New reporting arrangements for SMSFs from 1 July 2023

From 1 July 2023, trustees and directors of SMSFs must report certain events that affect their members transfer balance account quarterly.

These events must be reported by lodging a ‘transfer balance account report’ (TBAR) no later than 28 days after the end of the quarter in which they occur. The purpose of this change is to streamline the reporting process and bring all SMSFs under a single reporting framework. This means there will no longer be an ‘annual reporter’ option.

What is a transfer balance account and a TBAR event?

The introduction of a transfer balance cap (TBC) from July 2017 introduced a limit on how much an individual could transfer from their superannuation accumulation account into a retirement phase pension. In order to track an individual’s use of their TBC, a ‘transfer balance account’ (TBA) is created to record necessary transactions from the time an individual first commences a retirement phase pension.

Importantly, a TBAR is only required when a member has an event which affects their TBA. The most common reporting events include:

■Commencement of a pension

■Lump sum withdrawals from a pension account

■Commencement of a death benefit pension.

For many SMSFs, the members will have only one or two TBAR events in their lifetime. Other events that do not affect a member’s TBA and therefore do not need to be reported include:

■Pension payments

■Investment earnings or losses

■When an income stream ceases because the capital has been depleted

■Death of a member.

Changes from 1 July 2023 From 2023/24 onwards

■A member’s total superannuation balance will no longer be relevant in determining whether an SMSF reports on a quarterly or annual basis, and

■All SMSFs must lodge a TBAR within 28 days after the end of the quarter in which the TBC event has occurred (ie, by 28 January, 28 April, 28 July, and 28 October).

This means that SMSFs that have previously been permitted to lodge a TBAR on an annual basis will no longer be permitted to do so from 1 July 2023.

However, the obligation for SMSFs to report earlier will remain in cases where a fund must respond to a pension excess transfer balance determination or a commutation authority from the ATO.

Action items for SMSF trustees

For those SMSFs that already report on a quarterly basis, there will be no change to the reporting frequency for TBAR events. The changes impact SMSFs that are annual reporters only.

Note – if you’re currently lodging your TBAR annually at the same time as your SMSF annual return, you will need to report all events that occurred in the 2023 financial year by 28 October 2023. Should you have any questions on your TBAR reporting obligations, please contact us today as we can help you prepare for these upcoming changes.

If you have any questions regarding these coming changes – 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.

We look forward to working with you.

T: +61 3 9550 6900

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How to claim an early tax deduction on SG contributions

Are you an employer who needs to make superannuation guarantee (SG) contributions for your employees? If so, it may be worthwhile bringing forward these SG contributions to before 1 July to benefit from a tax deduction this financial year. However the timing of when SG contributions are deductible to an employer can be tricky if employers pay SG contributions for their employees via a superannuation clearing house (SCH).

RECAP – WHAT IS A SCH?

The ATO’s free Small Business Superannuation Clearing House (SBSCH) is the only ‘approved’ clearing house – none of the many commercial clearing houses have this status. The SBSCH is a free service that small businesses with 19 or fewer employees, or an annual aggregated turnover of less than $10 million, may use to make superannuation contributions to employees.The SBSCH aims to reduce compliance costs for small business employers by simplifying and streamlining the process of making employee superannuation contributions, by allowing employers to make a single lump payment of their contributions to the SBSCH each quarter. That lump sum payment is broken into individual payments by the SBSCH, and then contributed to each employee’s respective super fund or RSA superannuation account.

TAX DEDUCTION AVAILABLE FOR EMPLOYERS

Employers can claim income tax deductions for SG contributions made to a superannuation fund on behalf of their employees, subject to certain conditions being met. As the income tax deduction is available in the financial year the contribution is made, some employers may wish to improve their current year tax position by bringing forward the June quarter SG contributions to before 1 July, even though these SG contributions are not due until 28 July 2023.

TAKE CARE IF YOU USE A SCH

As mentioned above, SG contributions are tax deductible in the year in which they are made. That said, a contribution is not made until it is received by the fund, and when that happens depends on the way in which the contribution is made. This is clear cut where an employer pays SG contributions directly to an employee’s nominated superannuation fund. That is, the contribution will be made when it is received by the fund.

However, the timing of the tax deduction and when the contribution counts towards the employee’s contribution cap is not as straightforward where SG contributions are made to a SCH for all employees. Here, the SCH electronically transfers SG contributions to employees’ funds on the employer’s behalf. In this situation, the contribution is not made at the time the clearing house is credited with the funds from the employer. Rather, the contribution is made and therefore deductible when the funds are credited to the respective employee’s superannuation fund (following an electronic transfer of money from the clearing house) and then allocated to the employee.

BEWARE OF TIMING DELAYS

The ATO is aware that there may be a period of time between an employer’s payment to the SBSCH and superannuation fund receiving the contribution. Further, the SBSCH may be unavailable over a weekend close to the end of the financial year for scheduled system maintenance. This means that payments made towards the end of a financial year may not be received by an employee’s superannuation fund in the same financial year. This may therefore impact when an employer is entitled to an income tax deduction for the SG contributions

ACTION ITEMS FOR EMPLOYERS

For those employers who do not use the SBSCH but instead use commercial clearing houses, for the contributions to be deductible in 2022/23, it is recommended that it be made up to 21 days before the end of the financial year.

For employers who make contributions directly to their employees’ superannuation funds, the contributions should be made a few days before the end of the financial year to ensure they are received before 1 July and therefore deductible in the current financial year.

If you have any questions regarding these coming changes – de Kretser is here for you.

Need more information? Please contact us quickly so that we can help you ensure all entitlements are finalised – and you do not miss out.

We look forward to working with you.

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Proposed changes to super balances over $3m and how they may effect you.

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.

We look forward to working with you.

T: +61 3 9550 6900

E:admin@dekretser.com.au

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Employee or Contractor?

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.

FactorIf worker is an employeeIf worker is a contractor
Ability to subcontract/delegateThe 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 paymentThe 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 assetsYour 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 risksThe 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.
IndependenceThe 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/ObligationIf worker is an employeeIf worker is a contractor
IncomeYou’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.
SuperannuationYou’ll need to pay superannuation, at least quarterly, for eligible employees.You may still have to pay superannuation for individual contractors if the contract is wholly or principally for their labour.
Fringe benefits tax (FBT)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.

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Your personal Superannuation Comparison Tool for 2022/23

Are you ready to take control?

Follow these easy steps and compare your superannuation fund’s performance against other funds to make the right choice.

This will be possible if you have a MySuper fund as the ATO’s Your Super comparison tool as it can help you compare different MySuper products and choose a superannuation fund that meets your needs.

What is a MySuper fund?

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:

Displays a table of MySuper products ranked by fees and net returns (updated quarterly).

■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:

Log in to ATO online services through myGov, and

■Go to the Super drop-down menu and select Information, then select Your Super comparison.

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.

We look forward to working with you.

T: +61 3 9550 6900

E:admin@dekretser.com.au

This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
know.

To stay informed and connected, follow us on LinkedIn and Facebook


Superannuation simplified for your business – in 2022/23

Here at de Kretser – our team have compiled a simple guide to help your business with it’s Super responsibilities in the new Financial year.

You will have heard by now that business Superannuation contribution in Australia has increased to 10.5%  

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 –

PeriodSG rate (%)
1 July 2015 – 30 June 20169.5%
1 July 2016 – 30 June 20179.5%
1 July 2017 – 30 June 20189.5%
1 July 2018 – 30 June 20199.5%
1 July 2019 – 30 June 20209.5%
1 July 2020 – 30 June 20219.5%
1 July 2021 – 30 June 202210%
1 July 2022 – 30 June 202310.5%
1 July 2023 – 30 June 202411%
1 July 2024 – 30 June 202511.5%
1 July 2025 onwards12%

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.

We look forward to working with you.

T: +61 3 9550 6900

E:admin@dekretser.com.au

This is a de Kretser Client Information Newsletter keeping you on top of the issues, news and changes you need to
know.

To stay informed and connected, follow us on LinkedIn and Facebook