Australian employers wanting to access the federal government’s JobMaker hiring credits can now register for the scheme via the Australian Taxation Office.

Announced in the October budget, and passed by parliament in November, the scheme involves wage subsidies for businesses that increase their headcounts by hiring young workers. 

Businesses will be able to start claiming JobMaker hiring credits from February, but first need to register via the ATO’s website. 

Under the JobMaker scheme, eligible employers can claim up to $200 per week for each additional employee they hire who is aged between 16 and 29, and up to $100 per week for additional workers aged between 30 and 35. 

The credits can be claimed for employees hired between October 7, 2020, and October 6, 2021, with businesses able to claim a total of $10,400 over the 12 month period for each eligible employee aged between 16 and 29, and $5,200 for those aged 30 to 35. 

To qualify for the scheme, the new employees must have been receiving a government payment such as JobSeeker, Youth Allowance or the Parenting Payment for at least two of the six fortnights prior to being hired in the role. 

Employees must also work a minimum average of 20 hours per week during the JobMaker period in order for the business to receive the hiring credit. 

The credits will be paid quarterly and the first payment period will open for claims on February 1, 2021. 

Businesses will be able to claim for employees until October 6, 2021, except in cases where a business hires an additional employee on that date, in which case it will be able to make a claim for payment to October 6, 2022. 

More information about the JobMaker hiring credit scheme is available from the ATO website here.

Division 293 tax reduces the tax concession on super contributions for individuals with income greater than the Division 293 threshold.

Individuals earning over the threshold and making concessional contributions to superannuation, will be liable for Division 293 tax.

The rate of Division 293 tax is 15%.

Division 293 threshold

The threshold is $250,000 – see below how this amount is calculated.

An individual’s income is added to certain super contributions and compared to the Division 293 threshold.

Division 293 tax is payable on the excess over the threshold, or on the super contributions, whichever is less.

Overview

Super contributions made before tax (ie concessional contributions) are taxed within your super fund at a concessional rate of 15% (up to the concessional contribution limit which currently stands at $25,000pa).

From 1 July 2012, an additional 15% tax (known as Division 293 tax) was introduced. It reduces the tax concessions on superannuation contributions for individuals with income greater than $250,000 per annum.

The Division 293 tax is payable in addition to the standard 15% contributions tax.

This means, if you’re a high income earner with an income of more than the threshold, the total tax on your before-tax contributions below the concessional contribution limit is 30%.

If your income is less than the $250000 threshold, but by including your before tax contributions (that are below the concessional contribution limit) the total is more than the $250,000 threshold, the 30% tax rate will apply to the part of your before-tax contributions that are over $250,000 (but below your concessional contribution limit).

For example, if your income is $230,000 and your before-tax contributions are $25,000, you only pay the 30% tax rate on $5,000.

Div 293 tax is not included in your tax assessment notice. Once your tax return is lodged, The ATO will compute the figure and issue a separate Division 293 notice of assessment.

Income for Division 293 purposes 

The ‘income’ that is used to calculate the Division 293 tax is similar to the income used for determining whether you are liable to pay the Medicare levy surcharge.

It excludes reportable superannuation contributions (that are instead included in the low tax contributions).

This income includes the following amounts, if applicable: 

• taxable income (assessable income less deductions)
• reportable fringe benefits
• net financial investment loss
• net rental property loss
• the net amount on which family trust distribution tax has been paid.

 It excludes:

• the taxed element of a superannuation lump sum benefit (other than a Death benefit) up to the low rate cap amount (relevant only to those aged between 55 and 59).
• Low tax contributions If you are an accumulation member.

Low tax contributions

If you are an accumulation member, low tax contributions are generally the concessional contributions made in a financial year, excluding any excess concessional contributions. For most individuals, this will be employer contributions, salary sacrifice contributions and any deductible personal contributions. However, it may include additional amounts, for example, if your employer pays superannuation insurance premiums or expenses on your behalf.

Does Division 293 tax apply to me?

If the total of your income for surcharge purposes and low tax contributions is above $250,000, the Division 293 tax will apply to the lesser of the following two amounts: (i) the amount by which your total income for surcharge purposes and low tax contributions exceeds $250,000; or (ii) the total of your low tax contributions. The additional 15% tax is applied to the lesser of these two amounts.

Excess Concessional Contributions Tax

If you exceed the $25,000 concessional cap, excess concessional contribution tax will apply. Division 293 tax does not apply to the excess. The excess will be included by the ATO in your income tax assessment notice.
 

From 1 July 2020, the recent change in legislation has allowed making contributions to super easier for anyone aged 65 or 66 years of age as there now is no requirement to meet the work test. But once an individual reaches 67 years of age, the work test must be met prior to the contribution being made.

What is the work test and how does it work?

The work test requires a person to be gainfully employed for at least 40 hours in 30 consecutive days during the financial year before concessional or non-concessional contributions can be made after reaching the age of 67.

Being gainfully employed means that a person must be engaged in paid work in an occupation. This includes being employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. ‘Gain’ or ‘reward’ includes receiving wages, business income, bonuses and commissions or other income from the employment or self-employment.

A person engaged as a volunteer is not considered to be in gainful employment as they are not paid for the work undertaken. Even if a volunteer receives reimbursement of expenses or allowances for meals while undertaking the work as a volunteer, they are not considered to be gainfully employed.

It can be complicated to determine whether a person is engaged as an employee. Examples could include someone who is babysitting, cleaning, lawnmowing or gardening, mainly on a casual basis. However, to be considered an employee, the arrangement must be more than just a domestic or family arrangement.

For an individual to be in a genuine employment arrangement, the person’s employer would need to make payments which are taxable and tax is deducted from the payment, if required. Also, the employer may be required to meet their superannuation guarantee obligations, workplace health and safety requirements, arrange insurance and worker’s compensation and ensure that all employee entitlements are provided. This needs to be backed up with relevant business records and that contracts and employment agreements in place.

A person who is 67 years of and under the age of 75 may wish to make deductible and non-deductible personal super contributions. However, they are required to meet the work test in most situations. If an individual intends to claim a tax deduction, they are required to complete a notice of intent which must be lodged with the super fund and acknowledged in writing by the fund’s trustee.

There are two exceptions that apply to personal super contributions where the work test is not required to be met. The first applies on a once only basis for the financial year after a person has ceased work and their total super balance for that year is less than $300,000. The second is for anyone who qualifies for the downsizer contribution as it can be made at any time after they have reached the age of 65.

Good news about the bring forward rule

A proposed change to the legislation that we have been waiting for is the extension of the bring forward rule for non-concessional contributions from age 65 to age 67. This amendment is currently before parliament. Currently, the bring forward rule allows a person to bring forward up to two years of non-concessional contributions commencing in the year in which they make non-concessional contributions that is greater than the $100,000 annual cap. Where a person has a total super balance of less than $1.4 million, they can bring forward two years of non-concessional contributions. This allows a total of $300,000 to be made at any time during a fixed three-year period. If the person has a total super balance of between $1.4 and $1.5 million, they can bring forward one year of non-concessional contribution. This allows a total of $200,000 to be made at any time during a fixed two-year period.

The amendments to the bring forward rule were intended to commence from 1 July 2020. However, the legislation has been delayed as parliament has not been able to sit on a regular basis for most of this year due to the COVID-19 pandemic. The good news is that these amendments which were introduced into the parliament in May this year were debated in the House of Representatives on 25 August.

The debate seems to have bipartisan support among the major parties which is a positive sign and will be voted on by the House of Representatives before it progresses to the Senate for debate. The hope is for the amendment to receive a clear passage through both houses and not be referred to the committee stage prior to being considered by the Senate.

The only issues arising from the potential passing of the legislation is the date of effect and whether transitional arrangements will be put in place for those who may not have been able to access the bring forward rule. This would apply to anyone who was not able to make non-concessional contributions greater than the standard amount prior to reaching the age of 67 and will not meet the work test in this financial year.

What Next?

The extension of the work test exemptions to 67 years of age for personal superannuation contributions has been a bonus in these difficult times. However, we wait in anticipation to see whether the extension of the bring forward rule to the age of 67 will become law in the foreseeable future.

Over the past few years there have been significant changes to land tax regimes across Australia. These include the imposition of penalty rates for foreign owners of Australian real estate, trustee surcharge regimes for land held on trust, and the tightening of aggregation models. In some cases the changes were implemented a few years back and arrear payments may arise. Simply put, a land tax surcharge may apply if you are a foreign person/resident and you own property in Australia. If you are a non-resident of Australia and own property in Australia we recommend you contact the relevant authority to register. 

SUMMARY

Below is a generic summary of the laws applicable to the various states.  The material has been made available for informational and discussion purposes only. It is not professional advice. From 1 July 2020, the land tax headlines across the country can be summarised as follows:

 

These high-level figures, while useful, do not paint a full picture of land tax across all states and territories.

For example, while the ACT recently removed land tax on commercial properties, it was replaced with a very severe “variable charge”. While the top land tax rate of 1.1% looks attractive at first glance, the variable charge on commercial land in the ACT can be in excess of 5%.

South Australia, Tasmania and Western Australia do not currently impose an annual surcharge on foreign owners in the form of a land tax. However, each of these states may impose a surcharge in the form of additional transfer duty on the acquisition of a property by a foreign purchaser.  

LAND TAX SURCHARGE NEW SOUTH WALES

If you are a foreign person who owns residential land in NSW, you must pay a land tax surcharge (“LTS”) of 2.00% from the 2018 land tax year onwards.

This is in addition to the 1.6% land tax amount. The LTS is only payable by foreign persons owning land in NSW.

It applies to all properties owned by foreign persons including their principal place of residence. Importantly there is no tax free threshold applicable to the LTS.

Foreign persons will not be provided with a tax-free threshold for the land tax surcharge nor an exemption for the principal place of residence.

Australian citizens are not foreign persons, no matter where they reside.

Are you or your entities a ‘Foreign person’?

‘Foreign person’ is defined by reference to the definition under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), modified as follows:

an individual not ordinarily resident in Australia (except for Australian citizens or a New Zealand citizen holding a special category visa under section 32 of the Migration Act 1958); or

a corporation or trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest (20%); or

a corporation or trustee of a trust in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest (40%); or

any other person, or any other person that meets the conditions, prescribed by the Foreign Acquisition and Takeovers Regulation (Regs). Specifically, clauses 18, 46 and 47 of the Regs.

The modified definition of ‘Foreign Person’ excludes an Australian citizen and New Zealand citizen holding a special category visa from liability to the surcharges no matter where they reside. A non-Australian citizen will be ‘ordinarily resident’ in Australia at a particular time where the individual has actually been in Australia during 200 or more days in the last 12 months and is not (or was not from most recent departure) subject to any legal limitation as to time for continued presence in Australia.  A person who falls outside of the exclusion or is not ‘ordinarily’ in Australia will be regarded a ‘foreign person’.

The land tax surcharge will apply to taxable value of residential land owned by a foreign person at midnight on 31 December in any year commencing on 31 December 2016 including trusts with discretionary beneficiaries that may be ordinarily outside of Australia.

Review trusts that own residential land prior to 31 December to consider amendment to discretionary trust deed to exclude ‘foreign persons’ and limit the liability of trustee.

Foreign persons will not be eligible for the tax-free land tax threshold.

Foreign persons who own a principal place of residence in NSW will be subject to land tax of 0.75% from 2017 and two per cent from the 2018 land tax year onwards, on the taxable value of their land.

The land tax surcharge applies to foreign persons even if the property is exempt from general land tax except where the property is predominantly used for primary production.

Foreign persons must carefully consider the long-term holding costs for residential land in NSW taking into account the land tax surcharge.

Land tax surcharge will be imposed to the extent the foreign person’s interest in land is used for residential purpose. 

https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/land-tax/surcharge-land-tax

LAND TAX SURCHARGE VICTORIA

Absentee owner surcharge

If you own property in Victoria, you may have to pay land tax.

From the 2020 land tax year, an absentee owner surcharge of 2% applies to Victorian land owned by an absentee owner. The surcharge was 1.5% from 1 January 2017 and 0.5% for the 2016 land tax year.

The absentee owner surcharge is an additional amount that applies over the land tax you pay at general and trust surcharge rates.

Absentee owners need to advise the State Revenue Office of their status or penalties may apply.

What is an absentee owner?

An absentee owner is an absentee person that owns land in Victoria, and can be:

• an absentee individual,
• an absentee corporation, or
• a trustee of an absentee trust.

Each of these terms has a specific meaning. You should refer to each term for more information to see if the absentee owner surcharge applies to you.

When will the surcharge apply?

If you are an absentee owner at 31 December, the surcharge applies in the following land tax year.

The surcharge is calculated on the total taxable value of Victorian land you own and will be included on your Victorian land tax assessment. The surcharge calculation depends on who owns the land and how they own it, for example if the land is jointly owned, owned by an absentee corporation that is part of a land tax group or owned by a trustee of an absentee trust that is a discretionary trust, unit trust or fixed trust.

The surcharge does not apply if land is exempt from land tax or if the total taxable value of your land(s) is below the threshold of $250,000 or $25,000 (if the land is held on trust and is subject to the trust surcharge rate).

If your land attracts special land tax, you’ll pay this one-off tax at an absentee owner rate of 7% from the 2020 land tax year.

https://www.sro.vic.gov.au/absentee-owner-surcharge

LAND TAX SURCHARGE QUEENSLAND

If you are a foreign individual and do not ordinarily reside in Australia, you may be an absentee for land tax purposes.

From 30 June 2019, Australian citizens and permanent visa holders are not deemed absentees.

New Zealand citizens are absentees unless they ordinarily reside in Australia.

As an absentee, you are liable for land tax if the total taxable value of your freehold land at 30 June is $350,000 or more.

The land tax rates for absentees and a surcharge will apply to the land you own.

Similar to other types of owner, you will be assessed only on the land you own, which includes the value of your share in any land owned with others.

Read about annual land valuations if you want to learn about how your land is valued and what information is included in your notice.

Determining absentee status

The State Revenue Office considers several factors to determine if you usually live in Australia, such as the reason for your absence and the time spent in and out of the country. As a foreign individual, you will be an absentee if you: 

• were away from Australia at 30 June or
• have been away from Australia for more than 6 months in total during the financial year before 30 June.

If you are an absentee, you cannot claim a home or primary production exemption.

If the total taxable value of your land exceeds $350,000, you must tell the State Revenue Office within 1 month of the date you move overseas by completing an absentee/resident status declaration (Form LT16).

Working overseas

In limited cases, the land tax rates for individuals will continue to apply for foreign individuals working overseas. For this to apply, you must:

• be a public officer of the Commonwealth or of a state, who is absent in the performance of your duties or
• have been working for your employer in Australia for at least 1 continuous year before you go overseas, and are directed by that employer to continue working for them overseas for a period less than 5 years. If the period is longer, you will be reassessed as an absentee for the whole time you are overseas.

If you believe these arrangements apply to you, complete an absentee/resident status declaration (Form LT16) and include copies of your Australian and overseas employment contracts.

Similarly, if you have received the benefit of the above arrangements, complete a Form LT16 and send it to the State Revenue Office within 28 days of:

• ceasing to work for your employer
• working overseas for more than 5 years (public officers excluded).

Interest and penalties may apply if you don’t tell us that your resident status has changed.

https://www.qld.gov.au/environment/land/tax/calculation/absentees

Foreign companies and trusts for land tax

As a foreign company or trustee of a foreign trust, you are liable for land tax if the total taxable value of your freehold land at 30 June is $350,000 or more.

Foreign company

Your company is foreign if: 

• it is incorporated outside Australia
• foreign persons or related persons of foreign persons have at least 50% controlling interest.

 Trustee of a foreign trust

You are a trustee of a foreign trust if at least 50% of the trust interests are held by: 

• an individual who is not an Australian citizen or permanent resident
• a foreign company
• a trustee of a foreign trust
• a related person of any of the above.
• Your interest in a trust as a beneficiary is the percentage of the value of your entitlement under the trust. There are special rules for discretionary trusts where only ‘takers in default’ (i.e. people whose entitlements as beneficiaries result from the trustee not exercising their discretion) of an appointment by the trustee have a trust interest.

Read the public ruling on foreign corporations and trusts (LTA000.3) for more information.

Surcharge

A surcharge of 2% applies in addition to the land tax rates for companies and trustees. The surcharge will appear on the land tax summary section of your assessment notice.

https://www.qld.gov.au/environment/land/tax/calculation/foreign-companies

As part of the coronavirus relief package, the surcharge was waived for the 2019–20 assessment year.

LAND TAX SURCHARGE AUSTRALIAN CAPITAL TERRITORY

If you’re a foreign person who owns residential land in the ACT, you must pay a land tax surcharge of 0.75 per cent of the Average Unimproved Value per year from 1 July 2018 onwards.

The surcharge is in addition to land tax you must pay if a property isn’t your principal place of residence.

If you’re a foreign person and you already pay land tax, you’ll need to notify the State Revenue Office about your foreign status which you can do using the Land Tax Notification Form and pay the surcharge. Penalties may apply if you don’t notify the State Revenue Office about your foreign status. They will calculate the surcharge as part of your land tax assessment.

https://www.revenue.act.gov.au/land-tax/foreign-ownership-surcharge

On 24 February 2020, the Superannuation Guarantee (SG) Amnesty Bill passed both houses of Parliament and is now awaiting Royal Assent to become an Act.

The SG Amnesty provides a one-off temporary amnesty from late payment penalties for employers to correct their historical unpaid/underpaid employer superannuation guarantee contributions (SGC shortfalls) for their employees.

The amnesty provides relief from penalties that could otherwise be imposed on employers who fail to meet their SG obligations. The employer to which the amnesty is provided is still obliged to pay the SG shortfall amount (meaning that the employee still receives their superannuation as well as an interest amount applied to the shortfall).

Once the SG Amnesty Bill receives Royal Assent, there is a 6-month window after which the amnesty period will end, starting from the day of Royal Assent.

How to qualify for the amnesty?

To qualify for the amnesty, a voluntary disclosure must be made by an employer with the Australian Taxation Office (ATO) during the amnesty period. The method may be the same as what the ATO previously rolled out before the initial Amnesty Bill lapsed, ie, submit an SG Amnesty Fund payment form electronically through the Business Portal, Tax Agent Portal or BAS Agent Portal.

Further details of the process will be made public shortly.

Which period is covered by the amnesty?

The period covered by the amnesty’s beneficial treatment is for SGC shortfalls between 1 July 1992 to 31 March 2018. The period from 1 April 2018 to the present is not covered by the amnesty.

What are the benefits of disclosure during the amnesty?

Employers who qualify and make voluntary disclosure with the Australian Taxation Office during the amnesty period will:

• be allowed to claim a tax deduction for SGC shortfall payments; and
• not be liable for an administrative fee component;
•  have liability to penalty of up to 200% of SGC shortfall reduced (see below).

Penalty reduction during the amnesty

The ATO will change its SGC remission guideline to the following:

• Employer voluntary disclosure on their own accord: residual penalty between 0% to 20% of the superannuation guarantee charge (SGC).
• Unprompted self-assessment but not come forward on own accord: should attract a penalty of less than 100% of the SGC shortfall.
• Prompted self-assessment and worse: should attract a penalty of 100% of the SGC, with penalties increasing linearly as the offences become more shocking.
• Default assessment issued for worst cases: such as severe disengagement and phoenixing arrangement by the employer, should attract full penalty of 200% of the SGC shortfall.

What if an employer is caught with SG shortfall after the amnesty?

Employers who fail to come forward during the amnesty period will likely be subject to higher penalties and strong enforcement by the ATO.

What should you do?

If you employ people, and believe that you may have underpaid superannuation we recommend that you take advantage of this amnesty before it expires at the end of August 2020. Employers with historical SGC owing remaining unpaid may be entitled to the SG amnesty which can reduce tax penalties and obtain tax deductions for their payments.
 

 

 The Federal Government’s package of reforms aimed at addressing illegal phoenix activity is now law. One of the more significant measures under the reforms is the extension of the director penalty regime to include GST and other indirect tax liabilities of a company.
 
What is the director penalty regime?

The director penalty regime allows the Commissioner of Taxation to make directors of a company personally liable for specified taxation liabilities of the companies they represent through the issue of a Director Penalty Notice (DPN). Previously the regime was limited to PAYG withholding and superannuation guarantee charge liabilities, but has now been extended to include GST, wine equalisation tax (WET) and luxury car tax (LCT).

The expanded regime will commence from 1 April 2020, being the start of the first quarter after Royal Assent.

How will it work?

The changes allow the Commissioner to make an estimate of a company’s net amount payable of GST, WET and/or LCT in its business activity statement (BAS). If the Commissioner makes an estimate, the company is liable to pay that amount to the Commissioner and the directors have 21 days to ensure the amount is dealt with to avoid becoming personally liable.

An entity may reduce the amount of an estimate by making a sworn statement that the entity’s net amount for the tax period is less than the estimate. The legislation sets out the information that must be included in the statement.

What’s the impact on directors?

Company directors are now under an obligation to ensure their company pays an assessed net amount of GST, WET and/or LCT (including an estimate made by the Commissioner) or, recognising the company is insolvent and cannot pay the liability, put the company into administration or begin wind up action. That obligation begins on the day the relevant tax period ends. Directors that cease to be directors after this date are still subject to this obligation even if they cease to be directors before the due date of the assessment.

A director’s penalty arises when the director’s obligation is unsatisfied on the due date of the assessment. However, the penalty is only recoverable following a period of 21 days beginning when the Commissioner issues a director penalty notice to the director(s). The amount of the penalty is the amount of the company’s unpaid liability.

The penalty may be remitted if the director complies with the obligation to pay the outstanding assessment either before the director penalty notice is issued or within 21 days of the day the notice is issued. However, if the director complies with their obligation by placing the company into administration or beginning to wind up the company, the full amount of the penalty will only be remitted if this is done within 3 months of the assessment’s due date. Directors who fail to place the company into administration within 3 months of the assessment’s due date are likely to receive a lockdown DPN. This means the directors become personally liable to the ATO for the unpaid net amount and will not be entitled to remittance of the penalty even if the company then goes into liquidation.
 

Single Touch Payroll (STP) changes the way employers report their employees’ tax and super information to the ATO.

Using payroll or accounting software that offers STP, employers send their employees’ tax and super information to the ATO each time they run their payroll and pay their employees.

The result is that employers won’t need to complete payment summaries for their employees at the end of each financial year, as the payroll information would have been reported to the ATO at regular intervals throughout the year.

The payroll information is sent to the ATO either directly from the software or through a third party, such as a sending service provider.

STP reporting started gradually on 1 July 2018 for substantial employers (those with 20 or more employees).

Parliament has passed legislation to extend STP reporting to all employers from 1 July 2019. The Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 is yet to receive Royal Assent.

Different STP reporting options will be available by 1 July 2019 to help smaller employers. However, the ATO won’t force employers with 19 or less employees to purchase payroll software if they don’t currently use it.

The ATO has asked software developers to build low-cost STP solutions at or below $10 per month for micro employers – including simple payroll software, mobile phone apps and portals.

Micro employers (1–4 employees) will also have a number of alternative options that are not available to employers with 20 or more employees – such as initially allowing your registered tax or BAS agent to report quarterly, rather than each time you run your payroll.

 

On the May 24 2018, Kelly O’Dwyer, the Minister for Revenue and Financial Services announced the commencement of a 12 month Superannuation Guarantee Amnesty (the Amnesty).

This is a one-off opportunity for employers to correct past super guarantee non-compliance without facing penalty.

Subject to the passage of legislation, the amnesty will run for twelve months from 24 May 2018. This amnesty would allow such payments to still be tax deductible. Under the current rules, any discovered late payments are not tax deductible.

Any employer who voluntarily discloses their previously undeclared Superannuation Guarantee (SG) shortfalls during the Amnesty and before the commencement of an audit of their SG will:

• Not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
• Be able to claim a deduction for catch-up payments made in the 12 month period.

Employers must pay all employee entitlements, including the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).

The Amnesty applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018. The Amnesty does not apply to the period starting on 1 April 2018 or subsequent periods.

Any employer who is not up-to-date with their superannuation guarantee payment obligations to their employees and who don’t come forward during this Amnesty may be subject to higher penalties in the future – generally, a minimum of 50% on top of the SG charged owed, O’Dwyer said.

If you can pay the full SG amount directly to your employees’ super fund(s) then you can complete a payment form and submit to the Australian Taxation Office (ATO) through their electronic business portal.

If you find that you are unable to pay the full amount, then you can complete and lodge a payment form wherein the ATO will contact you to discuss a payment plan. You can start payment before the ATO contacts you and this will reduce the GIC you would have to pay.

For more information visit the ATO’s website

https://www.ato.gov.au/Business/Super-for-employers/Superannuation-Guarantee-Amnesty/

 

From 1 July 2017 the removal of the 10% maximum earnings condition means you may be eligible to claim a personal super contributions deduction for the 2018 tax year.

What has changed?

• In 2016–17, an individual (mainly those who are self-employed) could claim a deduction for personal super contributions where they met certain conditions. One of these conditions is that less than 10% of their income is from salary and wages. This is known as the 10% maximum earnings condition.
• Effective 1 July 2017, the 10% maximum earnings condition was removed for the 2017-18 and future financial years ie. This means most people under 75 years old can claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).
• This change improves the flexibility of the super system so that more Australians can use their concessional contributions cap.

If eligible you need to:

• make personal (after tax) super contributions directly to your super fund before 30 June 2018, if you haven’t already contributed this financial year
• give your fund a Notice of intent to claim or vary a deduction for personal super contributions
• obtain acknowledgement from your fund of your notice of intent before you lodge your 2018 tax return.

Eligibility rules

You can claim a deduction for personal super contributions made on or after 1 July 2017 if:

• have not already made concessional contributions up to the maximum that is allowed under the cap ($25000)
• you made the contribution to a complying super fund or a retirement savings account that is not a  
  • Commonwealth public sector superannuation scheme in which you have a defined benefit interest
  • CPF or other untaxed fund that would not include your contribution in its assessable income
  • super fund that notified the ATO before the start of the income year that they elected to treat all member contributions to
    • the super fund as non-deductible, or
    • the defined benefit interest within the fund as non-deductible
• you meet the age restrictions
• you notify your fund in writing of the amount you intend to claim as a deduction
• your fund acknowledges your notice of intent to claim a deduction in writing.

Work test

There is also age related conditions under which your super fund can accept your contributions. If you are under 65 years old when you make a contribution, you don’t need to satisfy the work test in order for your fund to accept the contribution from you. Once you turn 65; you must satisfy the work test in order for your super fund to accept a contribution for which you can claim a deduction.

If you are 65–74 years old at the end of the income year in which you made the contribution, you need to satisfy a work test in each financial year that you make a contribution in order for your fund to accept the contribution for which you can claim a deduction. To satisfy the work test, you must work at least 40 hours during a consecutive 30-day period each financial year in order for your fund to accept a personal super contribution for which you can claim a deduction.

Notice of intent

If you are eligible and want to claim a tax deduction, you need to complete a Notice of intent to claim a deduction form and send it to your fund within the required time frame. You can get this from your fund or from our website.

You will need to receive an acknowledgement from your fund before you lodge your tax return for the relevant year. Then you can claim a deduction in your tax return for the contributions you made.

A notice of intent is only valid if you are still a member of your fund, your fund still holds the contribution, and your fund has not started paying a super income stream using any of the contribution.

If you give your fund a notice of intent after you have rolled over your entire super interest to another fund (closed your account) or withdrawn your entire super interest (paid it out of super as a lump sum), your notice will not be valid. This means you will not be able to claim a deduction for the personal contributions you made before the rollover or withdrawal.

If you have partially rolled over or withdrawn your super interest (which included the contribution you made), your notice will not be valid for the entire contribution. You can only validly deduct a proportion of your contribution that remains in the fund.

Concessional contributions cap

The contributions that you claim as a deduction will count towards your concessional contributions cap. If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions cap.
 

 

Eligible small business entities can access a number of tax concessions, including

• Capital Gains Tax (CGT)
• Income tax
• Goods and Services Tax (GST)
• Pay As You Go (PAYG) instalments
• Fringe Benefits Tax (FBT).

To be eligible you must meet the following conditions:

• you are an individual, partnership, company or trust and
• you are running a business
• you have an aggregated turnover of less $10 million from 1 July 2016.

You’ll need to check if you qualify for the concessions each tax year. Additional conditions may apply to certain concessions.
The benefits of the concessions include:

• All business entities (incorporated or otherwise) that meet the new $10 million aggregated turnover test will be able to access the simplified depreciation rules, including the existing instant asset write-off scheme. This will allow them to claim an immediate deduction for depreciable asset purchases costing less than $20,000 until 30 June 2017. Increasing access to this scheme will provide significant incentives for many qualifying small businesses to increase their current capital expenditure spend. However, the after-tax consequences of the proposed immediate deduction for depreciating assets should be considered. If this results in a tax loss, there is no immediate cash-flow advantage.
• The option to account for Goods and Services Tax (GST) on a cash basis and pay GST instalments as calculated by the ATO
• Simplified trading stock rules, giving them the option to avoid end of year stocktake if the value of stock has changed by less than $5,000
• A simplified method of paying PAYG instalments calculated by the Australian Taxation Office (ATO) which removes the risk of under or over-estimating PAYG instalments and the resulting penalties that may be applied  Other tax concessions currently available to small businesses, such as fringe benefits tax (FBT) exemptions (from 1 April 2017 to align with the FBT year)
• A trial of simpler business activity statements (BAS) reducing GST compliance costs, with a full roll-out from 1 July 2017.
• simpler depreciation rules
• immediate deductions for certain prepaid business expenses-see below.
• Employee share scheme interests-see below
• Reduced tax rate for unincorporated businesses

The Government will increase the tax discount for unincorporated small businesses incrementally over 10 years from five per cent to 16 per cent. The tax discount will increase to
eight per cent on 1 July 2016, remain constant at eight per cent for eight years, then increase to 10 per cent in 2024-25, 13 per cent in 2025-26 and reach a new permanent discount of 16 per cent in 2026-27.
The tax discount applies to the income tax payable on the business income received from an unincorporated small business entity. Access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5 million. The current cap of $1,000 per individual for each income year will be retained

• Corporate tax rate reduction
  • In a highly anticipated move, the Federal Government announced that it will reduce the company tax rate from 30 per cent to 27.5 per cent for all incorporated businesses with an annual aggregated turnover of less than $10 million with effect from 1 July 2016.
  • The corporate tax rate is currently 28.5 per cent for small business entities (broadly, those with annual aggregated turnover of less than $2 million) and 30 per cent for all other companies.
  • The threshold will then be progressively increased to ultimately have all companies at 27.5 per cent in the 2023-24 income year. The annual aggregated turnover thresholds for companies facing a tax rate of 27.5 per cent is set out in the table below:

Income year	Annual aggregated turnover threshold
2016-17	$10 million
2017-18	$25 million
2018-19	$50 million
2019-20	$100 million
2020-21	$250 million
2021-22	$500 million
2022-23	$1 billion
2023-24	No threshold

 

• In the 2024-25 income year the company tax rate will be reduced to 27 per cent and then be reduced progressively by 1 percentage point per year until it reaches 25 per cent in the 2026-27 income year.
• Franking credits will be able to be distributed in line with the rate of tax paid by the company making the distribution. It is unclear how the phasing of the corporate tax reduction will apply to investment companies, i.e. non-business entities.
• The lowering of the small business corporate tax rate to 27.5 per cent, coupled with an increase of the qualifying threshold to $10 million from 1 July 2016 is expected to bring early significant cash flow benefits to those small businesses operated through corporate entities.
• However, the increased differential between the corporate tax rate and the top marginal tax rate will also have the effect of increasing the amount of ‘top up tax’ payable when private company profits are ultimately distributed to shareholders. Small businesses will therefore need to consider the tax profile of their shareholders and their capacity to frank dividends when considering their annual dividend strategies.

Some of the small business concessions were previously available under the Simplified Tax System (STS). If you were in the STS you can continue to use the concessions if you meet the eligibility requirements.

The current $2 million turnover threshold will be retained to access the small business capital gains tax (CGT) concessions, and access to the unincorporated small business tax discount will be limited to entities with turnover less than $5 million.

The introduction of an increased small business threshold is a welcome move as not all small businesses were able to take advantage of the existing concessions due to the low threshold. However, it is disappointing that the Government has not taken the opportunity to apply this $10 million eligibility threshold to all concessions targeted at small businesses.

Small business thresholds will continue to be inconsistent despite this change. This often leads to confusion and increased compliance costs due to the complexity of the rules applicable to the small business sector. For example, the small business CGT concessions require taxpayers to satisfy either the $6 million net asset value test or the $2 million aggregated turnover test. In contrast a $20 million aggregated turnover test applies for the R&D refundable tax offset rules and debt/equity rules.

Private business could benefit from having a consistent set of thresholds applying, and would have greater access to these small business concessions if the thresholds were increased and indexed annually.

Immediate tax deductibility for small business start-up costs
From 1 July 2015 an individual or entity starting up a new business will be able to claim the capital start-up costs of doing so as a tax deduction in the year of start-up. Previously, those costs could only be deducted over a 5 year period.
The immediately-deductible costs will include such things as:

• structural advice from lawyers and accounts;
• Valuation advice fees
• preparing the legal documents and setting up business systems;
• legal and accounting due diligence;
• business plans;
• capital costs of raising debt or equity capital;
• government fees (such as ASIC fees on incorporating a company and stamp duty on trust deeds)

There is no statutory cap on those costs.

The concession is available to any person or entity proposing to commence a new business and who is either:

• presently carrying on a business or businesses with an aggregated turnover over of less than $10million or
• is not presently carrying on any business.

If that person or entity is not presently carrying on any business, they must not be in a controlling relationship with any person or entity which is carrying on a business or businesses having an aggregated turnover of $10 million or more.

The concession must be for establishment costs for a proposed business. It will not cover:

• professional and other capital costs incurred in respect of an existing business;
• the purchase of assets for a new business;
• indirect establishment costs (e.g. the costs of travel to assess the viability or suitability of a proposed business).

Employee Share Schemes

For ESS interests acquired in a startup company after 30 June 2015, employees may be eligible to reduce the taxable income discount declared to nil.

To be eligible for the startup concession, the interests must be in a qualifying startup company that is an Australian resident taxpayer.

Startup businesses are typically classified as a business

• not listed on any stock exchange
• has been incorporated for less than 10 years
• has a combined turnover of less than $50million a year. 

If an employee is eligible for the startup concession, this does not prevent them from acquiring ESS interests under another concessional or non-concessional scheme if it is offered by their employer.

A concession is available to an employee with ESS interests in a start-up company provided that the scheme meets certain conditions:

• the employer (which may or may not be the company issuing the ESS interest) is an Australian resident company
• the employee meets the 10% ownership and voting rights test
• the discount on an ESS interest that is a share is no more than 15% of its market value at the time it is acquired
• the amount payable to exercise an ESS interest that is a right is greater than or equal to the market value of an ordinary share in the company when the right is acquired.

ESS can be extra beneficial for startups, allowing them to include shares/options as part of staff remuneration. This could mean avoiding paying high salaries while the business is being established, at a time when startups are cash-poor