You may be able to claim personal super as a tax deduction when you contribute your own after tax money into your super fund. Making a personal contribution into your superfund can have several benefits, including savings on tax and increasing your superannuation balance for retirement.

In order to claim a deduction for personal contributions (known as concessional contributions), there are a few steps that must be completed:

1. You need to deposit your contribution into your superannuation account before the end of the financial year (recommend well before 30 June as it can take some time to process).
2. You must notify your superfund that you intend to claim a tax deduction. To do this, you should complete a ‘Notice of Intent’ and send it to your fund.
3. You will then receive back an ‘Acknowledgement letter’ from your superfund. This allows you to claim your contribution as a deduction in your tax return.

Pro tip: If you’ve made a personal concessional contribution into a fund and are rolling funds from that fund to a new fund, you must lodge your notice and receive an acknowledgement from the old fund before doing the rollover. If you wait until year end, your old fund will no longer exist if there is no balance remaining. There are also issues with getting a notice of intent if you partially rollover or withdraw within the year as only partial amounts may be deductible for the contribution made during the year. If you think this may apply to you, please see the link below for more information.

https://www.ato.gov.au/forms/notice-of-intent-to-claim-or-vary-a-deduction-for-personal-super-contributions/?page=7

Unfortunately not everyone is eligible to claim a deduction for personal concessional super contributions as there are age restrictions. The below shows the different age criteria for making concessional contributions.

• Under 67: You can make concessional contributions.
• 67 to 74: You must pass a work test to make concessional contributions.
• 75 and over: You cannot make concessional contributions.

Additionally concessional contributions from all sources (including what your employer contributes for you) are currently limited to $27,500 per person per year.

If you are thinking about putting extra money into your super and claiming a tax deduction, and are still unsure if you will be eligible or if it will be beneficial in your circumstances, see the link below for more information.

https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/claiming-deductions-for-personal-super-contributions/

Other related blogs:

What happens if I make excess contributions to super?
Contributing to super – options for employees
Carry forward concessional contributions – what are the rules?

Author: Caleb Datson
Email: caleb@faj.com.au

The super guarantee system, where employers now contribute 10% of wages to super for their employees has been largely successful in providing better retirement incomes for working Australians since its 1992 introduction.

It’s also had its fair share of problems, one of those being that employees end up with multiple super accounts (there’s currently around 6 million) as they move jobs. Many of these accounts end up either lost or eroded by fees and insurance premiums.

Under current rules, if you start a new job and don’t nominate a super fund, your employer will open a new account in a default super fund selected by the employer.

New rules will commence from 1 November 2021 whereby you will keep the same stapled super fund when you move from job to job – i.e. your fund will be “stapled” to you (sounds like a malicious office incident). Treasury has estimated that Australian workers will save $2.8 billion over the next 10 years under these stapling arrangements.

All employers will be obligated to apply these rules for new workers that commence from 1 November. If you’re an employer, here’s what you’ll need to do.

First, within 28 days of their start date, you’ll have to offer your new employee the usual choice of fund using the Super Standard Choice Form. No changes there. If they fail to nominate a fund, you’ll need to log into ATO online services and provide some basic information about the employee. The ATO will respond to you online within minutes, and if the employee has a stapled fund you must contribute to it. They will also advise the employee that the request was made.

If for some reason the employee doesn’t have a stapled fund, then you can add them to your default fund.

Oddly, employees with multiple super accounts don’t get a say in which fund becomes their stapled account. The ATO will determine this using tiebreaker rules set out in the legislation. Generally the stapled fund will be the fund the employee last received contributions into, otherwise the rules look for the largest account balance, then the newest creation date.

To override the tiebreaker rules an employee will need to use the Super Standard Choice Form when they commence employment.

Employees should also be aware of the new YourSuper tool which enables them to compare super funds ranked by fees and investment returns, with a prompt to consolidate accounts if they have more than one. You can also search for any lost super through your myGov account.

Related blog:

Penalties for late payment of super guarantee
Contributing to super – options for employees

Author: Mark Douglas
Email: mark@faj.com.au

Taxable Payments Annual Reporting (TPAR) is where businesses report to the ATO the total payments they make to contractors for services in a financial year. The contractors can operate as any entity structure – sole trader, company, partnership or trusts. The TPAR does not result in additional payments or tax; it is simply reporting information to the ATO.

The ATO uses the information reported to data match what is declared on contractors taxable income and activity statements. The ATO will then know if contractors have failed to lodge a return or activity statement, failed to register or declare GST on their activity statements or haven’t declared their full revenue on a tax return.

Not all businesses need to prepare Taxable Payments Annual Reporting each year. It is only a requirement for industry specific businesses which include:

• Building & construction services
• Road freight & courier services
• Cleaning services
• IT Services
• Security, investigation & surveillance services

Not all payments a business makes need to be reported on TPAR; it is only for payments to contractors for their labour. You do not need to report payments for materials, incidental labour, invoices unpaid at 30 June, payments within a consolidated group and contractors without an ABN.

For each contractor you need to report the following:

• ABN
• Address
• Name (Business name/ Individual name)
• Gross amount paid
• GST paid (if applicable)

It is important to keep records of the above when payments are made to contractors to make completing the TPAR a lot faster, rather than having to chase information from contractors when the report is due.

TPAR needs to be lodged by the 28^th of August after each financial year and penalties can apply if the reports are lodged late. The form can be lodged through a few different methods – paper form, lodging through an accounting software and lodging through the online business portal.

Other related blogs:

Employee or contractor – the risks of getting it wrong
When do I need to pay super for contractors?

Author: Rhys Frewin
Email: rhys@faj.com.au

“We make a living by what we get. We make a life by what we give.” Wise and inspirational words from Winston Churchill.

Around four million taxpayers each year make almost $4 billion of tax-deductible donations to various charities around the country. West Australians top the list for the average amount of donation per person. But not everyone understands the rules around the deductibility of donations.

Those that give may be rewarded through our tax system by receiving a tax deduction for donations given to certain organisations, known as Deductible Gift Recipients (DGRs). But like many components of our complicated tax system, the integrity of the rules is exposed to misunderstanding and misuse.

In the 2019 year, nearly two thirds of the charitable donation claims that were adjusted by the ATO were because the taxpayer could not prove they had made the donation. For this reason the ATO has put out a timely reminder, listing the four main reasons that donations may or may not be tax-deductible.

Firstly, the donation can only be deductible if it is made to an organisation that is endorsed as an Australian registered DGR. An organisation’s DGR status can be checked using the on-line ABN lookup tool at abr.business.gov.au. It’s important to understand that not all charities and not-for-profits are DGRs.

Crowd-funding is proving popular as a modern means of charity, but crowd-funding contributions will rarely be tax-deductible unless the funding organisation is a DGR. Foreign charities are also often not registered as an Australian DGR.

Secondly, donations are generally not tax-deductible where the taxpayer receives or expects to receive a monetary or personal benefit in return. Common examples include buying raffle tickets or chocolates for fundraising purposes, although receiving a token like a pin, wristband or sticker will not deny you of your deduction. Some crowd-funding models also provide reward in return for payments and would therefore not be deductible, regardless of DGR status.

The third reason is based on record-keeping. Most charities issue receipts for donations, but some don’t. Where you have third party evidence like a credit card statement that makes it clear you have donated to a DGR, the ATO will likely accept your claim. They’ll also accept a claim for bucket collections of $2 or more without receipts up to a maximum of $10 per year.

Lastly, the ATO says that some people incorrectly claim deductions for donations they intend to make in their will, or claim for workplace giving that has already reduced taxable income through the payroll system.

Donations made by the executor of a deceased estate are never tax-deductible, so if this is part of your estate planning strategy you should chat to your tax advisor to ensure you get the best outcome.

Related blog:

Is my donation tax deductible?

Author: Mark Douglas
Email: mark@faj.com.au

Single Touch Payroll (STP) was introduced by the ATO to replace the PAYG Payment Summaries system, requiring employers to report their payroll information in real time. Most employers now report payroll data to the ATO each pay run using STP enabled software. The ATO has recently made STP changes which have taken effect from 1 July 2021.

What has changed for small employers – closely held payees

From 1 July 2021 small employers (with 19 or fewer employees) are now required to report payments made to ‘closely held’ payees through STP enabled software.

Small employers were exempt from reporting closely held payees through STP up until 30 June 2021. A closely held payee is an individual who is directly related to the entity, for example family members of a family business, directors or shareholders of a company, and beneficiaries of a trust.

When to report

There are 3 options to report your closely held payee data:

1. Report actual payments on or before each pay run
2. Report actual payments quarterly when the activity statement for that quarter is due
3. Report a reasonable estimate quarterly

Reporting quarterly means that you only need to lodge an STP report in quarters where you have made a payment that you need to report. Each quarter you still need to include any PAYG withholding amounts on your activity statement, and be sure to make Superannuation Guarantee contributions for your closely held payees before the relevant due date.

If your circumstances change and your reported reasonable estimates in previous quarters are either too high or too low, you have until the due date of your next quarterly STP report to correct a closely held payee’s year to date information. It is important not to underestimate amounts reported for closely held payees as you may be liable for penalties and interest.

How to report

Your best option is to subscribe to a suitable software package. All the major players like Xero and MYOB have stand-alone payroll packages for four or less employees for $10 per month that automate the process.

The ATO maintains a product register to include all available STP software options. This may be through an update to your existing software, or an additional service. Specifically for small or micro employers is a list of no cost or low cost STP software solutions, that cost less than $10 per month.

Each software provider will provide a way to report quarterly closely held payee data in addition to reporting payroll for regular employees each pay day. However, it may be more efficient for you to report your closely held employees at the same time.

End of financial year finalisation declaration

You will need to make a finalisation declaration in your STP enabled software to let the ATO know your STP reporting is complete for an employee for a financial year. This means your employees’ information will be available via myGov rather than on a payment summary.

Small employers with only closely held payees must make a finalisation declaration by the due date of the individual’s tax return, and the due date for arm’s length employees remains 14 July. If you are using the reasonable estimate reporting method you must correct the actual year to date amount paid.

What has changed for micro employers

Until 30 June 2021 a quarterly STP reporting option applied to micro employers (1 to 4 employees). From 1 July 2021 micro employers will need to report their payroll data in real time, or they can continue to report quarterly through a registered tax or BAS agent if they meet the following eligibility requirements:

• Lodge activity statements electronically through a registered tax agent
• Have a non-computerised payroll i.e. manually on a paper or a spreadsheet
• No overdue amounts owing to the ATO or lodgement obligations
• Meet the ATO’s exceptional circumstances determined on a case by case basis

Exceptional circumstances may include natural disasters, impeded access to records, serious illness or death of a family member, internet issues such as the inability to connect to the internet or an unreliable or slow internet connection, or having seasonal or intermittent workers.

Next phase of STP

From 1 January 2022 extra information will need to be included in your STP reporting for each employee, including their employment basis, itemised payment types that make up the gross amount (e.g. allowances, overtime, salary sacrifice), how they are taxed and details of why their employment has ceased.

Other related blogs:

Single Touch Payroll

Author: Danielle Pomersbach
Email: danielle@faj.com.au