Robert Goodman Accountants Blog

Super guaranteed

 

Paying the right amount of super to your employees can at times be a complex exercise, with the threshold changes in the recent years and the contribution base which changes every year according to indexation factors. With the rise of the gig economy there's also a grey area as to whether a certain person working for you is actually an employee or a genuine contractor. Find out what your super obligations are this year.

Are you paying the right amount of super for your employees? It's that time of the year again, where the Australian Bureau of Statistics (ABS) release the indexation factors that are critical in determining various superannuation thresholds. While the super guarantee is still frozen at 9.5%, the maximum contribution base will increase to $54,030 per quarter (or $216,120) for 2018-19. Employers are not required to provide the minimum super guarantee for the part of employees' wages above the maximum contribution base.

Besides the part employees' wages above $216,120, you as an employer, are required to make minimum contributions of 9.5% of an employee's ordinary time earnings by quarterly due dates to their nominated superannuation funds if you pay the employee $450 or more (before tax) in a calendar month. This is irrespective of whether an employee is full-time, part-time, casual, a family member, company directors, those who receive a super pension or annuity while still working, or temporary residents.

You should note that the ATO considers certain contractors that are paid mainly for their labour to be employees for super guarantee purposes. This is the case even if the contractor quotes an ABN. According to the ATO, you as an employer must make super guarantee contributions of 9.5% on what you pay your contractors if they are paid:

  • under a verbal or written contract that is wholly or principally for their labour;
  • for their personal labour and skills which may include physical labour, mental effort or artistic effort; or
  • to perform the contract work personally.

If you're not paying the right amount of super for your employees and some contractors, beware, the ATO uses sophisticated data analytics to identify employers at high risk of non-compliance.

It also takes a differentiated approach to compliance and penalties depending on the compliance history of the employer and how actively they engage to meet their superannuation obligations. Therefore, it pays to be in the good books of the ATO as they may take a more accommodating approach should your business have any discrepancies in super guarantee payment to your employees.

However, employers who are unwilling to meet their super guarantee obligations should expect the ATO to take firm compliance action including the imposition of penalties such as the super guarantee charge, a Part 7 penalty (up to 200%) for late lodgement of the super guarantee statement or failing to provide information when requested, and an administrative penalty (up to 75%) may also apply for an employer who makes a false and misleading statement.

Need help?

If you're having issues with working out the right super amount to pay to your employees or if you would like to determine whether that person working for you is considered to be an employee or a genuine contractor, we can help. 

Call us at Robert Goodman Accountants on 07 3289 1700 or email us at reception@rgoodman.com.auSource: Thomson Reuters.   Brought to you by Robert Goodman Accountants.

The small business superannuation clearing house (SBSCH) is a convenient service that allows a small business to make superannuation contributions for its employees in one single payment. It's important to know that access to the service has recently changed significantly. In this article we explain the steps you need to take to ensure your business can continue using the service.

 

Although the SBSCH itself hasn't changed, the service was migrated to the ATO's Business Portal on 26 February 2018. This means your old login details will no longer work and you need to arrange access to the new system as soon as possible (if you haven't done so already).

 

Despite this minor inconvenience, the change benefits small businesses because they can now access a number of the ATO's tax and superannuation services using one set of login details.

The way you access the SBSCH depends on your business type.

  • Small businesses with an ABN can now access the service through the Business Portal. If you're already using this portal, you can access the SBSCH from the "Manage Employees" menu. If you need to arrange access to the portal, you will first need to set up an approved authentication credential. You can choose from either AUSkey (which can only be used on the particular device it is installed on) or Manage ABN Connections (which allows access from any browser or mobile device).
  • Sole traders, individuals who employ others (such as carers or nannies) or businesses without an ABN can access the service through their myGov account (linked to ATO services).

Your tax professional can also manage your contributions through the SBSCH on your behalf.

Never used the SBSCH?

The SBSCH is a free service that makes it easier for small businesses to comply with their superannuation obligations. The service is available to any business with 19 or fewer employees or an annual aggregated turnover of less than $10 million.

After joining and updating the system with your employees' details, you only need to make a single electronic payment to the service and it will distribute the separate contributions to each employee's fund. Your contributions are "paid" on the date the SBSCH accepts them.

The SBSCH also allows you to nominate staff who are authorised to use the service on behalf of your business.

Need some assistance?

Has your business done everything it can to make superannuation compliance as easy as possible? If you need to set up access to the new SBSCH, or if you've never used the service and would like to sign up, contact our office for assistance.

Call us at Robert Goodman Accountants on 07 3289 1700 or email us at reception@rgoodman.com.auSource: Thomson Reuters.   Brought to you by Robert Goodman Accountants.   

 

How can superannuation be considered universal when it appears to discriminate against half the working population? With recent changes to the eligibility rules for spouse/partner contributions to super (brought in on 1 July 2017) it seems that policy makers are waking up to the shortfall in women's superannuation. We look at some of the key causes that may affect you, and what actions you should consider taking in relation to your super.

It may not be the super system itself that is unfair to women, but rather that it doesn't extend to "unpaid" or temporary/casual work, including domestic work mostly undertaken by women, or seek to cover those in less formal working roles. Whatever the cause, a disparity exists: A recent 2017 survey by HILDA (Household, Income and Labour Dynamics in Australia) found that women retire with an average super balance of $230,907 compared to men, who, on average, retire with double this amount. One in three women is heading towards retirement with no super, or a very small fund. There are a number of factors that contribute to this shortfall, notably the gender pay gap, and the reality that women are far more likely to spend time out of work in comparison to men, to work part-time, to bring up children, or to care for elderly or sick relatives. The universal Superannuation Guarantee (SG) system was conceived 25 years ago, based on income from full-time, dependable employment.

In addition to this women tend to live longer than men, meaning that planning and looking after their super is essential.

Are you a woman aware of a shortfall in your super? Have you reviewed your super recently? If so now might be a good time to look at some practical strategies to boost your super, whatever your age.

Start super early

Even if you don't have much capacity to put aside extra money for retirement, there is still a lot you can do to maximise your retirement benefits. No matter how small, compounding savings over a long-term horizon can produce substantial benefits.

If you can, plan early because having an adequate amount in your super by retirement age (current retirement age in Australia is 65, rising to 67 by July 2023) is dependent on growth of the fund over time. The earlier you start saving in super, the longer time your fund will have to accumulate. Saving for retirement is tax-effective via super as there is a lower rate of tax charged on super contributions, and from the age of 60 you can withdraw your super without paying tax.

Your employer should contribute 9.5% of your salary or wages to super if you are in full-time employment, or even part-time employment. An employer will usually select a default fund on your behalf, but you can choose your own nominated fund if you wish.

Find lost super

You may have lost track of a super fund, for example, if you have worked on a part-time basis or you have moved house, changed your name, or lived overseas. You can check this and track your entire super from your MyGov account: https://www.ato.gov.au/Individuals/Super/Keeping-track-of-your-super/#Checkyoursuper

Know your super/grow your super

It may be difficult to keep up with detail of changes made to super, but it's critical that you know the value of your own super as a starting point. Once you have located what super you have, you can check your balance/s, how much is being contributed, what investments are being made and any insurance that is in place. You can also add to your fund by making additional payments, either through salary sacrifice made directly from your employer, or by my making your own non-concessional contributions (after-tax super contributions).

Time out?

If you take time off to care for someone or to have a child, keep in mind that this will affect your super. You can use the career break super calculator to work out how taking time off will affect your super balance. If at all possible it is worth continuing to pay into your super while you are not working.

Individuals with total super balances less than $500,000 can make additional concessional contributions for unused cap amounts from the previous five years, starting from 1 July 2018. This will be a handy measure for those with a capacity to make "catch-up" contributions to boost their super.

Spousal/partner contributions – tax offset – change to eligibility

A tax offset of 18% up to $540 is currently available for any individual, married or de facto partner, contributing super on behalf of a recipient spouse/partner whose income is up to $37,000. Eligibility rules were extended from 1 July 2017 by the Government to increase this amount from $10,800. However, this offset is gradually reduced from income above $37,000 and disappears completely at income above $40,000. Individuals who are receiving such a contribution must be under 70 and if aged 65 to 69 must meet a work test.

A Government co-contribution up to $500 is also available for individuals with total incomes up to $36,813 for 2017–18 (phasing down for incomes up to $51,813).

Consolidate

While you can often choose the fund into which super is paid, you may already have more than one super fund. Look into consolidating your current super funds if this is the case because contributing to one super fund, rather than many different ones, will mean you spend less on fees (as each super has an administration fee). It is also is easier to keep track of one fund. Key things to consider when choosing a fund are the long-term average returns of that fund and the fees that are charged – make sure you are comfortable with both. Before switching funds, it is also important to consider any insurance implications. Some funds require new members to undergo a medical test before insurance benefits are granted, while other funds may automatically offer transferring members insurance under a group life policy.

Strategy for self-managed super fund – get advice

You may not be in a job where your employer pays your super, or you might want to manage your own super fund. If so, you could consider a self-managed super fund (SMSF). This is a legal structure (regulated by the ATO) with the specific purpose of providing for your retirement. There are similar rules and restrictions to ordinary super funds so it is important to seek advice from a licensed financial planner about whether an SMSF would suit your situation, how to set up your own fund and investment strategy going forward. 

Talk to us

Please contact our office to discuss your circumstances and find out how we can assist further. Call us at Robert Goodman Accountants on 07 3289 1700 or email us at reception@rgoodman.com.au . © Copyright 2018. All rights reserved. Source: Thomson Reuters.   Brought to you by Robert Goodman Accountants. 

IMPORTANT: Robert Goodman Accountants does not provide financial advice. All information on our blog is intended as a guide only. We recommend that you obtain independent professional accredited financial advice when considering whether the information is suitable to your personal circumstances.  We have associations with Financial Planners who specialise in providing independent SMSF, retirement & Estate Planning advice.


If you are either an employee or a self-employed person and you top up your super by making deductible contributions, you need to be aware of not breaching the annual $25,000 concessional (before-tax) contribution cap. If that happens, your tax bill will increase, not to mention the administrative inconvenience you may face.

As an employee, your employer is obliged to pay you the 9.5% of Superannuation Guarantee Contributions (SGC), which count as concessional contributions. So if you are a high-income earner, especially, with more than one employer (eg, a doctor working for more than one hospital) you could risk going over the limit.


You could also be in danger of reaching the cap if you, as an employee, have salary sacrifice arrangements already in place from last year when the annual concessional cap was higher ($35,000 or $30,000 depending on your age).


Given that the annual cap was lowered to $25,000 (regardless of age) from this 2017–2018 year, it is advisable to review your current arrangements and adjust your contribution amounts so you don't inadvertently contravene the new lower cap. 

What exactly are concessional contributions?

Concessional contributions are those made to a super fund out of an individual's pre-tax income and are taxed at 15%.

Generally, concessional contributions include:

  • Employer's super guarantee contributions, that is, the compulsory 9.5% of your salary that your employer puts into your super. 
  • Salary sacrifice payments made to your super fund by entering into a salary sacrifice agreement with your employer. 
  • Personal contributions, for which a deduction has been claimed, typically, if you are self-employed.
  • Insurance premiums and administration fees when your employer paid those costs to your super fund on your behalf, rather than these being deducted direct from your super fund.

What happens if the limit is breached?

If you go over the $25,000 concessional contributions cap, whether deliberately or unintentionally, the ATO will send you an excess concessional contributions determination, which indicates that:

  • The excess contributions will be included in your assessable income and you will be taxed at your marginal tax rate (plus Medicare levy).
  • You will receive a non-refundable tax offset of 15% for your excess concessional contributions. This amount acknowledges the tax already paid by the super fund on those contributions. (Remember: concessional contributions are taxed at 15% when received by the super fund.)

You will need to pay an "excess concessional contributions charge" (ECC charge) at an approximate rate of 4.70% (the rate is updated quarterly). The ECC charge period is calculated from the first day of the income year to which the charge relates, ending on the day before the day on which payment is due under the first notice of assessment.

Making the election

After receiving the excess concessional contributions determination, you can choose to pay the tax bill from your own money, or use a release authority issued by the ATO to pay the debt using your superannuation money.

However, before paying the excess, contact us, or your superannuation fund, to confirm that there was an excess of contributions and that this was not a mistake. There could also be a narrow possibility of challenging the excess based on "special circumstances", but do speak to us first to evaluate your position.

The release authority allows you to use up to 85% of the excess concessional contributions from the superannuation fund to cover the additional personal tax liability. The election to release must be made in the approved form within 21 days of receiving the excess concessional contributions determination.

Once you send the election form to the ATO, it will issue the nominated super fund with an excess concessional contributions release authority. The super fund will then be required to pay the amount to be released to the ATO within seven days. Due to the short seven-day timeframe, trustees of self-managed super funds (SMSFs) should ensure that they have sufficient cash to make the expected payment on time. Note that administrative penalties apply for failing to make a payment to the ATO.

Talk to us first

There are various practical things you can do to avoid paying additional charges. However, talk to us first before making any decision about your super.

Call us at Robert Goodman Accountants on 07 3289 1700 or email us at 

reception@rgoodman.com.au. 

© Copyright 2017. All rights reserved. Source: Thomson Reuters. This communication does not constitute financial advice and does not consider your personal circumstances. Please consult a licensed financial planner for financial advice tailored to your financial circumstances.  Brought to you by Robert Goodman Accountants.

 

The ATO is increasing its efforts to crack down on employers who fail to make quarterly  superannuation guarantee (SG) contributions of 9.5% on behalf of their employees. If you are an employer, regardless of whether you run a small or large business, now might be a good time to review your SG obligations before the ATO comes knocking. If a shortfall is discovered, simply rushing to make extra super contributions will not always be the best course of action. In fact, it can result in a double liability, so careful planning is required for dealing with any identified problems.

It is estimated that the shortfall – or gap – in SG payments could be around 5.2%, equivalent to $2.85 billion in missing super contributions (based on estimated figures for 2014–15). This gap is the difference between the theoretical amount due by employers to be fully compliant with their SG obligations and the actual contributions received by super funds. The Minister for Revenue said the failure of some employers to meet their SG obligations to employees has been a problem ever since SG was introduced in 1992.

ATO Deputy Commissioner, James O'Halloran reported recently: "While this analysis shows that 95% of the estimated superannuation guarantee is paid to employees, the gap exists because some employers appear not to be meeting their super guarantee obligations either by not paying enough or not paying it at all". This follows recent pressure from a Senate Committee calling for the ATO to adopt stronger compliance activities, rather than its previous reactive approach.

 In addition to following up all reports of unpaid SG, the ATO says it is increasing its proactive SG case work by a third this financial year. Mr O'Halloran added:


"We have improved our analysis of data to detect patterns in non-payment, and are working more closely with other government agencies to exchange information"


Package of reforms

As if the Commissioner doesn't have enough powers already, the Government has announced a package of reforms to give the ATO real-time visibility over SG compliance by employers. One of these involves additional ATO funding for a Superannuation Guarantee Taskforce to crack down on non-compliant employers.

Other key recommendations include the following:

Monthly contribution reporting

Superannuation funds will be required to report to the ATO on contributions received more frequently, at least monthly. The Government says this will enable the ATO to identify non-compliance and take prompt action. It has been noted that this move to more regular SG reporting will place a greater cost burden on super funds, especially smaller ones.

Single Touch Payroll (STP) roll out

Employers with 20 or more employees will transition to STP from 1 July 2018, while smaller employers (ie, those with 19 or less employees) will move to STP from 1 July 2019. Rather than being a check on businesses, this new system is designed to reduce the regulatory burden and transform compliance.

Director penalty notices

The issue of director penalty notices and the use of security bonds for high-risk employers are measures set to improve the effectiveness of the ATO's recovery powers, to ensure that unpaid superannuation is collected and paid to employees' super accounts.

Penalties by court order

The ATO will have the ability to seek court-ordered penalties in the most serious cases of non-payment, including those employers who are repeatedly caught but still fail to pay SG liabilities.

Super contribution due dates

Quarter ending

Employer contribution due date

Late contributions, SGC statement and payment due date

30September

28October

28November

31December

28January

28February

31March

28April

28May

30June

28July

28August

Employers are required to make quarterly super contributions of at least 9.5% of an employee's ordinary time earnings. If the super fund receives the SG contributions by the quarterly due dates (see table) the contribution is tax-deductible for the employer, whereas a late payment is not tax-deductible. When a due date falls on a weekend or public holiday, you can make the payment on the next working day.

Where an employer does not make sufficient quarterly super contributions by the due date, the employer becomes liable for the superannuation guarantee charge (SGC). The SGC is payable to the ATO and automatically arises as soon as the contributions are not made by the due date. This means that if an employer discovers a shortfall in SG contributions after the due date, making a contribution to the employee's super fund to cover the shortfall isn't always the best course of action as it may not reduce the SGC liability. Generally, an employer can only use late contributions to offset a portion of the SGC that relates to the relevant employee. However, a late contribution cannot be used to offset the SGC in respect of a person who is no longer an employee.

Fixing a SG problem

If you are expecting leniency from the ATO for a first offence, think again. The Commissioner does not have any discretion at law to remit the SGC itself. The best a non-compliant employer can hope for is that the ATO may remit the 200% additional SGC penalty that applies for the late lodgment of a SGC statement.

Employers can also request the ATO to defer the due date for lodgment of a SGC statement. However, a deferral of time to lodge the statement does not defer the time for payment. The ATO will generally only extend the due date for payment where there are circumstances beyond the employer's control (eg, a natural disaster or illness) and the payment can be made in full at a later time (or by instalments).

Clearing Houses

A clearing house distributes super contributions to your employees' funds on your behalf. If you use a clearing house, the employee's super contribution is counted as being paid on the date the super fund receives it, not the date the clearing house receives it from you. Some clearing houses take 3-10 business days to process the payments before the super fund receives it. The exception is the free Small Business Superannuation Clearing House service. Check with your clearing house to make sure you allow enough time for your payments to be processed before the quarterly due dates. 


Want to find out more?

Do you think you could have a problem with your SG obligations? Speak to us about your options before the ATO is on your doorstep. 

Call us at Robert Goodman Accountants on 07 3289 1700 or email us at reception@rgoodman.com.au.

 © Copyright 2017. All rights reserved.

Brought to you by: Robert Goodman Accountants

 

 

The Government introduced Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No 1) Bill 2017 in the House of Reps Thur 7.9.2017. The Bill proposes to allow people aged 65 or over to make additional non-concessional contributions up to $300,000 from the proceeds of selling their home from 1 July 2018.

The measure will apply to sales of a principal residence (excluding a caravan, houseboat or mobile home) that would qualify for a partial or full CGT concession. Either the individual or their spouse must have owned the home for a minimum of 10 years up to the point of sale. If the person's spouse is not on the title with them, both can still make a downsizer contribution. Note that a person is not required to make any subsequent purchase of another dwelling after selling their home and making a downsizer contribution. The measure seeks to reduce a barrier to downsizing for older people to enable more effective use of the housing stock by freeing up larger homes. 

This downsizer contributions cap of $300,000 will be excluded from the non-concessional contributions cap. It will also be exempt from the contribution rules for people aged 65 and older, and the restrictions on non-concessional contributions for people with total superannuation balances above $1.6 million. The contribution (non-deductible) must be made within 90 days after the home changes ownership (generally the date of settlement). While the family home is totally exempt from the Age Pension assets test, any sale proceeds from downsizing that are contributed to superannuation will count toward the assets test.

DATE OF EFFECT: Only applies to home sales where the contract of sale is entered into (exchanged) on or after 1 July 2018.

If you have any questions about how the proposed Downsizing measures applies to you, please don't hesitate to contact Robert Goodman Accountants on 07 3289 1700.