In July 2023, the superannuation guarantee statutory rate will rise to 11%. Annually, the rate is increasing by 0.5% 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. 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.

The 2022 federal budget has been released. It’s not the spending bonanza that it has been in previous years as the government tries to wind back Covid stimulus. In addition, pre-election budgets are always problematic as the announcements may not eventuate if there is a change in government.

Below are some key announcements from the 2022 budget

Businesses

Digital Adoption

Small Businesses will be able to claim an additional 20 per cent on business expenses and assets that support their digital adoption. This can include items such as portable payment devices, cyber security and cloud-based subscriptions.

We’ll need to wait for further clarity to confirm if laptops or similar devises are included in the bonus deductions.

An annual cap of $100,000 will apply for digital adoption expenditure.

The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023, however all claims will be included on the 2023 tax return.

Skills and Training Boost

Small businesses will be able to claim an extra 20 per cent deduction for external training courses provided to employees. The courses must be provided Australia or online, and delivered by entities registered in Australia.

Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.

The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024.

Taxable Payment Report

Taxable Payment reporting is currently required annually for selected industries where payments to subcontractors are reported to the ATO to help combat the ‘cash economy’ and income not being declared.

The reporting frequency is set to increase to align with the BAS lodgement cycle, with the changes expected to take effect from 1 January 2024.

Australian Apprenticeships Incentive System

In its first phase, from 1 July 2022 to 30 June 2024, the Australian Apprenticeships Incentive System will support employers of apprentices in priority and non-priority occupations with a wage subsidy; with apprentices in priority occupations entitled to access direct financial assistance. Priority occupations are those listed on the Australian Apprenticeship Priority List.

From 1 July 2024, following a checkpoint to assess progress, support will be available for priority occupations only, through a mix of employer and apprentice payments, including a hiring incentive for employers; and training support payments for apprentices.

Boosting Apprenticeship Commencements and Completing Apprenticeship Commencements

The Boosting Apprenticeship Commencements wage subsidy supports businesses and Group Training Organisations to take on new apprentices and trainees, to build a pipeline of skilled workers to support a sustained economic recovery.

Through the subsidy, any business or Group Training Organisation that engages an Australian Apprentice between 5 October 2020 and 30 June 2022 may be eligible for a subsidy of 50 per cent of wages paid to a new or recommencing apprentice or trainee. This covers a 12-month period from the date of commencement, to a maximum of $7,000 per quarter.

After 12 months of this support employers will be eligible to transition to the time-limited Completing Apprenticeship Commencements (CAC) wage subsidy for the second and third years of an apprenticeship. Under the CAC, eligible employers will receive a 10 per cent wage subsidy in the second year of an eligible apprenticeship, up to a maximum of $1,500 per quarter per apprentice, and a 5 per cent wage subsidy in the third year of their apprenticeship, to a maximum of $750 per quarter per apprentice.

For more information, see Employer Incentives | Australian Apprenticeships

Instant Asset Write Off

Not a new announcement in the 2022 Budget but a reminder that the Instant Asset Write Off will continue to be available for assets installed and ready for use prior to 30 June 2023.

Individuals

Low and Middle Income Tax Offset (LMITO) extension

The LMITO will be increased from $1,080 to $1,500 for the 2022 financial year and will be available to individuals with income below $126,000.

Cost of Living Payment

The Government will provide a $250 economic support payment to help eligible recipients with higher cost of living pressures. The payment will be made in April 2022 to recipients of eligible social security payments and to concession card holders

Temporary Fuel Excise Reduction

There will be a temporary reduction in the fuel excise, with the excise be cut by 22.1 cents per litre. The reduction will be in place from 30 March 2022 until 28 September 2022.

While providing welcome relief at the bowser, Farmers, Transport and other industries will need to account for a reduction in the fuel tax credits claimed on BAS during this period

Women’s Budget Statement

This 2022-2023 budget includes a Women’s Budget Statement, focussed on issues particular to women. There are a raft of issues identified and measures aimed at solving them, including ending violence against women and children, increasing women’s participation in the workforce, improving women’s health and retirement prospects. Amongst the many elements of the Budget spending highlighted in this Women’s Budget Statement, the following stood out:

Child Care and Parental Leave

The Budget allows for an increase in the Child Care Subsidy for families with multiple children and removing the annual Cap on the Subsidy.

Eligible families will be able to access up to 20 weeks paid parental leave to be used by either parent. Currently the Paid Parental Leave is 18 weeks, plus 2 weeks Dad and Partner Pay, so whilst there is no additional government leave available, it does mean that families can choose who takes the available leave and when.

Leadership

To help improve gender equality in leadership roles, the Government has provided funding to the Australian Institute of Company Directors to deliver board diversity scholarships to support women to attend a company directors course.

The Office for Women will oversee a refresh of the Government’s BoardLinks platform to improve its functionality, including navigation and search capability, improving visibility of upcoming government board vacancies, promoting greater board diversity, and providing links to established networks and industry partners.

Superannuation

From 1 April 2022, the Government’s reform to improve the visibility of superannuation assets in family law proceedings will come into effect. The Australian Taxation Office will be able to share information with the Courts on superannuation assets held by parties during family law disputes. This will help deliver fairer and more equitable outcomes for women going through separation proceedings by reducing the scope for former partners to under-disclose their assets.

From 1 July 2022, legislation comes into effect that removes the $450 per month income threshold under which employees do not have to be paid the superannuation guarantee by their employer. The measure will improve the coverage of the superannuation system, making a real difference to the retirement savings of around 300,000 lower income workers per month, 200,000 of whom are women. Whilst we would also want them to tackle the reason why so many women are earning less than $450 per month, removing this threshold means that at least those impacted will be receiving superannuation.

Also from 1 July 2022, the work test for non-concessional and salary sacrificed contributions to superannuation for individuals aged 67 to 75 will be removed, and the eligibility age for the downsizer contribution will be reduced from 65 to 60 years. As women are more likely to make voluntary contributions to their superannuation than men, this additional flexibility will increase the ability for women to make contributions later in life.

The extension of the downsizer contribution scheme – where the family home is sold and proceeds are contributed to superannuation – the extension applies to younger cohorts which will particularly benefit people with moderate superannuation balances, including women; women currently account for around 55 per cent of downsizer contributions

Housing

Announced in the 2021-22 Budget, the Family Home Guarantee is the first housing policy designed to specifically help single parents. The Family Home Guarantee supports single parents to build or purchase a home with a deposit of as little as two per cent. To build on the early success of this program, the Government is doubling the number of places available under the Family Home Guarantee to 5,000 per year to 30 June 2025.

We will provide updates as more news/ information comes to light. As always, it’s important to note that the budget announcements aren’t real until the legislation has been finalised.

If you have any questions about how the Budget has affected you or your business, please contact our office on 08 6118 6111 or email hello@prescottsolutions.com.au

More Information

• Budget 2022-23 – Budget.gov.au
• Budget Measures Budget Paper No. 2 2022–23 https://budget.gov.au/2022-23/content/bp2/download/bp2_2022-23.pdf
• ATO: Latest news on tax law and policy https://www.ato.gov.au/General/New-Legislation/Latest-news-on-tax-law-and-policy/

Whilst every care has been taken in its preparation no person should act specifically on the basis of the material contained herein. If assistance is required, professional advice should be obtained.

The superannuation guarantee statutory rate was 9.5% in 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 from 10% 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.

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.

When your business hires a new employee, the Choice of Fund form is used to identify where they want their superannuation to be directed. If the employee does not identify a fund, generally the employer directs their superannuation into a default fund.

From 1 November 2021, where an employee does not identify a fund, the employer is required to contact the ATO and request details of the employee’s existing superannuation fund or ‘stapled’ fund (the fund stapled to them). The request is made through the ATO’s online services through the ‘Employee Commencement Form’.

If the ATO confirms no other fund exists for the employee, contributions can be directed to the employer’s default fund or a fund specified under a workplace determination or an enterprise agreement (if the determination was made before 1 January 2021).

Superannuation is not like other assets as it is held in trust by the trustee of the superannuation fund.  When you die, it does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the rules of fund, superannuation law, and the death nomination you made. 

Death nominations

Most people have a death nomination in place to direct their superannuation to their nominated beneficiaries on their death. There are four types of death benefit nominations:

Binding death benefit nomination – Putting in place a binding death nomination will direct your superannuation to whoever you nominate. As long as that person is an eligible beneficiary, the trustee is bound by law to pay your superannuation to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.

Non-lapsing binding death benefit nomination – Non-lapsing binding death nominations, if permitted by your trust deed, remain in place unless the member cancels or replaces them. When you die, your super is directed to the person you nominate.

Non-binding death nomination – A non-binding death nomination is a guide for trustees as to who should receive your superannuation when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay the superannuation to someone else or to your estate.

Reversionary beneficiary – if you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years.

If no death benefit nomination is in place – If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will often be a financial dependant to the legal representative of your estate to then be distributed according to your Will.

Is your death benefit valid?

There have been a number of court cases over the years that have successfully contested the validity of death nominations, particularly within self managed superannuation funds. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. If you nominate a person, ensure you use their legal name and if the superannuation is to be directed to your estate, ensure the wording uses the correct legal terminology.

Who can receive your superannuation?

Your superannuation can be paid to a SIS dependant, your legal representative (for example, the executor of your will), or someone who has an interdependency relationship with you.

A dependant is defined in superannuation law as ‘the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship’. An interdependency relationship is where someone depends on you for financial support or care.

Do beneficiaries pay tax on you superannuation?

Whether or not the beneficiaries of your superannuation pay tax depends on who the superannuation was paid to and how. If your superannuation is paid as a lump sum to a tax dependant, the superannuation is tax-free. The tax laws have a different definition of who is a dependant to the superannuation laws. A tax dependant for tax purposes is your spouse or former spouse, your child under the age of 18, or someone you have an interdependency relationship with. Special rules exist if you are a police officer, member of the defence force or protective service officer who died in the line of duty.

If your superannuation is paid to your estate, the tax laws use a ‘look through’ approach when superannuation death benefits are distributed to the deceased’s legal representative. This involves determining whether the final recipient of the superannuation is a dependant or a non-dependant of the deceased.

If the person is not a dependant for tax purposes, for example an adult child, then there might be tax to pay.