Newsletter - August 2021 Edition 2
Cents & Sensibility | Tax News | Views | Clues
Self-Managed Super Fund (SMSF) Membership Change – Victoria Kogan
It is important to understand the purpose and responsibilities of superannuation, as well as to keep up with changes to legislation for SMSFs.
In June 2021, the government passed new legislation allowing SMSFs to have up to six members in a fund. This was previously capped at four members. It is a decision that includes family members, which can work well, but may not be for everyone.
When the group is as large as six, it could be expected that there will be a range of ages, skills and interests. For example, younger members will have longer investment time horizons than their parents.
Main advantages of the increase
- Larger families are catered for.
- Likely reduction in operation costs. Previously two or more funds may have been required.
- More efficient administration as state trustee legislation will now require a corporate trustee.
Administration costs can be saved as the SMSF is more likely to qualify as an Australian super fund when one or more members travel overseas for a prolonged period. This will assist the SMSF in maintaining Australian residency status, Central Management and Control status of the Fund.
Main disadvantages of the increase
- Ensuring the fund’s trust deed can cater for the increase in member numbers. Continuous changes to Superannuation laws and regulation, mean it is important that a Fund’s trust deed reflects current legislation.
- More complex administration.
- Reduced efficiency in decision making.
Fund control and management, e.g., appointing or removal of trustees.
As the information here is generic, it may not apply to your specific needs or circumstance. Please consider your own financial position and objectives and seek financial advice before making any relevant decisions.
Your Accountant and Estate Planning – Eric Zhang
Estate planning is important. There is a saying, ‘leave a Will, not a mess’. However, a well organised estate plan goes beyond a Will and requires your accountant’s involvement to achieve the best outcome.
Why your accountant is necessary
You don’t own the assets in your trust.
Assets in trusts are often overlooked or misunderstood during estate planning. The dealing of assets in your trust is governed by the trust deed. Your Will has very little effect on trust assets because they are not yours to give away.
With better understanding of your structure, your accountant can work with your legal adviser to construct a succession plan that reflects your wishes and intentions for your trust assets.
Superannuation Funds are complex
Your Will cannot directly deal with your superannuation. Assets held inside a super fund are managed by the trustee of the fund. You can choose to direct your super fund to your estate (then it will be covered by your Will) or leave it to certain beneficiaries, but this requires appropriate nominations. Your accountant can point you in the correct direction.
If you have a Self-Managed Superannuation Fund (SMSF), your accountant will play a bigger role in establishing a proper mechanism to achieve your succession goal.
Tax Implications to consider
There are complicated tax implications associated with transferring assets in trusts and superannuation funds. Your accountant can give your estate plan a health check to ensure your plan is feasible tax-wise.
Help your accountant help you!
Involvement of your accountant in estate planning gives your knp adviser insight into what matters to you. This valuable knowledge will help them tailor advice to fit your needs.
Maximum contributions base for super guarantee
The maximum super contributions base is used to determine the limit on any individual employee's earnings base for superannuation guarantee purposes on a quarterly basis.
Employers do not have to provide the minimum quarterly support for earnings above this limit.
For the 2022 financial year, the maximum contributions base has increased to $58,920 (up from $57,090).
Editor: This means once an employee earns over $235,680 during the 2022 income year, no additional superannuation guarantee will generally be required to be paid by an employer.
Practically, this means that the maximum superannuation guarantee contribution that an employer must pay for the 2022 income year is 10% of $235,680 (or $23,568).
Ref: ATO website, Key superannuation rates and thresholds, Maximum super contribution base, updated 6 July 2021.
The ‘gigs up’ with a new sharing economy reporting regime
Treasury has released draft legislation introducing the long-awaited third party reporting regime (proposed to apply from 1 July 2022).
The new regime will initially require ride-sharing and short term accommodation online platform operators to report transactions they facilitate directly to the ATO.
This measure was first announced in the 2020 MYEFO (following a recommendation from the Black Economy Taskforce established in 2016).
It is intended to extend to all other types of sharing (‘gig’) economy online platforms such as food delivery and task services from 1 July 2023.
Under this new proposed regime, the identity of participants and payments they receive will be reported to the ATO (twice a year) to identify entities who may not be meeting their tax obligations.
Ref: Treasury website, Implementing a reporting regime for sharing economy platform providers, 6 July 2021
Taxable Payments Annual Reports (‘TPARs’) due 28 August
2021 TPARs are due to be lodged for businesses who have paid contractors to provide the following services:
- building and construction;
- courier, delivery or road freight;
- information technology (‘IT’); or
- security, surveillance or investigation.
With specific reference to the TPAR due on 28 August 2021, the ATO has reminded taxpayers they may need to report payments made to contractors during the 2021 income year for the first time.
This will particularly be the case where such payments were made for delivery services done on behalf of their business (i.e., perhaps as a result of a COVID-19 business ‘pivot’ during lock down periods).
Importantly, the ATO has reminded taxpayers that they already have the records needed to lodge a TPAR from preparing their relevant activity statements including the:
- contractor’s name, address and ABN (if known); and
- total amounts for the income year of payments to each contractor (including GST) and tax withheld where the contractor did not quote their ABN.
Ref: ATO website, TPAR – check if you need to lodge, 12 July 2021
New FBT retraining and reskilling exemption available
Recent legislative amendments mean that employers who provide training or education to redundant (or soon to be redundant employees) may now be exempt from fringe benefits tax (‘FBT’).
The ATO has reminded eligible employers that they can apply the exemption to retraining and reskilling benefits provided on or after 2 October 2020.
There are no limits on the cost or number of training or education courses that employees may undertake.
Furthermore, retraining and reskilling benefits that are exempt from FBT don’t need to be included in the FBT return, or in an employee’s reportable fringe benefits amount.
The ATO has also advised that if an employer has already lodged and paid for their 2021 FBT return, they will need to amend to reduce the FBT paid for any exempt retraining and reskilling benefits.
Ref: ATO website, FBT retraining and reskilling exemption now law, 19 July 2021.
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.