Studies suggest that the failure to plan cash flow is one of the leading causes of small business failure.
To this end, a cash flow forecast is a crucial cash management tool for operating your business effectively.
Specifically, a cash flow forecast tracks the sources and amounts of cash coming into and out of your business over a given period. It enables you to foresee peaks and troughs of cash amounts held by your business, and therefore whether you have sufficient cash on hand to fund your debts at a particular time.
Keep in mind that sales figures can change all the time depending on:
your customer base and how quickly they pay you
changes in the economy such as interest rates and unemployment rates
what your competitors are doing
Moreover, it alerts you to when you may need to take action – by discounting stock or getting an overdraft, for example – to ensure your business has sufficient cash to meets its needs. On the other hand, it also allows you to see when you have large cash surpluses, which may indicate that you have borrowed too much, or you have money that ought to be invested.In practical terms, a cash flow forecast can also:
■make your business less vulnerable to external events in the economy, such as interest rate or super rises
■reduce your reliance on external funding
■improve your credit rating
■assist in the planning and re-allocation of resources, and
■help you to recognise the factors that have a major impact on your profitability.
At this point, a distinction should be drawn between budgets and cash flow forecasts. While budgets are designed to predict how viable a business will be over a given period, unlike cashflow forecasts, they include non-cash items, such as depreciation and outstanding creditors.
By contrast, cash flow forecast focus on the cash position of a business at a given period. Non-cash items do not feature. In short, while budgets will give you the profit position, cash flow forecasts will give you the cash position. Cash flow forecasting can be used by, and be of great assistance to, the following entities:
■business owners
■start-up business
■financiers
■creditors
A cash flow forecast is usually prepared for either the coming quarter or the coming year. Whether you choose to divide the forecast up into weekly or monthly segments will generally depend on when most of your fixed costs arise (such as salaries, for example).
When forecasting overheads, usually a forecast will list:
■receipts
■payments
■excess receipts over payments (with negative figures displayed in brackets)
■opening balance
■closing bank balance.
When you are making forecasts, it is important to use realistic estimates. This will usually involve looking at last year’s results and combining them with economic growth, and other factors unique to your line of business.
If you have any questions regarding your cash flow forecast – de Kretser is here for you.
Need more information? If you need help creating an overview of your cashflow and how it will greatly benefit your overall business approach, we are here to help, so please contact us for further information.
What is the proposed new tax on $3m+ Super balances?
Individuals with large superannuation balances may soon be subject to an extra 15% tax on earnings if their balance exceeds $3m at the end of a financial year.
What has been proposed?
Recently, the government announced it will introduce an additional tax of 15% on earnings for individuals whose total superannuation balance (TSB) exceeds $3m at the end of a financial year. Those affected would continue to pay 15% tax on any earnings below the $3m threshold but will also pay an extra 15% on earnings for balances over $3m.
The proposal will not impose a limit on superannuation account balances in the accumulation phase, rather it is about how generous the tax concessions are on higher balances. The government has confirmed the changes will not be applied retrospectively and will apply to future earnings, coming into effect from 1 July 2025.
This means your balance in superannuation at 30 June 2026 is what matters initially.
What counts towards the $3m threshold?
The $3m threshold is based on your total superannuation balance (TSB) and includes all of your superannuation accounts. This includes your accumulation and pension accounts and all superannuation funds you may have (such as your SMSF and any APRA-regulated superannuation funds you have). Further, the $3m threshold is per member, not per superannuation fund. This means a couple could have just under $6m in superannuation/pension phase before being impacted by the proposals.
How will earnings be calculated?
Put simply, the extra 15% tax is unrelated to the actual taxable income generated by your superannuation fund. Rather, it is a tax on earnings or increases in account balances over $3m (including unrealised gains and losses). This means any growth in balances will include anything that causes your account balance to group – such as interest, dividends, rent, and capital gains on assets that have been sold, including any notional or unrealised gains on assets that increase in value, even if your fund hasn’t sold them.
Apart from the extra 15% tax, the taxation of unrealised gains is what has caused a stir, as currently individuals do not pay tax on income or capital gains on assets that have not been sold. When looking at how to capture growth in a person’s TSB over a financial year, earnings will be calculated based on the difference in TSB at the start and end of the financial year, and will be adjusted for withdrawals and contributions. It is also worth noting that negative earnings can be carried forward and offset against this tax in future years’ tax liabilities.
How is the extra 15% tax calculated?
Superannuation funds, including SMSFs, will not be required to calculate the earnings attributable to a member’s balance above $3m. Rather, the ATO will use a three-step formula to calculate the proportion of total earnings which will be subject to the additional 15% tax.
How will the extra tax be paid?
Individuals will be notified of their liability to pay the extra tax by the ATO. This means the ATO, not their superannuation fund, will issue members with a tax assessment. Individuals will have the choice of either paying the tax themselves or from their superannuation fund(s) (if they have multiple funds). The tax will be separate to the individual’s personal income tax liabilities.
Don’t fret just yet! The measure is due to start from 1 July 2025, so superannuation funds and members still have time to consider their options.
Remember, this measure is still a proposal and must be passed into legislation by Parliament to become law. So don’t rush to remove benefits below the $3m limit just yet as once amounts have been withdrawn from superannuation, it’s hard to get them back in.
If you have any questions regarding your Super obligations – de Kretser is here for you.
Need more information? If you need help comparing your superannuation fund or need assistance understanding how the comparison information relates to your circumstances, we are here to help, so please contact us for further information.
The ATO released its final guidance material on the application of section 100A late last year. In doing so, it has fortunately clarified a number of issues.
To recap, the ATO in February 2022 updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, potentially the ATO may take an unfavourable view on what were previously understood to be legitimate distribution arrangements.
The ATO is chiefly targeting arrangements under section 100A of the Tax Act, specifically where trust distributions are made to a low-rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate.
In this regard, the ATO’s Taxpayer Alert illustrate show section 100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children. The final guidance is not the law and represents no more than the ATO’s view about how the law applies. It carries no legal authority, and clients in consultation with us as your advisor may consider venturing out into deeper and rougher waters, depending on your circumstances.
Following the release of the ATO material, there are a number of risk management options going forward:
■ Only distribute to Mum and Dad. This would be quite safe from section 100A scrutiny. No person pays less tax as a result of any agreement, and this is unlikely to be seen as high-risk by the ATO.
■ Continue to distribute to young adult beneficiaries, but hand over the money If you are happy to give money to your children, this can be achieved while at the same time optimising tax.
■ Charge board and current university fees If adult beneficiaries are living at home, they should pay board (just as if they had a job). This will not add up to large sums, but arm’s-length board for a full year could come to about $18,000. This allows for some tax arbitrage without handing the kids any money.
■ Use of bucket company. Three preconditions must exist for a bucket company to function:
There needs to be a trust with income to distribute.
The trust deed of the trust must allow for corporations to be beneficiaries.
The corporate beneficiary must fall within the definition ‘beneficiary’ under the trust deed.
Having a private corporate beneficiary caps the tax rate imposed on trust income. Franked dividends can subsequently be flexibly allocated through having a trust structure interposed between the bucket company and the beneficiaries. The present entitlement can be lent back to the trustee for use in the business of the trust, although there are minimum repayment conditions. Avoid having the main trust as a shareholder in the bucket company. The ATO considers circular income flows to be high-risk.
■ Be alert for the “no reimbursement agreement” argument If you are contemplating making a gift or an interest-free loan to another person, ask questions about the circumstances behind this plan. If it was not in contemplation at the time of the relevant appointment of trust income (up to two years ago), but has arisen because family circumstances have changed recently, there may not be a reimbursement agreement.
■ If making gifts, go once and go big! You are unlikely to escape ATO attention if you have beneficiaries making gifts or loans year-after-year. So, where there is a strong argument to support the ordinary dealing exception, try to make it once-off, and for a significant amount if possible.
Through a deep understanding of the personal and business structures of our clients, the de Kretser team are ready to assist you with your trust requirements, bringing about tax-effective outcomes tailored to the specific requirements at hand.
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Should you need assistance, please do not hesitate to contact us. T: +61 3 9550 6900 E:admin@dekretser.com.au
The ATO has issued new draft guidelines around a new method (the revised fixed rate method) of calculating work-from-home running expenses from 1 July 2022 (as an alternative to calculating the actual work-related portion of all running expenses).
The new revised fixed rate method will replace both:
■the 52 cents fixed-rate method for electricity and gas expenses, home office cleaning expenses and the decline in value of furniture and furnishings,
You are eligible to use the revised fixed-rate method from 1 July 2022 if you:
■work from home to fulfil your employment duties or to run your business (a separate home office or dedicated work area is not required)
■incur additional running expenses that are deductible, and
■keep and retain records of the time spent working from home and of the additional running expenses incurred.
New rate
The new rate of 67 cents (replacing the fixed rate of 52 cents was “based on the Australian Bureau of Statistics (ABS) household expenditure survey with consideration of annual Consumer Price Index (CPI) weightings”. It allowed 52c per hour for each hour a taxpayer worked from their home office to calculate their electricity and gas expenses, home office cleaning expenses and the decline in value of furniture and furnishings. In addition, a separate deduction for the taxpayer’s work-related internet expenses, mobile and home telephone expenses, stationery and computer consumables and the decline in value of a computer, laptop or similar device could be claimed.
The revised 67 cent fixed rate under the new rules is inclusive of:
■internet expenses
■mobile and/or home telephone expenses, and
■stationery and computer consumables.
The inclusion of these expenses within the revised fixed rate, when coupled with the current high inflation environment, means that there is a high likelihood that taxpayers may be worse off when moving from 52 cents to 67 cents.
Record keeping
From 1 January 2023, will see the need for you to keep a record of the actual hours worked from home (e.g. timesheets, rosters or a diary kept contemporaneously). This is more onerous than the 52 cent method where you only needed to keep a record to show how many hours you worked from home.
The ATO under the new revised fixed rate method also requires evidence in relation to each of the running expenses listed above.
For energy, mobile and/or home telephone and internet expenses, one bill per item needs to be retained.
If the bill is not in your name, additional evidence is needed to prove that you incurred the expenditure. For stationery and computer consumables, one receipt needs to be kept for an item purchased.
Under the new method, the amount that can be claimed will potentially be lower, while the compliance obligations are higher – the taxpayer not only needs to keep a record of times spent working from home, but also there is a need to keep an invoice/receipt for each of the additional costs, such as an electricity bill.
This is a new requirement which never formerly existed under either of the replaced fixed rate methods. While the new draft guidance offers a transitional arrangement until December 2022, individuals currently availing themselves of the 52 cent fixed rate method will need to consider whether they can meet the additional administrative burden from 1 January 2023, or whether the “actual expenses” method is amore achievable alternative.
Contact Us
If you are uncertain which method is best for you please contact us directly to discuss your circumstances.
Please do not hesitate to get in touch and one of our de Kretser members would love to help you in the right direction.
Do you run a business and have or are thinking about hiring workers? If so, it’s important to understand the difference between contractors and employees, as you have different tax and superannuation responsibilities depending on the status of the worker.
What’s the difference between contractors and employees?
Generally speaking, an employee works in your business and is part of your business. A contractor is a person who is typically running their own business and anyone who engages their services has little direction or control in respect of how that service is supplied unless a written agreement is provided.
The table below provides six key factors that determine whether a worker is an employee or contractor for tax and superannuation purposes.
Factor
If worker is an employee
If worker is a contractor
Ability to subcontract/delegate
The worker can’t subcontract /delegate the work – they can’t pay someone else to do the work. They must do the work themselves.
The worker can subcontract/ delegate the work – they can pay someone else to do the work.
Basis of payment
The worker is paid either:For the time worked or a price per item or activity and or, commission.
The worker is paid for a result achieved based on the quote they provided. A quote can be calculated using hourly rates or price per item to work out the total cost of the work.
Equipment, tools and other assets
Your business provides all or most of the equipment, tools and other assets required to complete the work, or the worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the cost of the equipment, tools and other assets.
The worker provides all or most of the equipment, tools and other assets required to complete the workThe worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.
Commercial risks
The worker takes no commercial risks. Your business is legally responsible for the work done by the worker and liable for the cost of rectifying any defect in the work.
The worker takes commercial risks, with the worker being legally responsible for their work and liable for the cost of rectifying any defect in their work.
Control over the work
Your business has the right to direct the way in which the worker does their work.
The worker has freedom in the way the work is done, subject to the specific terms in any contract or agreement.
Independence
The worker is not operating independently of your business. They work within and are considered part of your business.
The worker is operating their own business independently of your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.
Your tax and super obligations
Your tax, superannuation and other obligations will vary depending on whether your worker is an employee or contractor. The table below summarises the key considerations.
Tax/Obligation
If worker is an employee
If worker is a contractor
Income
You’ll need to withhold tax (PAYG withholding) from their wages and report and pay the withheld amounts to the ATO.
Contractors generally look after their own tax obligations, so you don’t have to withhold payments to them unless they don’t provide their ABN to you, or you have a voluntary agreement with them to withhold tax from their payments.
You’ll need to report and pay FBT if you provide your employee with fringe benefits.
You don’t have FBT obligations.
The High Court’s new employee/contractor test
The High Court has delivered several decisions which confirm that when determining whether a person is an employee or contractor, it is necessary to look to the legal rights and obligations agreed under the relevant contract, rather than what happened in the working relationship as it unfolded.
This is in contrast to the previous practice adopted by courts and tribunals whereby the actual circumstances of how the arrangement played out in real life (on the facts, not the contract terms) was decisive. In other words, the written agreement (the contract) will determine the nature of the relationship, rather than examining the subjective circumstances. This is unless the contract is a sham and does not reflect the circumstances of the arrangement.
Review your contracts with your workers
It is important that business owners understand the difference between employees and contractors. Businesses should absolutely review their written contracts with employees and contractors to ensure that the contracts correctly give effect to the arrangement the parties understood was being entered into when the contract was formed.
If you have any questions regarding your obligations in this space – de Kretser is here for you.
Need more information? Please do not hesitate to get in touch – we look forward to hearing from you.
As we collectively enter the last quarter of 2022, the de Kretser team are here to assist in every aspect of your business.
We believe strategies, implemented together, will immeasurably help your business to reduce wasting time and money, increase productivity and align your business goals for the new year.
So, get ready to spring into action and make your business shine with a clean from the digital to physical world!
6 Step Guide to Spring Cleaning Success
1. Digital Dust off
When you’re occupied by your business, the days go quickly and not all the backend business is completed.
It is now time for the digital dustpan and broom.
As a busy business owner your emails, PDF’s, contracts, documents etc. can quickly pile up and leave your computer’s hard drive overflowing with redundant and outdated information.
Spring is your opportunity to purge your inbox and to trash the things that were never used, or needed.
While you’re clearing out your inbox, you can also do some other digital spring cleaning. Go through old files on your computer and delete unnecessary documents and folders.
Create folders and place the communications already completed. Name them simply for easy access.
Do not stop with a simple Spring purge – set yourself up with a system for success.
How will you action a new communication from a client going forward?
How will you file what is necessary properly to save searching time in the future?
How will you make time, or task a team member with the consistent management of enquiries and things to do?
Set times for weekly meetings so that your inbox will not be a bother any longer.
2. Cleanse your Multi-Media Face
In today’s world – you must have an online presence if you want to grow and thrive.
Your website can easily collect dust and damage your brand.
Chances are, your business has grown and changed during the last year, particularly in the digital space! You might have revised your mission. Maybe you completely switched your business logo or colour scheme.
Spring is a great time to scour your website for things that don’t line up with your business’s current brand.
At least once a year also you should also –
Update testimonials on your website/socials.
Look through content on the business website that needs to be rewritten to better reflect your company’s offerings or target market.
Increase the amount of external links on your website and/or blog posts – this will increase your website standing in an organic google search.
Don’t limit spring cleaning to the beginning of the year or springtime. Try to “spring” clean your website and socials throughout the year ensuring your messaging is on brand and engaging.
3. Clean that Business Book shelf
Your business transactions and financial records can help you forecast your financial future and make smart decisions about your finances.
Start now.
It is time for you to look at your files and accounts, sort receipts, and digitise where you can. This is not hard, it just takes a moment.
Consider using accounting software to track transactions and make spring cleaning your books a breeze.
Set up systems for all staff so that everyone is following the same processes which will save time in the future.
4. Call a Friend
Dedicated and solid business connections are the backbone to any successful enterprise.
When was the last time you updated your client contact list?
When was the last time you personally talked to, or met with a loyal customer?
Has anyone, supplier or client, dropped off the radar? Do you have processes in place that stops this from happening?
Now is the time to get in touch with your closest business allies. Keeping contact genuine and consistent goes a long way to retaining your most valuable contacts and will aid in the growth of your relationships throughout the years to come.
5. Strategic Business Planning
Businesses constantly develop and change.
Your company is ever-changing, your business plan should be, too.
The creation of a business plan is a wonderful initiative though is only of use to your business if you use it!
High calibre businesses set aside time each year to spring clean their business plan.
Now is the time to reflect on the past year and ask your trusted colleagues – what kind of changes has your business made in the last year? If ever there was a time to do this – it is now!
After the period of change Australian businesses have endured it is time for a re-organisation.
What worked and what didn’t for your cashflow?
Where are your most lucrative streams of revenue coming from?
Did you add or remove products? Are you targeting a new market? Or, did you completely change your business structure? Retraction? Expansion?
Remember, entrepreneurs: your business plan is the foundation of your company. Take the time to revisit it each year.
6. Marketing
Like your business, marketing tactics are constantly developing. And each day, a new marketing trend pops up and with it, a new opportunity for your business.
The world is at your feet when you market your business correctly. How you market will be informed by your business plan and client feedback. Identifying who you are and what you do goes great lengths to understanding who your customer is, what they want and how to provide it for them.
Spend some time this spring freshen things up by:
Researching new marketing trends
Investing in social media
Automating tasks (e.g., email marketing)
Investigate the integration of a CRM into your business
Going to a conference or trade show
Revisiting your brand
Analysing last year’s data
Keeping an eye on your business marketing analytics is also a brilliant way to inform your future directions for growth.
7. Your Working Environment
Whether you are working from home, or from an external premises – now is the time to look at your place with new eyes.
Ask yourself, and your staff – what would you think if you were coming here for the first time?
First impressions are powerful.
Spring cleaning your work environment goes further than a fresh feeling. Organisation in the physical world sets a standard for success. Doing some decluttering around the office will bring a brilliant feeling of renewal.
Working together as a team on this task will enhance your success. The orientation of your spaces must be considered and how they are used by the people who work with in them. Stand up desks may be a consideration, a stocktake of supplies may be needed or a look at the physical filing or way information is distributed or displayed in your spaces may need a re-think.
Make a list, ask everyone for their thoughts on what works, what needs work and then – get to work on making your environment sparkle and shine – together.
Begin the process now with de Kretser – we are ready to assist you with your requirements.
A MySuper fund is a low-cost superannuation product and is usually the default account for people who don’t choose their own superannuation fund when they start a new job.
Many large Australian Prudential Regulation Authority (APRA) regulated superannuation funds (ie, retail, industry and corporate funds) can all offer MySuper accounts to members in accumulation (ie, non-retirement) phase. MySuper funds are simple accounts that generally have the following basic features:
■Simple investment strategy options – depending on the fund, you will be put into either a single diversified investment option or a lifecycle investment option based on your age.
■Lower fees – you don’t pay for unnecessary features that you don’t need.
■Default insurance options – you can easily opt out of the insurance arrangements if you wish.
■Easy to compare – you can easily compare MySuper funds based on investment performance, cost and insurance.
YourSuper comparison tool
You can find out about and compare MySuper products by using:
■Your superannuation fund’s product disclosure statement (PDS) for the MySuper product, or
■The ATO’s YourSuper comparison tool. If you can’t find your current account type within the MySuper products list, your account may not be a MySuper product. The best way to confirm whether your account is a MySuper product is by contacting your superannuation fund directly.
What does the YourSuper comparison tool do?
The YourSuper comparison tool can compare MySuper products based on only a few key differences.In particular, the YourSuper comparison tool:
■Allows you to select and compare in more detail up to four MySuper products at a time.
■Links you to a superannuation fund’s website when you select a MySuper product from the table.
■Can show your current superannuation accounts alongside other MySuper products (if you access the personalised version through myGov)
■Provides links to help you consolidate your superannuation accounts.
APRA assesses the annual performance of each MySuper product. As such, the investment performance column will provide one of the following results for each fund:
■Performing – the product has met or exceeded the performance test benchmark
■Underperforming – the product has not met the performance test benchmark
■Not assessed – the product had less than 5 years of performance history and has not been rated by APRA.
Using the YourSuper comparison tool
To access a personalised version of the tool which allows you to view and compare your existing MySuper products:
You can also access a non-personalised version of theYourSuper comparison tool without logging into myGov by:
■Visiting ato.gov.au and search for “Your Super comparison tool”
■Start searching for your own MySuper product name.
If you have any questions regarding your Super obligations – de Kretser is here for you.
Need more information? If you need help comparing your superannuation fund or need assistance understanding how the comparison information relates to your circumstances, we are here to help, so please contact us for further information.
The domain namespace, “.au” has been made available exclusively to existing Australian domain name owners from 24 March 2022 – 20 September 2022.
After this time, if you have not registered your business name’s .au address – anyone can.
The “.au” has a Direct namespace and is intended to complement, rather than replace, the existing second-level domain namespaces and to provide domain holders with the option to register shorter, simpler domain names.
Unlike the existing second-level domain namespaces, there is no restriction on the domain names that can be registered in the .au namespace, provided the domain name applicant satisfies the Australian presence requirement.
A domain name ending in .au signifies that the person or organisation using it has a connection Australia. In .au we have several different namespaces serving different sectors and purposes and with different rules for who can register them and what name they can have.
‘Open’ .au namespaces
The open namespaces are those in which the public can register names, provided they are eligible.
Each name space serves a specific type of enterprise or purpose and rules for who can register in them, and what names they can register vary between them.
After an approximately five-year process in the 1990s, the Internet industry created a self-regulatory body called .au Domain Administration (auDA) to operate the domain. It obtained assent from ICANN in 2001, and commenced operating a new competitive regime for domain registration on 1 July 2002. Since this new regime, any registration has to be ordered via a registrar.
Ready for the next step.
Registrations are currently permitted below a second-level domain, such as “yourname.com.au”. In April 2016, auDA announced it would introduce registrations directly at the second level, such as “yourname.au”.
Direct registrations were due to be implemented in 2017 although due to an ongoing debate on how cybersquatting would be mitigated with the release of the direct second-level registrations has led to a delay, with a new launch date of 24 March 2022.
Registration of a .au domain is completed through a reseller, known as a registrar, with the registry acting as the wholesale provider. auDA manages domain name policy as the ICANN and Australian Government-endorsed manager of the .au DNS.
Second-level domains
.com.au – Commercial entities
.net.au – Commercial entities (historically only ISPs, but the use has been broadened)
.org.au – Associations and non-profit organisations (historically only for organisations that did not fit in other categories)
.edu.au – Educational institutions (see Third-level domains, below)
.gov.au – Governments and their departments (see Third-level domains, below)
.asn.au – Associations and non-profit organisations
.id.au – Individuals (by real name or common alias)
.csiro.au – CSIRO (Commonwealth Scientific and Industrial Research Organisation)
The *.edu.au, *.gov.au and *.csiro.au namespaces are referred to as “Closed” namespaces, since registration is not available to the general public. All other second-level namespaces are referred to as “Open” namespaces.
The new rules provide an “Australian presence” requirement for all domain name holders. To satisfy the Australian presence requirement, an individual must be an Australian permanent resident or citizen, while an organisation must either be incorporated in Australia or hold an Australian Business Number (ABN). Holders of an Australian trade mark also satisfy the Australian presence requirement, provided the domain name is an exact match of the trade mark.
For most domain types, the licensing rules also require that the domain name must be:
a match, acronym or abbreviation of the name of the holder; or
a match of the name of products, services, events, programs, premises or activities associated with the domain name holder; or
a match of the holder’s Australian trade mark.
Sub-licensing of a domain name is prohibited, unless the domain name holder is a parent company of the licensee.
What’s next?
You are not obligated to sign up for the .au address, though it may be something your business would like to consider.
If you need help with this – please do not hesitate to get in touch and one of our de Kretser members would love to help you in the right direction.
STP (Single Touch Payroll) works by sending tax and super information from your STP-enabled payroll or accounting software to the ATO as you run your payroll.
You will:
run your payroll
pay your employees as normal
give them a payslip.
Your pay cycle does not need to change. You can continue to pay your employees weekly, fortnightly or monthly.
Your STP-enabled payroll software will send a report to the ATO which includes the information, such as:
salaries and wages
pay as you go (PAYG) withholding
super liability information.
If you have 20 or more employees, you should be reporting closely-held (related) payees each pay day along with arms-length employees. The finalisation due date for closely-held payees is 30 September each year. A ”closely-held (related) payee” is an individual directly related to the entity from which they receive payments (for example, family members of a business, directors or shareholders of a company, or beneficiaries of a trust).
For small employers (19 or fewer employees) who only have closely-held payees, the due date for end-of-year STP finalisation will be the payee’s income tax return due date.
For an employer with a mixture of both closely-held payees and arms-length employees, the due date for end-of-year STP finalisation for closely-held payees is 30 September each year.
All other employees are due 14 July each year.
Before making your finalisation declaration, make sure your STP information is correct. If you can’t make a finalisation declaration by the due date, you will need to apply for a deferral.
If you have any requirements here – de Kretser can take them up for you.
You may finalise your data earlier if it’s ready. The sooner you finalise your employees’ information, the sooner they will be able to lodge their tax returns for 2021/22.
This finalisation process is explained in detail in the STP employer reporting guidelines, including amendments for current and previous financial years. As noted, we can assist you in this process. When you have reported and finalised your employees’ information through STP, you are exempt from:
■ providing payment summaries to your employees
■ lodging a payment summary annual report.
For payments to your employees that were not reported through STP, you still need to:
■ give a payment summary to your employees
■ provide the ATO with a payment summary annual report for these payment summaries.
If you identify that you need to make an amendment after you have submitted a finalisation declaration, you’ll need to submit these as soon as possible.
You can make the amendments to finalised STP data in your STP solution. The ATO recommend you tell your employees when you make an adjustment that will be reflected in their income statement. If they have already lodged their tax return they may need to lodge an amendment.
You will need to tell your employees:
■ you are no longer required to provide them with a payment summary for the information you’ve reported and finalised through STP
■ they can access their year-to-date and end-of-year income statement online through myGov or talk to their registered tax agent
■ ‘income statement’ is the new term for their payment summary (if they don’t already know this from last year)
■ to wait until their income statement is ‘Tax ready’ before lodging their tax return
■ to check their personal details and if necessary, update with both you and the ATO (incorrect personal details may prevent them from seeing their STP information). If an employee does not have a myGov account, they can easily create one online.
They can also talk to the de Kretser team who can easily access your required statement information, and assist you will all you need to satisfy this business necessity.
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This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to know. Should you require further information on any of the topics covered, please contact us via the details below. T: +61 3 9550 6900 E:admin@dekretser.com.au
The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will then steadily increase by 0.5% each year until it reaches 12% on 1 July 2025 – the following numbers tell the story –
Period
SG rate (%)
1 July 2015 – 30 June 2016
9.5%
1 July 2016 – 30 June 2017
9.5%
1 July 2017 – 30 June 2018
9.5%
1 July 2018 – 30 June 2019
9.5%
1 July 2019 – 30 June 2020
9.5%
1 July 2020 – 30 June 2021
9.5%
1 July 2021 – 30 June 2022
10%
1 July 2022 – 30 June 2023
10.5%
1 July 2023 – 30 June 2024
11%
1 July 2024 – 30 June 2025
11.5%
1 July 2025 onwards
12%
The increase to the superannuation guarantee (SG) rate begins from 1 July 2022 and will see more employees (and certain contractors) entitled to additional SG contributions on their pay.
If you have employees, what this will mean depends on your employment agreements.
If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund.
For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.
But what happens when income earned before 30 June is paid after 30 June 2022 – will employees be entitled to the higher SG rate of 10.5%?
SG based on when an employee is paid
On 1 July 2022, the SG rate increased from 10% to 10.5%. In some cases, an employee’s pay period will cross over between June and July when the rate changes.
However, the percentage employers are required to apply is determined based on when the employee is paid, not when the income is earned.
The rate of 10.5% will need to be applied for all salary and wages that are paid on and after 1 July 2022, even if some or all of the pay period it relates to is before 1 July 2022.
This means if the pay period ends on or before 30 June, but the pay date falls on or after 1 July, the 10.5% SG rate applies on those salary and wages. The date of the salary and wage payment determines the rate of SG payable, regardless of when the work was performed.
EXAMPLE
Nicholas is an employee of ABC Pty Ltd.
If Nicholas performed work:
In June (or partly in June and partly in July) but he was paid in July, the SG rate is 10.5% on his entire payment and contributions totalling 10.5% of his ordinary time earnings for the September 2022 quarter must be made to his superannuation fund by 28 October.
In July but was paid in advance (before 1 July), the SG rate is 10% and contributions totalling 10% of his ordinary time earnings for the June 2022 quarter must be made to his superannuation fund by 28 July.
Please also note the following changes to the SG Threshold
$450 super guarantee threshold removed
From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation.
For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week.
If you have any questions regarding your Super obligations – de Kretser is here for you.
Need more information? There are many factors to consider regarding the information shown above. Please contact us if you would like more information, we are happy to explain and action your requirements.
