with the ATO as soon as practicable to facilitate the possible remission of any failure-to-withhold penalties. In addition, the ATO reminds businesses that super contributions on cash payments should be made no later than 28 days after the end of the quarter in which the payment was made, otherwise the super guarantee charge may apply.

Source: www.ato.gov.au/law/view/document?DocID=AFS/VACC_INC-COVID-19

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

www.ato.gov.au/General/COVID-19/Support-for-individuals-and-employees/COVID-19-vaccination-incentives-and-rewards-for-employees/

Free mental health support for small business

The Federal Government has announced additional funding to extend the availability of free mental health support to small business owners dealing with the current pandemic and recent natural disasters.

Funding of $4.6 million will go to Beyond Blue to boost its successful and innovative mental health program, NewAccess for Small Business Owners, and $2.1 million will go to Financial Counselling Australia to extend the Small Business Debt Helpline for 2022.

NewAccess for Small Business Owners

The NewAccess for Small Business Owners Program provides free, confidential, one-on-one mental health support by phone or video call to small business owners, including sole traders. The coaches are former small business owners themselves, so they understand the unique challenges that small businesses face, including family and financial pressures.

The program, developed and provided by Beyond Blue, starts with an initial assessment that allows the coach to develop a program tailored to each business owner’s individual needs. The sessions then use Low-intensity Cognitive Behavioural Therapy (LiCBT) work to help participants in recognising the ways they think, act and feel, and in separating from unhelpful thoughts. The program provides practical skills to manage stress and get back to feeling like yourself.

The recently announced additional funding will allow for six more coaches from 1 April 2022, meaning the program will have a team of 18 specialised support coaches available to help 4,680 small business owners through the series of six one-on-one coaching sessions.

Business owners who’ve participated in the program say it’s helped them feel better able to address the challenges they’re facing, and they feel well supported by people who understand them. Participants also say they value being able to get support almost immediately using the free service.

More information about the NewAccess for Small Business Owners program is available by calling 1300 945 301 or on the Beyond Blue website at www.beyondblue.org.au/newaccess-sbo.

Small Business Debt Helpline

The Small Business Debt Helpline was set up in 2020 by Financial Counselling Australia (FCA) with Federal Government funding. It’s a service for small business owners in financial difficulty, and supports small business owners to navigate issues including avoiding bankruptcy, negotiating payment plans, debt waivers, grant applications and insolvency.

The helpline is free to use, and the services provided are independent, confidential and impartial. Its professional financial counsellors offer a listening ear and practical business advice. They don’t sell anything or work on commission.

Small business owners can contact the Small Business Debt Helpline by calling 1800 413 828 (9 am to 5.30 pm AEDT, Monday to Friday) or on the Small Business Debt website at https://sbdh.org.au/.

ATO support options

The ATO also reminds business owners whose mental wellbeing may be affecting their ability to pay tax or super that it has support options available, including help with setting up payment plans and deferring lodgements or payments. Information is available on the ATO website at www.ato.gov.au/General/Support-in-difficult-times/.

Source: www.ato.gov.au/general/covid-19/

https://ministers.treasury.gov.au/ministers/stuart-robert-2021/media-releases/more-funding-free-mental-health-counselling-small

Changes to recovery loan scheme for small and medium enterprises

As a part of an economic package to help businesses recover from the impacts of the COVID-19 pandemic, the Federal Government provided low-cost credit to qualifying small and medium enterprises (SMEs) in the form of the SME Recovery Loan Scheme. When it was first introduced, and until 31 December 2021, the government essentially guaranteed 80% of the loan amount.

However, from 1 January 2022, as restrictions have eased, the government guarantee has been reduced from 80% of the loan amount to 50% of the loan amount. The eligibility conditions have also been slightly fine-tuned, with the scheme now due to end on 30 June 2022.

To recap, the scheme is available to eligible small and medium businesses with up to $250 million turnover, including sole traders and non-profits. Previously, the scheme was also open to recipients of JobKeeper payments between 4 January 2021 and 28 March 2021, and those businesses affected by floods in eligible local government areas in March 2021. Now, only those businesses that have been adversely economically affected by COVID-19 are eligible.

Eligible small and medium businesses can access up to $5 million in total from participating lenders. This is in addition to the loan limits for Phase 1 (unsecured capital loans of up to $250,000 for terms of up to three years) and Phase 2 (unsecured loans of up to $1 million for terms of up to five years with a cap on interest rates) of the scheme.

Loans can now be unsecured or secured and will generally be for terms of up to 10 years, with an optional repayment holiday period of up to 24 months. The amounts can be used for a range of business purposes, including investment support or refinancing the pre-existing debt of an eligible borrower. For example, the loans can be used to purchase non-residential real property, including commercial property, or for the acquisition of another business.

While the exact interest rate will be determined by participating lenders, under the scheme, the maximum rate will be capped at around 7.5% with flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.

Participating lenders can offer any suitable product to eligible businesses except for credit cards, charge cards, debit cards or business cards.

Loans issued under the scheme to refinance existing loans cannot be used for the purposes of:

• purchasing residential property;
• purchasing financial products;
• lending to an associated entity; or
• leasing, renting, hiring or hire-purchasing existing assets that are more than halfway into their effective life.

Further, there will also be some restrictions on refinancing loans, including not allowing loans more than 30 days in arrears to be refinanced, and not allowing borrowers who have entered into external administration or are insolvent to refinance debts. Participating lenders include the “Big 4” banks, plus a host of other smaller financial institutions and mutual societies.

Source: https://treasury.gov.au/coronavirus/sme-recovery-loan-scheme

https://business.gov.au/grants-and-programs/sme-recovery-loan-scheme

Need more money in retirement?

Retirees who own their own home and need more money in retirement are now able to access the Home Equity Access Scheme, run through Services Australia. The scheme was previously known as the Pensions Loans Scheme but along with a new name, the fortnightly interest rate has been lowered to 3.95% per annum. To access the scheme, there is no need for an individual and/or their partner to be on the Age Pension, although certain other requirements need to be met. Loan payments under the scheme can be started and stopped at any time.

The Home Equity Access Scheme allows older Australian to get a voluntary non-taxable fortnightly loan at an interest rate of 3.95% per annum, which is a much lower rate than personal loans from various providers, which typically start from around 5% per annum. To access the loan, a retiree or their partner needs to meet the following requirements:

• be at Age Pension age or older;
• be receiving or be eligible to receive a qualifying pension (the Age Pension, Carer Payment or Disability Support Pension);
• own real estate in Australia that can be used as security for the loan;
• have adequate and appropriate insurance covering the real estate offered as security; and
• not be bankrupt or subject to a personal insolvency agreement.

It should be noted that retirees can get a loan even if their income and assets mean that they wouldn’t normally get one of the qualifying pensions – they just need to be able to meet the eligibility rules. People who are on either the Pension Bonus Scheme or an Asset Hardship Payment may have affected eligibility for the scheme affected.

There are costs associated with starting and stopping the scheme – for example, Services Australia will place a charge or caveat on the property offered as security for the loan, and the retiree will need to pay the costs involved with registering and removing the charge or caveat. These costs will not need to be paid upfront and can be added to the loan balance, which can then be paid at any time.

When qualifying for the scheme, people can choose to get their loan payment each fortnight at either the maximum amount (which is 150% of the person’s maximum pension rate), a smaller percentage, or a fixed loan amount of their choosing. The loan amount will be automatically adjusted whenever the pension amount changes.

For individuals who do not receive the pension, the maximum amount under the Home Equity Access Scheme, $1,665.45 per fortnight, can be accessed.

Payments under the scheme will continue until the holder reaches their maximum loan amount (including interests and costs). This maximum loan amount depends on the person’s age, the age of their partner (if any), and the market value of the property offered as security. For example, for a single person aged 70 who has a home with a market value of $800,000, the maximum loan amount available under the scheme is $246,400.

The scheme is flexible, which means it’s possible to stop loan payments at any time and to make repayments at any time, but regular repayments are not required. Rather, recipients of the loan have the choice to wait to pay the loan, legal costs and accrued interest in full when they sell the property they’ve used as security. However, it should be noted that the longer the loan is held, the more interest will accrue.

Source: https://ministers.dss.gov.au/media-releases/7851 

www.servicesaustralia.gov.au/home-equity-access-scheme

www.dva.gov.au/financial-support/income-support/support-when-you-cannot-work/pensions/home-equity-access-scheme

Income protection insurance in super: beware of offsets

In Australia, around seven of the 20 largest MySuper products provide default income protection insurance on an opt-out basis. While income protection insurance has the advantage of providing a regular income for a specified period of time if a person cannot work due to temporary disability or illness, a recent ASIC review into this type of cover in super has raised concerns around the amount of information given to members – in particular communication about “offset clauses”, which are often described in technical and legalistic language.

Insurance within super is usually the most cost-effective way for an individual to cover themselves in the event of a mishap. Most super funds typically offer three types of insurance for their members: life cover, total and permanent disability (TPD) and income protection insurance (or salary continuance cover).

Life cover (death cover) pays a lump sum or income stream to beneficiaries upon the insurance holder’s death, or in the event of a terminal illness. TPD insurance pays the holder a benefit if they become seriously disabled and are unlikely to work again. Income protection insurance pays a regular income for a specified period, ranging from two years to five years, or up to a certain age, if the holder can’t work due to temporary disability or illness. It is estimated that seven out of the 20 largest MySuper products provide default income protection insurance on an opt-out basis, and approximately 3.4 million MySuper accounts have income protection insurance.

Recently, ASIC reviewed the practices of five large super funds that provide default income protection insurance on an opt-out basis to their members, accounting for around 2 million MySuper member accounts as at June 2021. From that review, the regulator has raised various concerns around the amount of information received by members on these policies and whether funds should be doing more to communicate clearly about insurance.

Overall, the review found that most income protection insurance policies contain “offset” clauses, which mean that the insurance benefit is reduced or “offset” if the individual receives other kinds of income support. This is used as a way to reduce incentives for individuals to delay their return to work as a result of receiving more income while disabled than when working. In addition, the review found there were large variations between super funds in the types of income that were offset against income protection benefits.

For example, different funds will offset different combinations of alternative income such as paid leave (annual or long service), employer super contributions, social security benefits, TPD benefits, workers compensation, and other insurance settlement or benefits.

ASIC found that trustees were not proactively giving their members clear explanations about when insurance benefits would or would not be paid as a result of offsets. This information is obviously relevant to members considering whether they should opt out of default income protection insurance, and to those making insurance claims.

ASIC’s concern is not that these offset clauses exist, but rather that relevant information to explain the clauses was not available in website communications or in welcome packs, and the clauses were only described in technical and legalistic language in insurance guides.

The regulator is also concerned that super fund trustees were unable to demonstrate that they had sought reliable data on offsets and used it to review the appropriateness of their default income protection insurance offering. This could cause unnecessary erosion of super benefits of members if offsets mean that particular groups of members get little value from their default insurance if they need to claim.

Super fund members can get more information on ASIC’s MoneySmart website about what to look for when considering income protection insurance through super, at https://moneysmart.gov.au/how-life-insurance-works/income-protection-insurance.

Source: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-343mr-super-trustees-offering-default-income-protection-insurance-urged-to-check-on-member-outcomes/

ATO scrutinising gifts or loans from overseas

The ATO has recently issued an alert warning taxpayers against disguising undeclared foreign income as gifts or loans from related overseas entities, including family and friends. It says it has continued to encounter situations where Australian resident taxpayers have derived amounts of income or capital gains offshore that are assessable, but the taxpayers have failed to declare the amounts in their income tax returns.

Individuals who are Australian residents for tax purposes should remember that their worldwide income, as well as certain profits derived by offshore entities they control, is assessable income for Australian tax purposes.

The ATO will now be looking closely at arrangements where taxpayers are aware of their residency status and the tax implications that flow from it, but attempt to avoid or evade tax of their foreign assessable income by concealing the character of the funds upon repatriation to Australia by disguising the amounts as either gifts or loans from a related overseas entity.

Whether or not a gift or loan is genuine depends upon the following criteria being satisfied:

• the characterisation of the transaction as a gift or loan is supported by appropriate documentation;
• the behaviour of the parties is consistent with that characterisation; and
• the monies provided are sourced from funds genuinely independent of the gift or loan receiver.

If family or friends who reside overseas have provided a genuine gift to an individual or their business, it is prudent for them to keep supporting documents such as:

• any declarations the donor has made in their country of residence about the nature of the amounts transferred;
• an executed contemporaneous deed of gift prepared by the donor;
• formal identification of the donor (eg a copy of their photo identification from their passport or identity card);
• a copy of the donor’s bank statements showing the gift and donor’s wealth before they made the gift; and
• financial records reflecting the donor’s transfer.

Gifts also include inheritances. Where an inheritance is received, a certified copy of the donor’s will or a distribution statement for the estate should be a part of the recordkeeping.

In relation to genuine loans from overseas entities made to help start up a business or to acquire income-producing assets, supporting documents may include the following:

• a properly documented loan agreement that details parties to the loan, date, amount, interest rate, frequency of repayments and terms of the loan;
• correspondence relating to the loan, such as pre-contractual negotiation communications or variations made post-agreement);
• documents in relation to security or guarantees provided;
• arrangements governing the drawdown and transmission of funds;
• financial records showing advance of funds and subsequent repayments, including interest and principal payments over the loan term;
• financial and accounting records showing how the loan amounts were used; and
• documents showing the payment of withholding tax.

If there is any uncertainty about whether particular amounts are genuine gifts or loans, the ATO has said it will form a view based on all the available evidence – therefore, keeping contemporaneous and complete records is strongly recommended. The ATO notes that a deed of gift or a statutory declaration (provided either by the donor or the receiver) may not be accepted as conclusive evidence.

New data matching program: government payments

A new data matching program designed to identify and address non-compliance with tax and super obligations is under way in relation to government payments for the 2018–2019 to 2022–2023 income years. In essence, it covers most services that the Commonwealth Government pays third-party program providers to deliver.

Specifically, data will be obtained from the following agencies in relation to these programs that they deliver:

• Comcare – services provided under the Safety Rehabilitation and Compensation Act 1988;
• Department of Education, Skills and Employment – VET FEE-HELP scheme, VET student loans program, child care subsidy, employment services;
• Department of Health – aged care subsidy, hearing services program, Commonwealth home support program;
• National Disability Insurance Agency – National Disability Insurance Scheme (NDIS);
• National Indigenous Australian Agency – Indigenous Advancement Strategy;
• Department of Home Affairs – youth transition support services, national community hubs, humanitarian settlement program, Australian cultural orientation program, adult migrant English program, free translating service, and settlement engagement and transition support program;
• Department of Veterans’ Affairs – health treatment program; and
• clean energy regulator – large-scale renewable energy target and small-scale renewable energy scheme.

The wide-ranging nature of this program is designed to identify and address non-compliance with tax and super obligations by service providers receiving government payments or helping deliver the specified programs. The data collected will enhance the information the ATO currently receives from government entities through the taxable payments annual report (TPAR).

This means that contractors, subcontractors and consultants in any type of business structure (sole trader, company, partnership or trust) that receive payments from government under any of these programs may be subject to extra scrutiny.

Service provider identification details obtained under the program will vary depending on whether they are individuals or entities. For individuals and sole traders, basic details collected will include names (first and last), dates of birth, addresses (residential, postal, etc), ABNs, service types, email addresses and phone numbers. For entities, basic details collected will include service provider business names, addresses (business, postal, registered, etc), ABNs, ACNs, organisation or service types, contact names, email addresses and phone numbers.

Payment information obtained under the program will consist of service provider IDs, names of services, types of services (linked to programs), value of payments received for the relevant financial years, counts and types of claims, and withholding and re-credit amounts.

It is estimated that 36,000 service providers will be captured under this program each financial year; of that number, approximately 11,000 will be individuals and the rest will be companies, partnerships, trusts and government entities.

The ATO will be checking the registration obligations of third-party providers (ABNs, TFNs, GST and PAYG withholding) as well as lodgment obligations (outstanding income tax, BAS and FBT returns). It will also look at whether service providers have correctly reported income, comparing the data obtained against income records, and will check for any outstanding tax and super debts and assess the entity’s ability to pay those debts.

Source: www.ato.gov.au/General/Gen/Government-Payments-Program/

www.legislation.gov.au/Details/C2021G00763

Do you need a Director Identification Number?

Directors of companies will soon have to enrol in the Director Identification Number regime. This requires current and future directors to apply for director identification numbers (DIN) which will be permanently linked to the individual, even if they are no longer a director. It is hoped the regime will make it easier to trace relationships across companies and reduce instances of phoenixing and other illegal activity. Most existing directors will have until 30 November 2022 to apply for the DIN through the ATO.

The Director Identification Number regime came into force late in 2020 as a tool for the Federal Government to reduce phoenixing and black economy activities. Broadly, the regime will require all directors to confirm their identity with the ATO, at which time they will be issued a unique identifier. This identifier will then be permanently linked to the individual, even if they cease to be a director.

The Government has recently introduced an instrument that extends the time available for persons who are eligible officers immediately before the commencement of the obligations to apply for a DIN. Individuals that operate under the Corporations Act 2001 and became a director on or before 31 October 2021 are required to apply for a DIN before the end of the transitional period, which is between 4 April 2021 and 30 November 2022.

Directors who operate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and became a director on or before 31 October 2021 will have even more time to apply for a DIN – until 30 November 2023 (with a transition period between 4 April 2021 and 30 November 2023). Any individuals who are appointed directors between 1 November 2021 and 4 April 2022 will have within 28 days of their appointment to apply for the DIN, and from 5 April 2022 individuals seeking to become directors will need to apply for a DIN before their appointment.

It is envisaged that the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and preventing the use of fictitious entities. It will also assist regulators to investigate a director’s involvement in what may be repeated unlawful activity, including illegal phoenixing.

The Australian Securities and Investments Commission (ASIC) and external administrators will also benefit, saving time and money, as the DIN will make it simpler to track the corporate history of various directors and assist liquidators in improving the efficiency of the insolvency process. The DIN is also expected to protect individuals against the fraudulent use of stolen identities to set up companies, and is expected to improve overall data integrity and security.

To prevent abuse of the regime, any conduct that undermines the DIN requirement will be subject to civil and criminal penalties. This includes deliberately providing false identity information, intentionally providing a false DIN or intentionally applying for multiple DINs.

Directors will be able to use the new Australian Business Registry Services (ABRS) online services to register from 1 November 2021.

Sign-ins and director identity verification will be conducted using the myGovID app. This app requires a compatible smart device and will require an individual to enter personal details and verify at least two Australian identity documents (drivers licence, birth certificate, citizenship certificate, passport, etc) to obtain the “standard identity strength”. The “strong identity strength” which is currently in testing phase will require the completion of an additional face verification check.

Source: www.legislation.gov.au/Details/F2021L01391

www.ato.gov.au/General/Gen/Modernising-Business-Registers/

www.abrs.gov.au/director-identification-number/who-needs-apply-and-when

COVID-19 relief for SMSFs extended

Due to the ongoing economic impacts of COVID-19 on large parts of Australia, the ATO has announced the extension of various COVID-19 relief measures for trustees of self managed superannuation funds (SMSFs). The relief previously only applied to the 2019–2020 and 2020–2021 financial years, but will now also be available for the 2021–2022 financial year.

SMSF residency test

To be a complying super fund and receive tax concessions, SMSFs must be an “Australian super fund” at all times during the year. This requires, among other things, for the central management and control of the SMSF (ie individual trustees, or directors of a corporate trustee) to ordinarily be in Australia. Under the relief, a fund will still meet this requirement even if its central management and control is temporarily outside of Australia for up to two years.

Obviously, with the Australian borders pretty much closed during the entirety of the pandemic, and many other countries imposing travel bans, some individual trustees or directors of a corporate trustee may be stranded in another country over the two-year limit through no fault of their own. In these situations, provided there are no other changes in the SMSF or in the circumstances of the individual trustee (or directors of the corporate trustee) affecting other residency conditions, the ATO has indicated it will not apply compliance resources to determine whether a fund meets the residency test.

Rental relief

If an SMSF or a related party has continued to provide rental relief based on the current market conditions, whether it be a rental reduction, waiver or deferral to a tenant, the ATO will provide relief in the form of not taking any compliance action against the fund. However, this is predicated on the rental relief being offered on commercial terms, and there being proper documentation with regards to the arrangement.

The ATO notes that not taking compliance action is only an interim measure. In due course it will be making a formal determination, similar to the one made in 2020, to ensure that rental deferrals offered by SMSFs or related parties to their tenants does not cause a loan or an investment to be an in-house asset in the current and future financial years.

Loan repayment relief

For loan repayment relief provided by an SMSF to a related or unrelated party due to the financial impacts of COVID-19, where the relief is offered on commercial terms and the changes to the loan agreement are properly documented, the ATO will provide relief on similar terms as the interim rental relief – that is, it will not take any compliance action against the fund. This will also apply to limited recourse borrowing arrangements (LRBAs).

In-house assets

Where an SMSF exceeds the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19, trustees must still prepare a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022. However, the ATO has said it will not take any compliance action where the plan has not been executed by the due date (30 June 2022) as a result of the market not having recovered, or in some cases the plan may be unnecessary owing to the recovery of the market.

PAYG variations

The ATO has also confirmed that its penalty and interest relief for excessive PAYG variations applies to SMSFs that continue to be impacted by COVID-19 during 2021–2022. The ATO will not apply penalties or interest for excessive variations of PAYG instalments during the 2021–2022 income year, provided that the taxpayer has taken reasonable care to estimate their end-of-year tax.

This ATO concession for penalties and interest applies to 30 June ordinary balancers for the 2021–2022 income year and entities that have been granted a substituted accounting period (SAP). For an entity with a SAP, any variation must relate to instalments made during the 2021–2022 income year.

A PAYG instalment variation requires a reasonable and genuine attempt to determine the liability. When considering if a genuine attempt has been made, the ATO takes into account what a reasonable person would have done in the taxpayer’s circumstances.

The ATO notes that PAYG variations do not carry over into the new income year. Therefore, if a taxpayer made variations in the 2020–2021 income year, they may need to vary again in 2021–2022. The varied amount or rate then applies for all of the taxpayer’s remaining instalments for the income year, or until they make another variation.

The ATO encourages PAYG instalment payers to review their tax position regularly and vary the PAYG instalments as their situation changes. Taxpayers who realise they have made a mistake working out their PAYG instalment can correct it by lodging a revised activity statement or varying a subsequent instalment.

If a taxpayer is unable to pay an instalment amount, the ATO requires them to still lodge an instalment notice and discuss a payment arrangement with the ATO so that they don’t have a debt at the end of the year.

Audits

The ATO has also extended to 2021–2022 its existing COVID-19 relief in the Addendum to the Auditor/actuary contravention report (ACR). The ACR relief for 2021–2022 will apply for:

• rental relief (including rental reductions, waivers and deferrals);
• loan repayment relief (including for LRBAs); and
• in-house assets.

Approved SMSF auditors need to refer to the Addendum when determining whether a contravention arises because of the relief, when to report a contravention to the ATO via an ACR for the 2021–2022 financial year, and what evidence to obtain from the trustees to support the relief. In summary, SMSF auditors need to check that:

• rental relief is offered on commercial terms due to the financial impacts of COVID-19 (having regard to relevant state and territory COVID-19 support measures) and the arrangement is appropriately documented;
• loan repayment relief is offered on commercial terms due to the financial impacts of COVID-19 (having regard to the terms of relief offered by commercial lenders), and the changes to the loan agreement are properly documented;
• funds that exceeded the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19 have prepared a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022.

The ATO has said that SMSF auditors need to use their professional judgment when determining whether relief is offered on commercial terms due to the financial effects of COVID-19. If there is insufficient appropriate evidence to support the relief, including that it is offered on commercial terms, SMSF auditors should report this via an ACR where the reporting criteria are met.

Audit opinion modifications

The existing ACR Addendum notes that auditors may still need to modify their opinion in Part B of the audit report where they identify any material breach of the provisions and regulations listed within the audit report, even if those breaches have arisen from the impacts of COVID-19 in circumstances where the ATO will not be taking compliance action against them. Even where a modification is not necessary, for example because the auditor forms an opinion that the contravention is not material, the auditor must still notify the trustee of these contraventions. This could be done in the management letter to the trustee.

The ATO also recommends that auditors add to the management letter that the ATO will not be taking any compliance action against these contraventions for the 2019–2020, 2020–2021 and 2021–2022 financial years. All other contraventions identified in the fund need to be reported to the trustee in the management letter and reported to the ATO in the ACR where the reporting criteria are met.

Arm’s length terms must be documented

The ATO relief generally only applies where a landlord has “acted in good faith” and agreed that the tenant can defer payment of rent on arm’s length terms during one or all of the 2019–2020, 2020–2021 and 2021–2022 income years in order to ease the financial hardship caused by COVID-19.

The National Cabinet Mandatory Code of Conduct (or any relevant state-based codes or legislation) may assist in assessing whether the rental deferral has been negotiated in good faith and on arm’s length terms.

There must also be contemporaneous documentation reflecting the arm’s length terms and that the lease remains enforceable. Any deferred amounts must also be repaid by the tenant as soon as practicable.

Source:

www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf

www.service.nsw.gov.au/campaign/covid-19-help-businesses/covid-19-assistance-commercial-and-residential-landlords

www.vsbc.vic.gov.au/your-rights-and-responsibilities/retail-tenants-and-landlords/

www.ato.gov.au/Super/Sup/Varying-your-pay-as-you-go-instalments-due-to-COVID-19/

www.ato.gov.au/Forms/Auditor-actuary-contravention-report-instructions/?anchor=AddendumAuditorContraventionReportingins#AddendumAuditorContraventionReportingins

www.ato.gov.au/Super/Sup/COVID-19-relief-in-ACR-Addendum-extended-to-2021-22-financial-year/

 

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