How does the super guarantee charge work?
Posted on 20 September '17 by admin
Employers who do not pay the minimum amount of super guarantee for their employee(s) by the due date may have to pay the super guarantee charge (SGC).
The charge is made up of super guarantee shortfall amounts including any choice liability calculated on your employee’s salary or wages, interest on those amounts (currently 10 per cent) and an administration fee ($20 per employee, per quarter).
Employers must report and rectify the missing payment by lodging an SGC statement by the due date and paying the SGC to the ATO. Employers may be able to use a late payment to reduce the amount of SGC, however, they must still lodge an SGC statement and pay the balance of the SGC to the ATO.
The ATO prioritises the collection of unpaid SGC debts. If an employee reports an employer for unpaid super, the ATO will investigate on their behalf.
Employers must lodge their SGC statement and pay the charge by the due date.
| Quarter | Period | Due date |
| 1 | 1 July – 30 September | 28 November |
| 2 | 1 October – 31 December | 28 February |
| 3 | 1 January – 31 March | 28 May |
| 4 | 1 April – 30 June | 28 August |
If a due date falls on a weekend or public holiday, the payment can be made the next working day.
Once the statement has been lodged and the SGC is paid, the ATO will transfer the super guarantee shortfall amount and any interest to the employee’s chosen super fund.
Ride sourcing – Claiming car expenses
Posted on 20 September '17 by admin
Those who participate in ride-sourcing (i.e., Uber, GoCatch) as a driver can access a number of tax deductions come tax time.
You may be able to claim expenses such as:
– Parking fees
– Road tolls
– Mobile phone costs
– Fees or commissions charged the facilitator
– Other expenses – to the extent that they relate to work-related travel.
Under the logbook method (the business-use percentage of car expenses) include:
– Petrol
– Depreciation of your car
– General vehicle running costs such as insurance, car rego and repairs
– Maintenance.
Expenses you cannot claim include:
– Fines, such as parking and speeding fines
– Fuel tax credits
– The cost of getting and maintaining a standard driving licence
– Costs of a capital nature, such as car purchase price
– Personal or private expenses, such as the private use of a car used for ride-sourcing activities.
If you use your car for both personal and work-related use, you will need to apportion your car expenses appropriately. If the owner of the car is a spouse or de-facto partner, you can still claim deductions for the car as it is considered a joint asset.
You may be eligible for a range of concessions, i.e., simpler depreciation – instant asset write-off if you are a small business entity in an income year. Be sure to review your eligibility each year.
New measures to crack down on super non-compliance
Posted on 14 September '17 by admin
The Australian Taxation Office (ATO) will receive additional funding for a Superannuation Guarantee Taskforce to crack down on non-compliance by employers.
The Government has announced a package of reforms to close a legal loophole used by dishonest employers that short-change employees who make salary-sacrifice contributions to super.
Funding for the Taskforce coincides with new data released by the ATO reporting a significant estimated Super Guarantee gap. This gap is the difference between the theoretical amount payable by employers to be fully compliant and actual contributions received by funds.
The ATO estimates the net SG gap as 5.2 per cent or $2.85 billion of the total estimated $54.78 billion in SG payments that employers were required to pay in 2014-15.
The gap exists because some employers are not meeting their super guarantee obligations either by not paying enough or not paying at all.
Employers who deliberately are not paying their workers’ super entitlements are robbing their workers of their wages. The new package aims to take action on this so employers cannot hide from their legal obligation.
Some of the measures included in the package involve:
- A requirement for superannuation funds to report contributions received more frequently (at least monthly) to the ATO. This is aimed to better identify patterns of non-payment and allow for immediate action;
- The rollout of Single Touch Payroll to further improve visibility on reporting, simplify tax and super for employers while allowing the Tax Office to better detect patterns of non-compliance;
- Improvements to the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and the use of security bonds for high-risk employers, to ensure unpaid super is better collected by the ATO and paid to employees’ super accounts; and
- Allowing the ATO to seek court-ordered penalties in the most shocking cases of non-payment, including employers who are repeat offenders.
The crackdown serves as a strong reminder for businesses to do the right thing. The ATO deals with roughly 20,000 complaints annually regarding unpaid super from both former and current employees.
Superannuation is a legal entitlement for employees; failure to pay employee super guarantee is illegal and can result in harsh penalties.
Sharing economy and tax
Posted on 14 September '17 by admin
The ATO is reminding those who work in the sharing economy to be aware of their tax obligations.
The sharing economy connects buyers (users) and sellers (providers) through a facilitator who usually operates an app or a website. Some popular examples include Airbnb, Stayz, Uber, Deliveroo, Airtasker and so on.
Different rules apply, depending on what type of sharing economy activities are undertaken by an individual.
Those who rent out part or all of their home are reminded to:
– declare what they earn in their tax return;
– apportion related expenses as appropriate before claiming deductions and
– understand it may affect their capital gains tax if they sell their home in the future.
Individuals who participate in ride-sourcing activities need an ABN, to register for GST from the day they start, to pay GST on the full amount of every fare and to keep records of income and expenses for both GST and income tax purposes. GST credits associated with your ride-sourcing enterprise are deductible.
Those providing other goods and services through the sharing economy need to remember to declare what they earn and apportion related expenses.
Strategies to bulk up your super before retirement
Posted on 7 September '17 by admin
To retire comfortably, you should be doing everything you can while still in the workforce to make sure your superannuation is as fruitful as possible.
Consider the following:
Consolidate super into one account
Super account fees can eat away at your super balance, especially if you have numerous accounts. If you find yourself in this position, take the time to organise your super contributions into the one account to reduce unnecessary and excessive fees.
Outstanding super payments
Check you have been paid all the super you are entitled to, as well as interest, as this can uncover large amounts of unpaid super. Employers have a legal obligation to pay all employees who have earned more than $450 in the space of a month, and these payments are required to be paid at least quarterly. If you have not been paid what you are owed, you are also missing out on accumulated interest. It is now compulsory for employers to report the super contributions they make, but this was not always the case, meaning you may need to contact previous employers or the ATO to access unpaid super you are entitled to.
Salary sacrifice
This is an efficient way to grow your superannuation while also incurring worthwhile tax benefits. To practice salary sacrificing, you will have to come to an agreement with your employer. You can contribute money from your pre-tax salary into your superannuation account, on top of the 9.5 per cent SG contribution that your employer must make. You will only be taxed 15 per cent on this additional contribution amount, but it does mean taking home a smaller figure each paycheck.
Spousal contributions
If your spouse is a low-income earner who is receiving less than $13,800 annually, you can contribute up to $3,000 into their super each year while getting an 18 per cent tax offset. This can save you up to $540 in tax.
Single Touch Payroll for streamlined reporting
Posted on 7 September '17 by admin
From 1 July 2018, employers with 20 or more employees will report payments to the Australian Taxation Office at the same time as they pay their employees, using the Single Touch Payroll reporting system.
This reporting system will keep track of payments such as:
- Salary and wages
- Super contributions
- Deductions, e.g. workplace giving
- Pay as you go (PAYG)
- Allowances
The introduction of this new reporting measure does not incite changes to an employer’s payroll cycle; you can still make payments as you were, i.e., weekly, fortnightly, monthly, etc. When you do make these payments, the super and tax details of employees will be passed on, creating a more streamlined approach to make reporting and compliance more manageable.
For businesses with less than 20 employees, the single touch payroll reporting system will be in place by 1 July 2019.
Carrying on a business in an SMSF
Posted on 30 August '17 by admin
Self-managed super funds can carry on a business providing the business is allowed under the trust deed and operated for the sole purpose of providing retirement benefits for fund members.
Carrying on a business through an SMSF does have restrictions that other businesses do not have, such as entering into credit arrangements or having overdrafts.
SMSF trustees that carry on a business through their fund must adhere to the sole purpose test. The ATO looks for cases where:
- the trustee employs a family member
- the ‘business’ is an activity commonly carried out as a hobby or pastime
- the business carried on by the fund has links to associated trading entities
- there are indications the fund’s business assets are available for the private use and benefit of the trustee or related parties
The same regulatory provisions still apply to funds that carry on a business, i.e, SMSF investments must be made on a commercial ‘arm’s length’ basis, business activities must be conducted in accordance with the SMSF’s investment strategy, collectables and personal use assets cannot be displayed at the business premises and so on.
The SMSF cannot be involved in the following business activities:
- selling an SMSF asset for less than its market value to a member or relative of a member
- purchasing an asset for greater than its market value from a member or relative of a member
- acquiring services in excess of what the SMSF requires from a member or relative of a member
- paying an inflated price for services acquired from a member or relative of a member.
Claiming the small business income tax offset
Posted on 30 August '17 by admin
The small business income tax offset can help reduce the tax small businesses pay on business income by up to $1,000.
This offset is available from the 2015-16 income year onwards. Small businesses with an aggregated turnover less than $5 million can access the concession from the 2016-17 income year.
Business income derived by another partnership or trust, in which the small business owner is not a partner or beneficiary, is not eligible for the offset.
Small business owners can claim the offset if they receive a share of net small business income from a small business:
- partnership, in which they are a partner
- trust, in which they are a beneficiary.
The offset is 8 per cent for the 2016-17 income year onwards, 5 per cent for the 2015-16 income year. The offset will increase to 10 per cent in 2024-25, 13 per cent in 2025-26 and 16 per cent in 2026-27.
Identifying undervalued assets
Posted on 23 August '17 by admin
Recent research has found that an alarming 31 per cent of SMSF trustees consider choosing investments as one of the hardest aspects of running an SMSF. Value investing is one such strategy that SMSF investors can utilise to boost their portfolios.
Value investing involves identifying undervalued assets that have the potential to increase in value over time. These assets are generally priced well below their intrinsic value due to missed expectations, market crashes, cyclical fluctuations and so forth.
To identify undervalued assets or asset classes you need thorough analysis and good judgment. Look for asset classes that are inexpensive and backed by news. It is much better to invest in industries where you understand the business dynamics, i.e., how they make their money, underlying conditions and so on.
Furthermore, looking for businesses in industries with a sustainable competitive advantage where external factors do not affect them too much is ideal.
When evaluating stocks look at companies with a low debt load, are paying steady dividends and have a quality rating that is average or better. Other metrics to consider include:
Price-to-earnings ratio: This is a stock’s current share price divided by its annual earnings. A lower ratio indicates it is cheaper. Stocks with a ratio of 9 or less are typically undervalued.
Price-to-earnings growth: A stock’s price-to-earnings ratio divided by its projected earnings growth rate over a certain time frame. Ideally, companies with no deficits and where earnings increase over that time period are better.
Price-to-book value: This is calculated by dividing the current price by the book value per share. Investing in stocks which are selling below their book value is key.
As with any other investment strategy, it is best to seek professional advice if you are unsure whether value investing is appropriate for you.
Have you received personal services income?
Posted on 23 August '17 by admin
Personal services income (PSI) is income mainly produced from your personal skills or efforts. There are special tax rules that apply if your income is classified as PSI.
Almost any trade, industry or profession can receive PSI. The most common are financial professionals, IT consultants, engineers, construction workers and medical practitioners. PSI does not affect employees receiving only salaries and wages.
When more than 50 per cent of the amount you received for a contract was for your labour, skills or expertise, then the income is classified as PSI.
If you have received PSI (including if you have received it as a company, partnership or trust), you will need to work out if the PSI rules apply to that income. You can use the ATO’s Personal services income decision tool to do this.
Where the rules do apply, they affect how you report your PSI to the ATO and the deductions you can claim.
In the circumstances where the PSI rules do not apply, you are still required to declare any PSI amounts at the relevant labels on your tax return. Where you receive PSI but the rules do not apply, there are no changes to the deductions you can claim.
It is important to note that PSI is not only applicable to sole traders. Those who produce PSI through a company, trust or partnership and the PSI rules apply, the income will be treated as your individual income for tax purposes.
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