Posts Categorized: Employment matters

Important change to employer super obligations

An important new requirement took effect from 1^st November 2021. Employers now need to complete an extra step in respect of super when taking on a new employee.

Back in 2005, the ATO introduced Choice of Super Fund rules. This was a positive change as it ensured employees had a choice as to where their super would be contributed to. This initiative limited employees having multiple accounts and therefore reduced extra costs and the opportunity for super to be lost. And arguably more importantly, it also ensured employees did not lose life insurance under super when changing jobs.

Where an employee did not exercise their choice then the super had to be made to a default fund. A default fund had to offer a minimum $50,000 in life insurance (hardly enough but better than nothing). The default fund was also specified in an award (hence the rise of the industry funds).

An improvement has been made to the choice system in light of technological advancements and the number of employees with multiple super accounts as a result of their not exercising choice.

So from 1^st November, a system has been put in place to staple a super account to an employee. This means that the default fund choice will be replaced by employers having to contribute to a stapled super fund where no choice is exercised. It only applies to employees employed on or after 1^st November 2021 (with one exception below).

How do you find an employees’ stapled super fund?

If a new employee has not exercised choice within 28 days of starting employment, then the employer must log on ATO online services and access the stapled super fund service. Apparently the stapled fund(s) will be listed on screen within minutes of completing a request.

We are not yet clear as to what employers without access to a computer or ATO online services are supposed to do (other than ask employees to complete and return the choice form within 28 days).

What if you contribute to a non-stapled super fund?

If an employer contributes into the default fund without checking for a stapled super fund, then that contribution will be subject to super guarantee charge. In other words, the contribution is disregarded AND another contribution has to be made (which is non-deductible and can easily be two to three times more costly).

Other words of warning

Employers only have two months to contribute into a super fund after an employee has exercised their choice.
If you received an employees choice before 1^st November where they nominated the default fund but no contributions were made before 1^st November, contributions must be made under the new stapled super fund requirements.

Want to know more?

Call us

SG super reminder

Thursday 28^th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2021 quarter.

But as super clearing houses take up to 10 days to pass the money through to the super fund, it means that processing and payment to the clearing should be made no later than this Friday.

And please make sure you have been calculating super at 10% since it increased on 1^st July 2021.

And being the start of a new financial year, we take the opportunity t remind you that SG super is payable on all forms of remuneration including:-

Commissions.
Bonuses (but see below).
Directors’ fees and all other forms of remuneration to directors.
Allowances (except where fully expended).
Individual contractor paid mainly for their labour.

But excluding the following forms of remuneration:-

Overtime.
Reimbursements.
Unused annual leave on termination.
Remuneration of less than $450 in a month.
Bonuses that are only in respect of overtime.
Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
In respect of employees younger than 18.
Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
On quarterly remuneration greater than $58,920.
Non-residents performing work for an Australian business outside Australia.

SGC super should never be paid late as late payments attract substantial interest and penalties. Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

We welcome any question you might have.

Payroll reporting deadlines

With the progressive roll-out of Single Touch Payroll, year end finalisation deadlines are tightening. It’s not like the “good old” Payment Summary days were one had to the 14^th August to return the stationery. Employers are now required to complete the Single Touch Payroll finalisation step by 14^th July.

Thankfully though two extensions are available this year:-

In response to demands caused to business owners, 31^st July
For closely held employees (family members) 30^th September

Those larger employers that are subject to Pay-roll Tax are due to certify the 2020/21 remuneration by 21^st July. This is not just a matter as in addition to wages, salaries, commissions, directors fees, bonuses and so on, Pay-roll tax is also payable on:-

Superannuation
Some fringe benefits
Payments to certain contractors (including some corporates).

Whilst 28^th July is the end date for paying the June quarter SG super, payments through clearing houses can take up to 10 days. We therefore recommend that the June quarter super be processed no later than Friday 16^th.

We welcome any question you may have about these matters.

Important SG super changes

As you will have read in our Budget analysis and no doubt been notified by your software provider, please ensure that you are calculating SG super as from July at 10%.

It is opportune to remind you that SG is payable on what is called Ordinary Times Earnings (OTE). OTE is not calculated on a number of items including overtime and some bonuses. You can read more here.

And in closing just a reminder that the removal of the $450 monthly; threshold is due not to be removed until 1^st July 2022.

Payroll processing is complicated. Moreover errors can prove costly. We are therefore pleased that Xero now interacts with KeyPay (QuickBooks Online has used a limited version for 5+ years). Please ask us if you would like a review of your payroll system.

Best to pay your employee super now?

Most businesses pay tax on an accruals basis. That means that income is recognised when an invoice is raised; likewise expenses when the bill is received. Those assessed on a cash basis pay tax based on when income is received and expenses paid.

Accrual taxpayers can deduct bills received by 30^th June and other liabilities incurred.

However this doesn’t apply to employee super.

An employer can only deduct the super it has actually paid during the year.

TIP

Whilst employers have to 28^th July to pay the June quarter super, it may be best to pay it now. Paying it now will allow a tax deduction to be claimed within the 2021 Tax Return. You will pay less tax. You will also pay less PAYG Instalments next year.

It’s common sense – might as well pay it now for what is due before the end of next month anyway.

But if covid business life is tough and you are in a loss situation, there is no point in accelerating the cash flow. Mind you, if cash is not the problem, corporate taxpayers may still wish to do so as they can claim back more 2019 and/or 2020 tax under the new loss carry back rules.

As with all years, proper tax planning takes all these considerations and matters into account to deliver you the best result.

We have a great process and one that delivers a plain English report. That report sets out what you need to do and what the tax and cash flow benefits will be. Call us now – it’s best not left to the final days of June.

What’s in the Budget for you?

Probably significantly more than you think.

As what is now unfortunately the norm, there were plenty of pre-announcements before Budget night. But there is much more to the Budget that was announced on Budget night or leading up to it.

In addition to some key business announcements (extension of loss carry back company rules and instant asset write-off) there were very welcome announcements to being able to getting more money into super. Welcome I say as how can one provide for retirement with a contribution cap – which currently sists at $25,000 before being eroded by 15% tax, life insurance premiums and for some an extra 15% tax).

Also of note were the proposed changes to personal and self managed super fund residency rules. I say welcome as the existing rules are quiet archaic in context of how people today live, work and travel – mind you we still aren’t going anywhere for a while with covid.

We will explore some of the key measures in our next survive and thrive webinar. It will beheld at 5.30pm on Wednesday 2^nd June and you can book here – https://tinyurl.com/reg0206

We will also flesh out some opportunities in upcoming blogs.

But having said all that, please keep in mind that:-

A Budget is only ever a series of announcements,
They still have to be legislated,
They may be changed slightly and
Many have start dates form July 2021 – and we may have a change of government before then.

Please though don’t hesitate to call us if you any questions.

Important action if you employ casual employees

Do you employ any casual employees?

If so, recent changes to the Fair Work Act require your attention.

In late March the Fair Work Act was amended to require an employer to convert the employment basis to either full or part time where:-

Employee has been employed for more than 12 months and
During previous 6 months, there has been a regular and systematic pattern of working hours.

Employers are required to make the offer of either full or part time employment the later of either:-

Before 27^th September 2021 or
Within 21 days after an employee’s 12 month anniversary

There is however a provision to not make such an offer where there a “reasonable business grounds” not do so. Unfortunately, this is a test that will be analysed in hindsight, so documentation of this decision will be imperative.

It should also be noted that many modern awards already stipulate a conversion from casual employment.

It must be said that casual employment is often misunderstood. If someone works regular days then they are not a casual employee. A casual is one who may be called upon the work on a Friday and Saturday night at a function, not the next week and then the following Saturday. That said, there are many shades of grey.

You can read more at The Fair Work website here including the definition of an casual employee.

You can download the casual employment information sheet here.

Employment law is truly a specialist area. Please let us know if you would like a referral.

Entertainment can be taxing

Entertainment can be taxing. That’s an understatement as there are 3 aspects – tax deductibility, GST and Fringe Benefits Tax (FBT). There are 38 outcomes depending on who does with whom where and why. It therefore requires careful analysis

No wonder the ATO has such a great strike right in FBT audits on entertainment.

But that’s not all that has to be considered. For FBT purposes, an employer has to determine which of three methods produces the best result. Although that said, the actual method for quantifying the FBT taxable value of entertainment is usually best for small employers (but not always!).

You can read more on the following factsheet – FBT Flyer – Meal Entertainment Factsheet

Confused or concerned? That’s understandable. We would be happy to discuss your situation.

We take this opportunity to state that the prudent action is to lodge an FBT Tax Return – even if nothing is payable (which is usually the case for small businesses). This extra step is not a waste of time nor money as it starts the audit clock ticking – after 3 years the ATO can’t go back and audit you; don’t lodge an FBT Tax Return and the ATO can go back as far as they like.

Urgent SG super reminder

Wednesday 28^th April is the end date for satisfying Super Guarantee (SG) super obligations for the March 2021 quarter.

But beware as some of the clearing houses have a submission and payment deadline well before then. May be even today!

SG super is payable on all forms of remuneration including:-

Commissions
Bonuses (but see below)
Directors’ fees and all other forms of remuneration to directors
Allowances (except where fully expended)
Contractors paid mainly for their labour

But excluding the following remuneration:-

Overtime
Reimbursements
Unused annual leave on termination
Remuneration of less than $450 in a month
Bonuses that are only in respect of overtime
Bonuses that are ex-gratia but have nothing to do with hours worked; which is harder to satisfy than what you might think
In respect of employees younger than 18
Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies)
On quarterly remuneration greater than $57,090
Non-residents performing work for an Australian business outside Australia

If your payroll system has been set up correctly then it will perform these calculations for you. We would welcome the opportunity to assist you with this and if need be refer you to a good book-keeper.

SG super should never be paid late as late payments attract substantial interest and penalties. Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

The SG rate remains at 9.50%.

So if you haven’t paid your employer super obligations already, we recommend doing so today!

Do I have to pay FBT on my workhorse vehicle?

Do I have to pay FBT on my workhorse vehicle (think utes, vans and taxis)?

Well it depends.

There has and still is an exemption for private use that is minor, infrequent and irregular.

The problem is the ATO recently announced safe harbour provisions. And those safe harbour provisions are probably more restrictive than what most people think.

These provisions also dictate record keeping that wasn’t required previously.

Want to know more – then click on the following link.

FBT Flyer – Workhorse Vehicles and new safe harbour provisions

Why is this important?

Well if any private use doesn’t satisfy the safe harbour tests to minor, infrequent and irregular travel then the business is subject to Fringe Benefits Tax.

And this leads to the next point of how important it is to lodge an FBT Return (even if no FBT is payable). Lodging and FBT Return starts the audit clock ticking. When three years have passed, the ATO can’t go back and audit that year. Don’t lodge a FBT Return and they can go back as far as they like.

Not sure about your exposure? Don’t want to risk not complying and paying FBT (and penalties and interest)? Then call us.