October 2021 – Practice Update

October 7, 2021

Extra super step when hiring new employees

Employers may soon need to do something extra when a new employee starts to work for them.

Currently, if a new employee does not choose their own fund, their employer can pay contributions for them to a default fund.

From 1 November 2021, if a new employee does not choose a specific fund, their employer may need to request the employee’s ‘stapled super fund’ details from the ATO.

A stapled super fund is an existing account which is linked (or ‘stapled’) to an individual employee, so it follows them as they change jobs.

Businesses will be able to request stapled super fund details for new employees using ‘Online services for business’, or by asking their registered tax or BAS agent to do this for them.

ATO support for employers with expansion of STP

As part of the expansion of Single Touch Payroll (known as STP Phase 2), from 1 January 2022, employers will need to report additional payroll information in their STP reports including:

• disaggregation of gross amounts (including separate reporting of paid leave, allowances, overtime, directors’ fees and salary sacrifice amounts);
• employment and taxation conditions (including information from the TFN declaration); and
• income types (for example, salary and wages, working holiday maker income, foreign employment income).

To support employers with the move to STP Phase 2 reporting, the ATO will take the following approach:

• Employers that can start Phase 2 reporting by their digital service provider’s deferral date (if applicable), do not need to apply to the ATO for more time.
• If an employer’s software will be ready for 1 January 2022 and they are able to start reporting before 1 March 2022, they do not need to apply to the ATO for more time (that is, an automatic extension applies).

The ATO has also advised that penalties will not be applied for genuine mistakes in the first year of Phase 2 reporting until 31 December 2022.

Reminder for first-time share investors to declare income

With the growth of micro-investment platforms helping new investors enter the market, the ATO has issued a reminder for first-time share and Exchange Traded Funds (‘ETF’) investors.

The ATO is concerned that first-time investors often do not understand their tax obligations in relation to reporting capital gains from the sale of shares and income in the form of dividends and distributions.

This could result in errors when they lodge their tax return and delay tax refunds.

While the ATO pre-fills data from third parties into individual tax returns, investors are urged to check that all relevant data has been included, or make sure their registered tax agent has all the necessary information before lodging. Investors should also keep good records.

Additional ATO support during COVID-19

The ATO is providing additional support to taxpayers having difficulty meeting their tax and superannuation guarantee charge obligations for employees because of COVID-19.

Available support includes the following:

• Lodgment or payment support options – for example, payment plans or remitting interest and penalties.
• Varying PAYG instalments – The ATO will not apply penalties or charge interest on varied instalments that relate to the 2022 income year where taxpayers have taken reasonable care to estimate their end of year tax liability.
• Moving from quarterly to monthly GST reporting for quicker access to refunds.
• Applying for administrative relief for Division 7A minimum yearly repayments.

Paid Parental Leave changes support parents in lockdown

The Paid Parental Leave (‘PPL’) scheme has been amended to enable expectant parents whose work has been affected by COVID-19 lockdowns to access Parental Leave Pay or Dad and Partner Pay under the scheme.

Many people who would otherwise have qualified for PPL, may no longer meet the ‘work test’ condition to be eligible for payment because of continued lockdowns across much of Australia.

For example, this could apply to a person who has been stood down, had their hours of work reduced or ceased work entirely as a result of a lockdown.

The changes to the PPL ensure that the period a person receives an Australian Government COVID-19 payment or the COVID-19 Disaster Payment (that is, because their work has been impacted by lockdowns) counts towards the work test, so that they may still receive Parental Leave Pay or Dad and Partner Pay.

Reminder of SG obligations for September 2021 quarter

Under the Superannuation Guarantee (‘SG’) scheme, employers are required to make quarterly contributions on behalf of their employees.

From 1 July 2021, the minimum contribution required is 10% (up from 9.5%) of an employee’s Ordinary Time Earnings base, up to a maximum quarterly contribution base of $58,920 for 2021/22.

Employers are reminded that the due date for making SG contributions for the September 2021 quarter is 28 October 2021.

Director identification number

All directors of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation will need a director identification number (director ID), a 15 digit identify that the director has been verified. It will assist government agencies by preventing the use of false or fraudulent identities. The implementation timetable of the Director ID is as follows

 

Date you become a director	Date you must apply
On or before 31 October 2021	By 30 November 2022
Between 1 November 2021 and 4 April 2022	Within 28 days of appointment
From 5 April 2022	Before appointment

 

Hughes O’Dea Corredig will be assisting all clients in the transaction to this new system. In the meantime, further information can be found at https://www.abrs.gov.au/director-identification-number

Support for reopening businesses

Once again, the Commonwealth and Victorian Government has announced further COVID-19 grants to support and provide certainty to businesses. The funding package of up to $2.27 billion announced last week will support businesses most affected by restrictions as Victoria reaches the 70%, then 80% fully vaccinated thresholds on the state’s Roadmap to Deliver the National Plan. A summary is below, while a comprehensive version can be found at: https://business.vic.gov.au/news-and-updates/2021/supporting-victorian-businesses-through-to-reopening

Business Costs Assistance Program Round Five 
Funding of up to $1.26 billion will provide for automatic payments to recipients of the Business Costs Assistance Program across October and into the first half of November. Eligible non-employing businesses will receive:

• $1000 per week, increasing to $2800 a week for an annual payroll of up to $650,000.
• $5600 a week for a payroll of $650,000 – $3 million.
• $8400 a week for a payroll of $3 million – $10 million.

Licensed Hospitality Venue Fund
Will ensure that more than 9,000 eligible cafes, restaurants, hotels and bars across Victoria will receive automatic Licensed Hospitality Venue Fund payments of between $5000 and $20,000 per week until the end of October. Weekly payments are allocated according to premises capacity. Further information on payments per capacity can be found at https://business.vic.gov.au/news-and-updates/2021/supporting-victorian-businesses-through-to-reopening

Small Business COVID Hardship Fund
The existing $700 million funding pool has been fully subscribed and the new allocation means 65,000 businesses will now be supported with one-off grants of $20,000. The Fund supports businesses that have suffered significant losses due to the pandemic, including businesses legally allowed to operate but restricted in their ability to generate revenue, but have previously fallen between the cracks in terms of government support.

 First Home Super Saver Scheme

A shortcut to save for your first home

With runaway house prices and the lowest interest rates on record, saving a deposit for your first home is becoming increasingly difficult. To assist you to save for your first home, the Federal Government introduced the First Home Super Saver (FHSS) Scheme on the May 2017 Federal Budget to allow you to use your superannuation fund for this purpose.

From the 1 July 2017, any voluntary concessional (before-tax) or non-concessional (after-tax) contributions you have made into your superannuation up to $15,000 per financial year (or $30,000 in total) plus ‘deemed’ earnings can be released from your superannuation to fund the purchase of your first home.

The Government announced on the May 2021 Federal Budget that the maximum releasable amount will increase from $30,000 to $50,000 for any voluntary contributions made into your superannuation from the 1 July 2017. However, this new measure is yet to be legislated.

The key advantages of using the FHSS to save for your first deposit over your savings account are as follows:

• Deemed earnings: The ‘deemed’ rate is based on the Shortfall Interest Charge (SIC) rate set by the Australian Taxation Office (ATO) every quarter, which is currently 3.01% per year. In comparison, the average interest rate on savings accounts is currently 0.50% per year. Your ‘deemed’ rate is not impacted if your superannuation fund was to perform lower than this rate during the saving period.
• Tax Savings: Income you earn within superannuation are taxed at a maximum of 15% whereas income you earn in your personal name can be taxed up to 47% per year (incl. the 2% Medicare Levy).

To illustrate the benefits of the FHSS, someone earning $90,000 per year with a marginal tax rate of 34.5% per year (incl. the 2% Medicare Levy) could potentially save approx. $5,400 more than a standard savings account earning 0.50% per year if they made a voluntary concessional contribution of $15,000 per year in the next 2 years as illustrated by the graph below:

Reference: BT FHSS Calculator

Please note the following:

• You may incur tax upon the withdrawal of your FHSS contributions based on your marginal tax rate less a 30% offset. Based on the example above, if you were to release $30,000 from your superannuation fund, the tax payable would be approx. $1,350 and the overall savings from FHSS would be reduced to approx. $4,050.
• To be eligible to the FHSS you must have never owned any type of property in Australia.
• Eligibility is assessed on an individual basis, hence if you are purchasing your first home with someone who is not eligible for the FHSS (i.e. because they are not a first home buyer), it will not make you ineligible for the FHSS.
• You need to firstly request to apply for a ‘FHSS determination’ from the ATO via your MyGov login to determine the maximum amount you can release from your superannuation. Once you receive a determination from the ATO, you can apply for a “release of you FHSS contributions” from the ATO via your MyGov login to fund your property purchase. Please note it can take up to 25 business days for your FHSS contributions to be released to you and you have 12 months from the date of release to sign a contract to purchase or build your home. The ATO can, in some circumstances, grant a 12-month extension.
• Before you proceed to make voluntary contributions into your superannuation for the purpose of the FHSS, it is highly recommended you seek financial advice to review whether this is the most appropriate strategy for your personal circumstances, including whether your superannuation fund participates in the FHSS scheme, and guide you through all the steps involved.

If you wish to learn more about the FHSS and how it can apply to your individual circumstances, please contact your HOC representative to discuss.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances

 

Tags: ATO, Coronavirus, COVID-19, GST, JobKeeper, JobKeeper Payment, JobKeeper Payment Extension, self-managed super, superannuaction, superannuation guarantee amnesty

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