Super changes – transition-to-retirement pension

Currently, the earnings on assets used to support a transition-to-retirement pension account are tax-free.  Members who are over preservation age (but younger than 65) and have not retired may start a transition-to-retirement pension.  This enables the member to draw a pension from their superannuation account while still working.  This pension is designed to supplement the member’s income to enable them to “transition” into retirement.  The earnings on this pension account are tax-free.

From 1 July 2017, the earnings on a transition-to-retirement pension account will no longer be tax-free.  Existing capital assets that support a transition-to-retirement pension account will be eligible for capital gains tax relief.  This will be addressed in a separate article.

Call us today on 56656469 if you would like to discuss how these changes may apply to you.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

Super changes – CGT relief

The recent changes to superannuation have resulted in the earnings on some member accounts being subject to income tax (where previously they would have been tax-free).

For example, members can only have a pension account balance of $1.6 million as at 1 July 2017.  Any amount of the pension that exceeds $1.6 million will need to be commuted back to accumulation.  The excess amount commuted back to accumulation will now be taxed at 15% (whereas previously it would have been tax-free).  Under the current rules, where members dispose of capital assets and their entire account balance in pension phase, the disposal of the asset will be tax-free.  However, where there account balance exceeds $1.6 million and the excess is transferred back to accumulation, the disposal of capital assets after 1 July 2017 may result in a capital gains tax liability.

Further, there are some taxpayers that currently have a transition-to-retirement pension.  The earnings on these accounts are presently tax-free.  As such, the sale of capital assets supporting the transition-to-retirement pension account are also tax-free.  From 1 July 2017, the earnings on transition-to-retirement pension accounts will no longer be tax-free.  As such, the future sale of capital assets that support the transition-to-retirement pension account may result in a capital gains tax liability.

For funds with unsegregated assets, members have a choice to reset the cost base of their capital assets to market value as at 30 June 2017.  This choice will ensure that the gains already made on the asset are tax-free up to 30 June 2017.  The choice can be made on an asset-by-asset basis and once the choice is made, it is irrevocable.

The notional capital gain/loss on the asset will be shown on the 2017 tax return of the superfund.  If the asset makes a capital loss, the loss will be disclosed on the 2017 tax return and carried forward to offset against future capital gains.  If the asset makes a capital gain, the gain is disclosed on the 2017 tax return but will be tax-free to the extent is supports a pension account as at 30 June 2017.  Essentially, if the member makes the election to reset the cost base of the asset, there is a deemed sale and repurchase of the asset as at 30 June 2017 and the net capital gains tax implications of this deemed sale will be disclosed on the 2017 tax return.  

Superannuation funds and members will need to carefully analyse whether this election will be beneficial for their member accounts. 

Call us today on 56656469 if you would like to discuss how these changes may apply to you.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

Employing staff

Is your business looking to employ staff?  There are many things to consider when you are about to employ staff for the first time.  Below is a general summary of the things you need to do to:

  • Get your business “employee-ready”

  • Obtain sufficient information from your new employee before they start

  • Comply with your ongoing obligations as an employer

 

Getting your business “employee-ready”

Before hiring an employee, at a minimum we recommend that you undertake the following steps:

  • Obtain advice from an employment lawyer to confirm the appropriate award(s) that apply to your employees and the minimum wages and conditions that will apply;

  • Have an employment lawyer prepare an appropriate employment contract for your new employees;

  • Register your business for PAYG withholding (this is the tax that is withheld from your employee’s pay each pay period and remitted to the ATO as part of your business activity statements);

  • Select a default superannuation fund for your employees (this will be the default fund for superannuation contributions for your employees if they do not choose another fund).  You will need to register with this default fund as an employer;

  • Setup a system to manage payments and keep records.Most accounting software packages have capabilities to manage and record payments to employees;

  • Prepare an employee information form to collect basic information from your employee (name, address, next of kin/emergency contact, bank account details);

  • Take out appropriate worker’s compensation insurance;

  • Consider possible liability to payroll tax and fringe benefits tax.

 

Our checklist above has focused on the financial and tax obligations of employing staff for the first time.  There are other legal factors you may need to consider.  Below are links to checklists provided by various government departments outlining other employment considerations.

 

Before your new employee starts

It is important to ensure that you have systems in place to collect all the relevant information from your employee before they commence.  Failure to collect this information may result in penalties for your business.  For example, if you do not collect the appropriate superannuation fund information from your employee, you may not be able to pay their superannuation contributions on time, for which you may be penalised.

We have outlined below the minimum forms you should have your new employees complete:

  1. Employment contract (prepared by an employment lawyer)

  2. Tax file number declaration form (https://www.ato.gov.au/Forms/TFN-declaration/)

  3. Choice of superannuation form (https://www.ato.gov.au/Forms/Superannuation-(super)-standard-choice-form/)

  4. Basic employee information form

 

This information must be obtained before your employee starts work.  If you do not get this information before your employee starts work and they subsequently leave your employment, it can be difficult to fulfil your obligations as their employer (eg. paying their superannuation guarantee and providing them with an end of year payment summary).

 

Ongoing obligations for employees

After your employee has started, you have ongoing obligations as their employer

Every pay period

Every pay period, you must ensure:

  1. Your staff are paid their appropriate wages and entitlements in accordance with their employment contract and awards;

  2. Sufficient tax is withheld from each pay (you can use the ATO’s tax withheld calculator (https://www.ato.gov.au/Calculators-and-tools/Tax-withheld-calculator/) or tax tables (https://www.ato.gov.au/Rates/Tax-tables/);

  3. Staff are provided with an appropriate payslip.

 

Every quarter

Every quarter, you must ensure:

  1. Your employees’ superannuation guarantee obligations are paid in full and on time (penalties apply for late payment).  Superannuation guarantee payments are due on the 28th day after the end of the relevant quarter.

    For small businesses with less than 20 employees or a turnover of less than $2 million, we recommend using the government’s Small Business Superannuation Clearing House to pay your quarterly superannuation obligations.  It is a free service and will help you fulfil your superannuation obligations and provide appropriate information for SuperStream reporting.
     

  2. You report the gross wages and PAYG withholding on your quarterly business activity statement.  The quarterly PAYG withholding amount will need to be paid to the ATO as part of your business activity statement.  (Once your business is withholding more than $25,000 in PAYG withholding annually, you will be required to report and pay your PAYG withholding to the ATO on a monthly basis.)

 

Every year

Every year, you must ensure:

  1. Staff are provided with an end of year payment summary no later than 14 July each year for the payments made between 1 July and 30 June;

  2. A PAYG payment summary annual report (showing the gross wages to your employees and the total tax withheld) is sent to the ATO no later than 14 August.

 

Other considerations

There are some handy summaries provided by the following government departments about other factors you should take into consideration when hiring employees:

 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,