On Wednesday, I provided you with a summary of the superannuation rules that apply for the next two financial years. In today’s bulletin, I outline the changes that apply from 1 July 2015 and those that have been announced but do not as yet have a start date.

Changes that apply from 1 July 2015 include:

• a superannuation guarantee payment increase from 9.5% to 10% for all employees; and
• the application of the new data and e-commerce standards for all employers, regardless of how many people they employ. Remember that employers who employ fewer than 20 employees are able to use the Small Business Clearing House to make all their superannuation payments (please refer to last Wednesday’s bulletin for more information).

Other changes in the process of being developed include:

• payslip reporting of all superannuation contributions made to employees’ superannuation funds; and
• a concessional contributions cap increase to $35,000 for people aged 60 and over from 1 July 2013, and for people aged 55 and over from 1 July 2014.

Of course, we have the Federal Budget next month so there may be more changes to the superannuation rules announced then.

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The superannuation rules seem to be constantly under review, making it hard for employers to keep up with all of the changes. Of course, as with anything related to tax, harsh penalties may apply if you get it wrong, so I have prepared a summary of the rules for you.

Changes that apply from 1 July 2013 include:

• a superannuation guarantee payment increase from 9% to 9.25% for all employees; and
• the start of compulsory superannuation guarantee payments on behalf of employees aged 70 years and over.

Changes that apply from 1 January 2014 include:

• the start of compulsory superannuation guarantee payments for employees who have not selected a preferred fund (by completing a choice of fund form) to a fund that offers a MySuper product. Refer to the ATO website for more information on MySuper.

Changes that apply from 1 July 2014 include:

• a superannuation guarantee payment increase from 9.25% to 9.5% for all employees;
• a new service for AUSkey holders which will allow employers to check superannuation fund ABNs, product identifiers, bank account details and email addresses; and
• the application of new data and e-commerce standards for employers who employ 20 or more employees. The data and e-commerce standard will require streamlined, standard electronic reporting and payments to all superannuation funds. Refer to the ATO website for more information.

In Friday’s bulletin I will outline the changes that apply from 1 July 2015, as well as changes that have been announced but do not yet have start dates.

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The Small Business Superannuation Clearing House (the Clearing House) was set up in 2010 in recognition of the high costs the superannuation system imposes on small business employers, and is one of the few genuine freebies you get in business.

The Clearing House is a free service which is available for employers with fewer than 20 employees. It allows small businesses to make one single superannuation payment, which the Clearing House then uses to make payments to employees’ designated superannuation funds on the employer’s behalf.

You can choose to use the Clearing House on a weekly, monthly or quarterly basis, depending on how often you make your superannuation payments. Provided your payment is received by the Clearing House by the due date for the superannuation guarantee charge, it is deemed to have been received by the superannuation fund by this date.

Of course, there is a little bit of time and effort involved in setting up your account, as you need to enter the details of each employee and their superannuation fund into the Clearing House database and keep these details up to date as and when they change. However as the Clearing House is available 24/7 and has a reporting capability, you can update records easily and it is still more time-efficient than directly contacting individual superannuation funds.

One issue with the service is that if you offer salary sacrifice arrangements for employees where the superannuation contribution needs to be made to the superannuation fund by a specified date, you must ensure you make the payment to the Clearing House quite early to allow time for it to transfer to the superannuation fund by the due date. Or, you could simply transfer these particular payments directly to the superannuation fund yourself.

You can visit www.humanservices.gov.au/smallbusinesssuper to register for the Clearing House.

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Do you employ staff in your business?

By now you will have received a letter from the ATO advising that the Pay As You Go Withholding tables have been updated for the current financial year (you can find a copy of those tables here).

However, the ATO is also introducing an assortment of other changes in the way that employers process employees’ wages. These are important changes of which you need to be informed.

First, under recent amendments to the Superannuation Industry (Supervision) Act 1993, you are now required to report on your employee’s payslip:

• the amount of superannuation contributions accruing to the employee during the pay period;
• the date when you expect to pay the employee’s superannuation contribution to their superannuation fund; and
• the fund to which the contributions will be paid.

It is no longer sufficient for you to notify the employee of their superannuation benefits by any other method – it must be printed on their payslip.

This new rule is part of a series of initiatives aimed at getting employers to comply with their superannuation obligations, particularly for low income, casual and part time workers, who are the worst affected by non-compliance.

Don’t forget: You must contribute superannuation into your employees’ superannuation funds at least four times a year, or more often if this is specified in the award under which you employ your staff. If you don’t make your superannuation payment by the cut-off date, you cannot claim a deduction for the superannuation contribution and you may have to pay the superannuation guarantee charge.

In addition, the following changes will take effect from 1 July, 2013:

• the superannuation surcharge will increase from 9% to 9.25%;
• employees aged 70 years and over will be entitled to the superannuation guarantee for the first time; and
• new requirements will be introduced governing how you collect, record and securely store your employees’ personal information (e.g. tax file numbers).

As always, you can find more information via the ATO website, so make sure you stay fully informed and prepared.

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Do you run a business in one of the following industries?

• Cafes;
• Restaurants;
• Real estate services; and
• Carpentry services.

The Tax Office is running an education campaign about superannuation that will focus on businesses operating in these industries.

Once the education campaign is finished, the Tax Office is going to audit any employers that they think are not paying the right amount of superannuation.

Did you know that you need to pay superannuation for contractors where the contract is mostly for the labour of the contractor?

This is one of the major issues on the Tax Office’s hit list, so if you aren’t up to date on all your super obligations, the time to prepare yourself is now.

If you haven’t read about how the Smart Tax Handbook can help you, please follow the link to find out more.

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In Wednesday’s Smart Tax Bulletin, John Kelly (editor-in-chief of the Smart Tax Handbook) discussed the changes to the living-away-from -home-allowance and today he brings us some information about some minor but important changes to superannuation.

There are always changes being made to legislation and it is important to keep on top of Government announcements as they may have an impact on your business or your employees.

If don’t do this, you will not be aware of how the changes will impact you and it could result in an increased and unexpected tax liability when the changes come into force.

Remember, if you are ever unsure how proposed changes to legislation may impact you, you should contact your tax adviser for more information.

But in the meantime, the Smart Tax Bulletin will keep you informed and up to date with any changes that may affect you so that you can stay on top of it all.

As part of the 2011-12 Mid-Year Economic and Fiscal Outlook that was released on 29 November 2011, the Government has announced a number of minor changes to superannuation. The changes announced include the following:

• Indexation of caps on hold: The Government said it will pause the indexation of the general superannuation concessional contributions cap for one year in 2013-14, so that it will remain at $25,000. Indexation of the cap will be deferred until 2014-15, when it is expected to rise to $30,000. The Government said this will also result in a pause in the indexation of the concessional contributions cap for individuals aged 50 and over and the non-concessional contributions cap.
• Concessional contributions cap for over 50s: In response to industry feedback, the Assistant Treasurer said the Government would undertake further consultation on compliance cost issues raised by industry in relation to the higher concessional contributions cap for those aged 50 and over who have less than $500,000 in superannuation.
• Low income super contribution: The Government said it will streamline the low income superannuation contribution (LISC) so that individuals automatically benefit from it without being burdened with extra paperwork. Rather than requiring eligible workers to fill out a tax return or other type of form, the ATO will verify an individual’s income using available data.
• Super co-contribution: The Government said it will reduce the matching rate and maximum payment of the voluntary superannuation co-contribution from 1 July 2012, when the new LISC commences. The matching rate will be reduced to 50% (down from 100%), with a maximum co-contribution of $500 for people with incomes up to $31,920 in 2012-13 (phasing down for incomes up to $46,920). Currently, the Government pays a co-contribution of up to $1,000 at a 100% matching rate for certain non-concessional contributions by individuals earning up to $31,920 (phasing out at $61,920).
• Excess super contributions: The Government said it will ensure certain trust deed clauses cannot be used to avoid what would otherwise be excess contributions from being counted against the caps.

The aim of the recommendation is to remove the possibility of making directors liable for something that they should not be, and the recommendation is to focus on phoenix operators.

But what is a phoenix operator?

A phoenix operator is someone who sets up a company to operate a business and in doing so incurs liabilities in that company. Then, to avoid paying those liabilities, the phoenix operator deregisters that company and sets up a new company and operates the same business through the new company but leaves all the liabilities in the old company.

Under a Bill introduced last month, a director may be personally liable for a company’s unpaid superannuation guarantee amounts.

However in considering the Bill, the House of Representatives Standing Committee of Economics recommended that the Government further investigate whether the Bill should be amended to specifically target phoenix operators.

Concerns were raised by business groups that the current Bill which extends the director penalty regime to make a director personally liable for a company’s unpaid superannuation guarantee amounts may subject an honest company director by accident.

Accordingly, the House of Representatives Standing Committee of Economics recommended that the section of the Bill relating to the proposed extension of the director penalty regime be removed.

As of this week, a bill has been introduced that will change the level of mandatory superannuation contributions that companies make to their employees.

If enacted, this will change as of 1 July 2013, so make sure that you are on top of your obligations in order to comply with the new laws.

Not only that, but there will no longer be an age limit on the payment of superannuation contributions… Meaning that each and every one of your employees can be paid superannuation for an indefinite period.

Please read on to find out the details of these changes and make a note of them so that you know what to do when you have to do it…

If you are not yet a subscriber to the Smart Tax Handbook, we can show you how it can help you and your business. Please click here to find out more about the Smart Tax Handbook and its benefits.

2. Mandatory superannuation contributions to increase from 9 percent to 12 percent

The bill to amend legislation such that the superannuation guarantee would increase from 9 percent to 12 percent was introduced this week.

Bill Shorten MP provided that the rationale for the increase in mandatory superannuation contributions to 12 percent is that,

“Australians should not have to work hard and retire poor. Nine per cent super is simply not enough.”

In addition to the increase in mandatory superannuation contributions, the bill also amends legislation to increase the age of employees for which the superannuation guarantee is no longer required from 70 to 75.

The proposed changes are intended to commence from 1 July 2013.

Bill Shorten MP also announced this week that,

“… there will be no age limit for superannuation guarantee contributions.”

As such, whilst superannuation contributions will be compulsory until the age of 75, contributions can continue to be made after the age of 75 for an indefinite period. These changes are also intended to commence from 1 July 2013.

If an employer fails to lodge their superannuation guarantee statement for a quarter by the due date, the ATO may impose a penalty. There are two types of penalties which may be imposed:

• the superannuation guarantee charge, which is equal to double the amount of the superannuation guarantee; and
• an administrative penalty, which is 75 percent of the tax-related liability.

The Commissioner has the discretion to remit all or part of the above penalties and the Practice Statement discusses the various factors that an ATO officer should consider when determining whether to exercise the Commissioner’s discretion.

The Practice Statement outlines a three step process which an ATO officer should consider when making a decision to remit the penalty. You should take note of the factors the ATO must consider so that you can make sure you are doing the right thing and improve your chances of having a penalty remitted.

Step-by-Step: What the ATO should consider when deciding whether to issue a penalty

Step 1: To consider the degree to which an employer attempts to comply with their superannuation obligations.

If an employer has genuinely attempted to comply with their superannuation obligations, the more likely the penalty will be fully remitted. Conversely, if there was only a moderate or no attempt to comply, the less likely the penalty will be remitted in full.

Step 2: To consider the employer’s compliance history in relation to their superannuation obligations as well as their compliance history in relation to other tax related obligations.

An employer with a good compliance history is more likely to have the penalty remitted in full, whilst an employer with a poor compliance history is less likely to have the penalty remitted.

Step 3: To consider other relevant factors which depend on the circumstances of the employer.

Currently, the ATO can require company directors to pay their company’s unremitted PAYG withholding liabilities, or unpaid estimates of those liabilities within 21 days.

The same personal liability will now apply to unpaid superannuation guarantee amounts as well.

Continues below…

In the 2011 budget, the Federal Government announced that it was extending the director penalty regime to Superannuation Guarantee amounts, with effect from 1 July 2011.

This means that if you are the director of a company, and you fail to pay your employee superannuation guarantee contributions, you may become personally liable.

With these changes, failing to pay your employees’ super guarantee amounts can also make you liable for the super guarantee charge, a fine on shortfall amounts of super.

In addition to this, if certain unpaid company liabilities remain unreported after 3 months of becoming due, the ATO will be given the power to commence recovery against directors without providing the 21 day grace period.

The Government has said this extension of a director’s personal liability is intended to improve tax compliance and to counter any fraudulent phoenix activities.

You should also take into consideration that if the ATO determines contractors are employees for superannuation purposes, directors will also be personally liable for the super charge, even if your intention was that the higher fee paid to the contractor would compensate them for not receiving super contributions.

Thanks for reading!

Holly Hutchinson
Sub-Editor
Smart Tax Handbook