From 1 July 2014, employers with 20 or more employees will begin using the new Data and Payment Standard, also known as SuperStream, to make superannuation contributions to their employees.
From 1 July 2015 small employers, with 19 or fewer employees, will also begin to make contributions using the new standard. The Data and Payment Standard is designed to improve the processing of everyday superannuation transactions. Businesses need to begin preparing as soon as possible and investigate the options available to them to meet the standard.
There are over 800,000 Australian employers who are required to make super guarantee contributions on behalf of their employees.
Some employers can find this a complex process because they often have to contribute to multiple superannuation funds, each with their own specifications for accepting the data and payments.
The Data and Payment Standard will streamline the process for many employers when making contributions. It provides a simpler, consistent method of preparing contributions. In most cases, it will provide a single channel for interacting with multiple super funds.
Employers will make super contributions electronically. The contribution data is sent electronically in message format to the fund and the contribution payment is sent electronically through the banking system. It will also reduce payment processing costs as the manual methods have been removed.
Super funds and their members will also benefit from processing contributions faster and improved data quality. The ultimate goal is to lead to better retirement outcomes for all Australians including:
- reduced administration costs
- higher lifetime savings
- fewer lost accounts
The data message and payment will be linked by a payment reference number which will enable reconciliation at the receiving fund.
Most of the key components required for this change, including e-commerce infrastructure and software solutions, are currently being developed, trialed and implemented.
Employers have options available to them for meeting this new standard. They can either use software that conforms to the standards, or a service provider who can meet the standard on their behalf.
Their options may also include:
- upgrading the businesses payroll software;
- using an outsourced payroll or other service provider; or
- using a commercial clearing house.
Businesses have specific obligations under Australian Consumer Law (ACL) when it relates to refunds, returns, guarantees and warranties. It is important that a business's refund policy comply with ACL.
All businesses have a legal responsibility to consumers. In relation to the sale of goods, these include guarantees that the goods:
- are of acceptable quality;
- are fit for any disclosed and/or advertised purpose;
- will match any description under which they are sold; and
- will have spare parts available for a reasonable time.
Refund obligations can be placed into two categories; minor and major faults
According to ACL, a major failure is when a product or service fails to meet a consumer guarantee, whereas a minor fault occurs when a problem can be fixed easily and in a reasonable time.
The remedy a business is obligated to provide will depend on whether the fault was major or minor. When there is a major failure within a product or service, the consumer can choose to give the product back, or cancel the service and receive a refund.
When a business receives a refund, the first step they should take is to find out, preferably in writing, what the reason is for a refund request. This is valuable information that can be used to improve the business products and services.
To prevent issues with refunds businesses should ensure that the refund and return policy is easily accessible by customers.
If some goods are unable to be refunded, such as swimwear or perishable products, this must be clearly outlined in the refund policy. It is important that customers be able to access and understand the policy before making a purchase. Here are some basic tips when constructing a refund policy:
- it is illegal to put up a 'no refund' sign in store or online;
- if the product has a major failure, the business must give a refund, replacement or compensation;
- if a product has a minor failure the business must offer to repair, replace or refund; and
- it is the businesses choice whether to provide a refund if the customer changes their mind.
Businesses should be aware of their responsibilities at the year-end.
Businesses that are unorganised, or make mistakes in their tax return, can lose out on significant tax savings, as well as find themselves liable for penalties.
Below is some common mistakes that small businesses often make at year-end:
A job that is often forgotten by employers is superannuation contributions. Super is payable 28 days after the end of the quarter.
However, it is important to remember, that to claim a deduction in the 204 year for the super contribution the employer must have made the contribution before June 30. Not paying super by the due date will also lead to a penalty imposed by the ATO.
A common mistake made by business owners is issuing group certificates late and incorrectly reporting the figures. Employers are required to issue their payment summaries to their employees by July 14 and to the ATO by August 14.
Small business benchmarks are financial ratios that have been developed by the ATO to help compare the performance of similar businesses in an industry. Benchmarks allow the ATO to identify businesses that may be avoiding their tax obligations.
Businesses should take a look at their financials and review their management accounts before June 30. They should be focusing on any unusual large amounts that have been reported as this could be an indicator of an accounting error, or a more serious problem.
Employers who are not meeting their super obligations may lose the tax deduction they would normally receive for super contributions.
They will also have to pay a superannuation guarantee charge to the ATO
From 1 July 2013 employers must be paying 9.25 percent of each eligible employee's ordinary time earnings each quarter in super. From 1 July 2014 this will increase to 9.5 per cent.
The date for the next quarterly cut-off for superannuation contributions is the 28 July, which applies to the period of 1 April to 30 June.
If employers have not met their super obligations they will need to lodge a Superannuation guarantee charge statement with the ATO and also pay a superannuation guarantee charge.
Also, their business may lose the tax deduction that they would normally receive for superannuation contributions. This is because like most late payments the super guarantee charge is not tax deductible.
Employers will have to pay the super guarantee charge if:
- they do not pay enough super contributions to their employee. This is known as a super guarantee shortfall.
- they do not pay super contributions by the quarterly cut-off date for payment they do not pay super to their
- employee's chosen super fund; this is called a choice liability.
The super guarantee charge is made up of the super guarantee shortfall amounts, nominal interest at 10 per cent per annum, and an administration fee of $20 per employee, per quarter.
The High Court has reinforced the importance for businesses in taking care when advertising their products and services.
In June 2012 the Australian Competition and Consumer Commission (ACCC) was successful in obtaining orders in the Federal Court penalising TPG for engaging in misleading and deceptive conduct in their advertisements by putting important information in the fine print.
Businesses should consider implementing a four-step process for determining whether an advertisement is misleading;
- Identify the 'dominant message' or 'headline claim' of the advertisement ;
- Determine whether the dominant message, without any qualification, conveys a misleading impression. If it would be misleading, identify whether the advertisement also contains any qualification or condition which corrects the misleading impression given by the dominant message; and
- Consider whether the qualification or condition is given sufficient prominence in the advertisement so that an ordinary and reasonable consumer would notice the qualification and be disabused of the misleading impression from the dominant message.
- The final step requires people to use their own common sense and judgement in determining whether the advertisement is misleading.
When the High Court considers misleading conduct it takes into consideration a variety of factors, including:
- the extent to which the 'dominant message' is misleading;
- the nature of the product being advertised;
- the nature of the target audience of the advertisement; and
- the medium in which the advertisement is placed.
There are many ways in which entities can defer income, maximise deductions and take advantage of other tax planning initiatives to manage their taxable incomes. Taxpayers should be aware that in order to maximise these opportunities, they need to start the year-end tax planning process early. Of course, those undertaking tax planning should be aware of the potential application of anti-avoidance provisions. However, if done correctly, tax planning can provide a number of tax savings for entities.
Please remember to contact your Harris Black team member to arrange for your tax planning appointment prior to 30 June this year.
Deferring Assessable Income
- Income received in advance of services being provided is, generally, not assessable until the services are provided.
- Taxpayers who provide professional services may consider, in consultation with their clients, rendering accounts after 30 June in order to defer the income.
- A taxpayer is required to calculate the balancing adjustment amount resulting from the disposal of a depreciating asset. If the disposal of an asset will result in assessable income, a taxpayer may want to consider postponing the disposal
to the following income year.
- Taxpayers should review all outstanding debts prior to year-end to determine whether there are any debtors who may be unable to pay their bills. Once a taxpayer has done everything in their power to seek repayment of the debt, the taxpayer could consider writing off the balance as bad debt.
- Superannuation must be paid by 30 June in order for it to be deductable that year
- A deduction may be available on the disposal of a depreciating asset if a taxpayer stops using it and expects never to use it again. Therefore, asset registers may need to be reviewed for any assets that fit this category.
- Small business entities are entitled to an outright deduction for the taxable purpose proportion of the adjustable value of a depreciating asset, subject to conditions.
- Companies should consider whether they have undertaken eligible research and development (R&D) activities that may be eligible for the R&D tax incentive.
- Companies may want to consider consolidating for tax purposes prior to year-end to reduce compliance costs and take advantage of tax opportunities available as a result of the consolidated group being treated as a single entity for tax purposes.
- Non-business taxpayers are entitled to an immediate deduction for assets used predominantly to produce assessable income and that cost $300 or less, subject to conditions.
- The self-employed and other eligible persons are entitled to a deduction for personal superannuation contributions, subject to meeting conditions such as the 10% rule.
- The 30% private health insurance offset has been means tested since 1 July 2012. For 2013–2014, the singles' income threshold for the 30% offset is $88,000 ($176,000 for families).
- A taxpayer may consider crystallising any unrealised capital gains and losses to improve their overall tax position for an income year.
- Taxpayers should review trust deeds to determine how trust income is defined. This may have an impact on the trustee's tax planning.
- Trustees should consider whether a family trust election (FTE) is required to ensure that any losses or bad debts incurred by the trust will be deductible and to ensure that franking credits will be available to beneficiaries.
- Taxpayers should avoid retaining income in a trust because it may be taxed in the hands of the trustee at the top marginal tax rate of 46.5%.
- For 2013–2014, a $35,000 concessional contributions cap applies for those who were aged 59 years or over on 30 June 2013. The $35,000 concessional cap will apply from 2014–2015 for those aged 49 years or over on 30 June of the previous income year.
- From 1 July 2013, excess concessional contributions tax has been abolished. Instead, excess concessional contributions are included in an individual's assessable income (and subject to an interest charge). Excess non-concessional contributions tax continues to apply where relevant.
- Individuals who wish to take advantage of the concessionally taxed superannuation environment but wish to stay under the relevant contributions caps should consider keeping track of contributions and avoid making last minute contributions that would be allocated to the next financial year.
- Individuals with salary-sacrifice superannuation arrangements may want to have early discussions with their employers to help ensure contributions are allocated to the correct financial year.
- From 2012–2013, individuals earning above $300,000 are subject to an additional 15% tax on concessional contributions. However, despite the extra 15% tax, there is still an effective tax concession of 15% (ie the top marginal rate less 30%) on their contributions up to the relevant cap.
Spaces still available for the Craig James Event.
Craig's current role is Chief Economist at Commonwealth Bank Securities.
Craig appears regularly in the electronic and print media and is know for delivering an interesting and easy to understand commentary on the state of our nation and global events.
Don't miss this fantastic opportunity to see Craig in the flesh as he discusses Australia's current financial and economic position.
Friday, 29th May 2014
Tattersall's Club, 215 Queen Street, Brisbane, Qld, 4000
Please click here to RSVP by COB Friday, 23 May 2014.
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Each month the team at Harris Black are putting together a list of their Top 10. This month we have focused on the Top 10 South East Queensland Day Trips. In the hustle and bustle of day to day life we often forget to stop and enjoy what is right on our doorstep so here are some of our favourite places.
- Enjoy the sunshine
- Mooloolaba, Sunshine Coast
- Cotton Tree, Maroochydore
- Burleigh Heads, Gold Coast
- Walk the dog – The Spit, Southport
- Dive the wrecks – Tangalooma, Moreton Island
- Great food and wine –
- Sirromet Winery, Mt Cotton
- Weiss Restaurant, Toowoomba
- Preston Peak Winery, Preston
- 4WD driving on the sand – Ocean Beach, Bribie Island
- Shop – Eumundi Markets, Eumundi
- Fish – Tweed River
- Waterfalls and Bushwalking
- Cedar Creek Falls, Tamborine Mountain National Park
- Kondalilla Falls, Montville, Sunshine Coast Hinterland
- Bushwalking, views and maybe a picnic
- Springbrook National Park
- Mt Ngungun Bushwalking Trail, Glasshouse Mountains, Sunshine Coast
- O'Reilly's Guest House, Lamington National Park
- Adventure- High Ropes Course - Currumbin Wildlife Sanctuary Adventure Parc
2014 FBT Return – Final date for lodgement and payment (if required).
April 2014 Monthly Activity Statements – Final Date for Lodgement and Payment.
March 2014 Quarterly Activity Statements.
Final lodgement for all Income Tax returns not due earlier.
May 2014 Monthly Activity Statements – Final Date for Lodgement and Payment.