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Superannuation eligibility changes could impact your payroll

In addition to planning for the expected statutory super rate rise to 10.5%, some employers need to prepare for a significant change from July 2022.

Removal of the $450 Monthly Earnings Threshold

The $450 per month eligibility threshold has been removed for most workers.

This means employers will need to pay the superannuation guarantee contribution (SGC) on all ordinary earnings. Particularly if your business relies on a large pool of casual workers who earn less than $450 per month, you’ll notice the extra cost when it comes to paying SGC for the September quarter.

There are some exceptions to the rule – employees under 18 and domestic workers need to work more than 30 hours per week and earn more than $450 per month. Contractors deemed employees for superannuation contributions must earn more than $450 per month. There are different rules for international and temporary workers.

Single Touch Payroll Super Reporting

All your payroll details are reported to the ATO through STP. This includes super amounts owed to employees. Late payment and interest penalties are expensive, so this is one employer obligation you don’t want to miss!

Get Ready for Increased Payroll Costs

Be proactive and start costing your payroll now to budget for the increased payroll costs. You can also let your employees know about the changes coming to their super, so they know about their entitlements.

If you’d like a review of your payroll systems and costs, talk to us today. We’ll help you plan for the impacts of the increased super expenses on your business.

Super Guarantee Rate Rises in July to 10.5%

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now, to increase the rate to 12% incrementally.

In July 2022, the rate will rise to 10.5%. From then on, the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prepare Now for the July Rate Rise

• Review your current superannuation costs for all employees, both hourly and salaried.
• Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
• For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
• Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2022. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
• Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
• Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy.

Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

High inflation: What does it mean for your business?

2022-23 Federal Budget Highlights

The Federal Treasurer, Mr Josh Frydenberg, handed down the 2022–23 Federal Budget at 7:30 pm (AEDT) on 29 March 2022.

In an economy emerging from the pandemic, the Treasurer has confirmed an unemployment rate of 4% and an expected budget deficit of $78 billion for 2022–23. As international uncertainties add pressure on the cost of living, key measures in the Budget provide cost of living relief in the form of an increased Low and Middle Income Tax Offset, a one off $250 payment for welfare recipients and pensioners and a 6-month fuel excise relief.

Other measures for business seek to promote innovation, with expanded “patent box” tax concessions proposed, and provide tax incentives for small business to invest in the skills of their employees. A lower GDP uplift rate for PAYG and GST instalments has also been proposed to support cash flows of small and medium businesses.

The full Budget papers are available at www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au. The tax, superannuation and social security highlights are set out below.

Individuals

• The low and middle income tax offset will be increased by $420 in the 2021–22 income year to ease the current cost of living pressures.
• A one-off payment of $250 will be made to individuals who are currently in receipt of Australian government social security payments, including pensions, to ease cost of living pressures.
• Additional funding will be provided over 5 years to support older Australians in the aged care sector with managing the impacts of the COVID-19 pandemic.
• Costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021.
• A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
• CPI indexed Medicare levy low-income threshold amounts for singles, families, and seniors and pensioners for the 2021–22 year announced.
• The number of guarantees under the Home Guarantee Scheme will be increased to 50,000 per year to assist home buyers who have a lower deposit.

Business

• Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022.
• Small and medium businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.
• Small and medium businesses will be able to deduct an additional 20% of eligible expenditure supporting digital adoption.
• The Boosting Apprenticeship Commencements wage subsidy will be extended by 3 months.
• Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
• Access to employee share schemes in unlisted companies will be expanded.
• The PAYG instalment system is set for a structural overhaul with a set GDP uplift of 2% to apply for the 2022–23 income year.
• Additional funding will be provided to further reform insolvency arrangements, including the insolvent trading “safe harbour”.
• Business registry fees will be streamlined over 3 years from 2023–24.
• Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians will be exempt from corporate income tax.

Excise and customs duty

• Excise and excise-equivalent customs duty on petrol and diesel will be reduced by 50% from 30 March 2022 for 6 months.
• The temporary tariff concession for COVID-19 related medical and hygiene products will be made permanent.
• Administration of fuel and alcohol excise, and excise-equivalent customs duty will be streamlined.

Superannuation

• The 50% reduction of the superannuation minimum drawdown requirements for account-based pensions will be extended for an additional year.

Innovation

• Corporate income from the commercialisation of patents, issued from 29 March 2022, in respect to agricultural and veterinary (agvet) chemical products will be taxed at an effective rate of 17% for income years starting from 1 July 2023.
• The effective tax rate of 17% for the “patent box” regime will also be expanded to include patents that have the potential to lower emissions.
• Following on from the 2021 Federal Budget announcement of the “patent box” regime for medical and biotechnology innovations, the concessional tax treatment will be expanded to include certain overseas jurisdictions with equivalent patent regimes.

Tax administration

• Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
• Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgment cycle as their activity statements.
• Trust and beneficiary income reporting and processing will be digitalised.
• IT infrastructure will be developed to allow the ATO to share single touch payroll data with state and territory revenue offices.
• The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years.
• The start date of the 2019–20 Budget measure for holders of Australian Business Numbers will be deferred by 12 months.

Not-for-profits

• Melbourne Business School Ltd, Advance Global Australians Ltd, Leaders Institute South Australia Inc, St Patrick’s Cathedral Melbourne Restoration Fund, and various entities related to Community Foundations Australia, have been added to the list of specifically DGRs for a period beginning 1 July 2022.

Indirect tax

• The Indirect Tax Concession Scheme (ITCS) has been granted or extended to various diplomatic and consular representations.

A strong strategy is the heart of your successful business

Businesses that have clear objectives or goals, robust accountability and a shared sense of purpose should always outperform those that just show up and go through the motions.

Strategy lies at the heart of most successful businesses. To achieve this you need to resource and execute with a clear purpose. Few businesses have a strategic plan or a robust planning process. Changing this situation should be a top priority! Here are two top tips for business owners.

1. Process Creates the Plan

Getting strategy at the heart of your success will require you to carve out some time, get a process started, and shake things up. There’s no better time to review and tweak your business model, future-proof compelling services, and to get your strategic building blocks in place.

Just as every good strategy has key elements, every good plan needs a step-by-step process. In fact, the process is often just as important as the plan itself. A strategic planning retreat with your core team is a great way to start the process – find a spot offsite to get the creative juices flowing and set an agenda.

2. Key elements of an effective strategy

The key elements in a good strategy normally incorporate:

• Vision – this is a statement that identifies what a company would like to achieve or accomplish.
• Values – these are the fundamental beliefs upon which your business and its behaviour are based. They are the guiding principles that your business uses to manage its internal affairs as well as its relationship with customers.
• Objectives – short term, long term. These should be SMART (specific, measurable, achievable, realistic and timebound).
• KPIs – stands for Key Performance Indicators. These are measurable values that demonstrate how effectively a company is achieving key business objectives.
• Actions – what needs to be done to meet the objectives? Make this simple and clear.
• Owners – delegating tasks to specific owners to ensure follow through and accountability.
• Deadlines – when your actions will be complete to ensure you make progress.

It doesn’t need to be much more complicated than that, but do invest the time and effort in doing this right. A proactive, value-add strategic model will need fresh thinking, debate, research, and open conversations. Enjoy and embrace the process and you should end up with a good outcome.

Great planning requires a guide, facilitator, and/or professional expertise to be as robust as possible. We can help your business and guide you through the steps.

Putting strategy at the heart of your business activity should not only give your business greater direction and focus but lead to stimulating, profitable opportunities too. It’s time to get started!

COVID-19 tests to be tax deductible

The cost incurred in taking a COVID-19 test will be tax deductible for you as long as the test was used for a work-related purpose.

The legislation has passed through the parliamentary process and will become law. It applies from 1 July 2021, which means you can make claims in your next income tax return.

The new legislation provides a specific deduction and removes any previously held ambiguity about whether an expense for a COVID-19 test was deductible.For the purchase of a COVID-19 test to be tax deductible:

• must have paid for the test and not been reimbursed by your employer, and
• were required to take the test before going to work because:
  • of a public health order
  • your employer has asked or required you to take one, or
  • you were previously a positive case and needed to show your employer a negative test before going back to work.

It is important to point out that the deductibility is solely on the requirement to take a test. The test result, or whether you actually worked on the day you took the test, is irrelevant.

Apportionment

You will need to apportion your deduction when you have bought a packet with multiple tests and you have only used some of them for work-related purposes.

Substantiation

It is important to always keep records and receipts of items where you want to claim a tax deduction.

However, if you don’t have the receipts handy, don’t worry. We’ll ask you at tax time to come up with a reasonable calculation for your claim, as the new law comes under rules where you might not have a receipt. This rule generally allows you to make a claim up to $300 for various expenses in your tax return.

If you need to know more about the new allowable deduction, please give our office a call. We would be delighted to discuss this with you further.

One-off cost-of-living payment for social security recipients

In the 2022 Federal Budget, the government announced a one-off cost-of-living payment of $250 for individuals currently in receipt of a government allowance or pension. If you do not receive an allowance or pension but hold a Pensioner Concession Card or Commonwealth Seniors Health Card, you will also receive the payment.

The payment of $250 will be tax free, and it will not count as income for government allowance or pension income test purposes.

If you receive one of the following payments, you are eligible to receive the cost of living payment:

• age pension
• disability support pension
• carer payment
• parenting payment
• youth allowance
• Austudy payment
• JobSeeker payment
• special benefit
• farm household allowance
• carer allowance, or
• double orphan pension.

It is expected that the cost-of-living payment will flow through to your nominated bank account from 28 April 2022.

If you do not receive the payment and think you should have, please contact us. We will be happy to discuss this matter on your behalf.

Do Your Independent Contractor Agreements Measure Up?

Business owners need to classify workers correctly to minimise the risk of being penalised later for wrongly classifying workers as contractors when they should be employees.

It’s a common area of concern for business owners who engage contractors. Many Fair Work Ombudsman cases have resulted in severe penalties and back payments imposed for engaging someone as a contractor when they should have been paid as an employee.

What’s Required in Contractor Agreements?

You should have a comprehensive agreement with every independent contractor.

The contract should include:

• Details of the nature of the working relationship to demonstrate that a genuine contractor relationship exists.
• All rights and obligations of both the contractor and the business.
• Terms and conditions of the agreement.
• Whether superannuation applies.
• The main factors used to assess the worker as a contractor such as independence, ability to delegate work, the basis of payment, the use of tools and equipment, the degree of control or the ability to take on other work.
• The date of the next review of the contract.

Many factors are involved in assessing whether a worker is deemed to be an employee or contractor, and the relationship can change over time. There is no single overriding factor in deciding if a worker is truly an independent contractor. Therefore, each working relationship must be assessed separately and individually.

Time to Upgrade Contractor Agreements

If a lawful agreement clarifies the terms of engagement and addresses all aspects of the working relationship, this will reduce the risk of later being penalised because of wrongly classifying a worker. But for the contract to be relied upon in court, it must address all aspects of the working relationship in enough detail that there is no room for misinterpretation of terms.

Now is a great time to review and upgrade any agreements you have in place with contractors. Do they measure up?

Talk to us about getting reliable agreements in place for all your independent contractors so you can trust in the terms of the engagement.

Company Director? You’ll need a Director Identification Number from now on

What is a Director Identification Number?

During 2021, the government initiated a new system that attaches a unique identifying number to an individual who is a company director. A director has one number permanently attached to them, and this is used for identification purposes for any or all companies they are a director of.

From 5 April 2022, director ID numbers are mandatory for all new company directors.

The new Australian Business Registry Services (ABRS) administers the director ID register. The ABRS will gradually integrate all government business registers into one easily accessible register with greater security.

The director ID numbers promote integrity and better transparency of appointed directors. The system is designed to flush out fake director identities used in illegal activities, which results in increased privacy protections for legitimate directors.

What do You Need to do?

• Existing directors have until November 2022 to register for a director ID number. But there’s no reason to delay – apply as soon as possible.
• New directors appointed between 1 November 2021 and 4 April 2022 must apply within 28 days of being appointed as a director.
• New directors appointed from 5 April 2022 must obtain a director ID number before accepting a director appointment.
• Prospective directors can apply for a director ID up to 12 months ahead of the appointment.
• Complete the application process yourself as you must verify your identity as part of the application – nobody else can apply on your behalf.

Application Process

The easiest and fastest way to apply is online via ABRS.

• You’ll need a myGovID account to apply for your director ID number online. This creates an authenticated digital identity you can use when accessing government services online.
• Apply through ABRS Director identification number. You’ll need proof of identity documents such as tax file number, ATO notice of assessment or bank details.
• You’ll then need to complete the application process from the ABRS webpage, which will link your myGovID account to the application. If the application is verified successfully, you’ll receive your director ID straight away.
• You can also apply via paper form or telephone; however, this is a slower process.

What Next?

Set up your myGovID if you haven’t already. Get your identification documents together and apply by your due date. This is also a great time to update your ABN details and ASIC details. Talk to us if you’d like to know more about director ID numbers and company director obligations.