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The Age Pension Thresholds Have Changed Since 1 July 2023…
Posted on 9 October '23 by admin, under Super. No Comments.
One of the most common questions from those entering or nearing retirement is, ‘How much money can I have before it affects my pension?’
Our answer is usually derived from the total value of your savings, other assets and any income that might be earned from other sources. However, from 1 July 2023, the thresholds determining how much pension you may be paid have changed due to inflation-related adjustments.
This means that many of those who may otherwise have been looking at a part-pensioner status due to being over the threshold may be able to be on a full pension with the adjusted thresholds (depending on their circumstances).
Similarly, those who may have been ineligible for a pension due to being over the cut-off point for the assets test should become eligible to start claiming a part pension (and all the concessions that go with it).
What Assets Will I Be Tested On?
The assets that you or your partner own that are included in your assets test include the following:
- Real estate (excluding your family home)
- The market value of your household contents (such as fridges, appliances, etc).
- Superannuation balances if you and your partner have reached the Age Pension eligibility age, including the balance of your pension accounts that provide you with an income stream. If your partner is below the Age Pension eligibility age, their super balances will not be included in your assets test
- Other financial investments, like term deposits or any surrender value of life insurance policies
- Retirement village contributions
- Business assets
- Motor vehicles
- Boats
- Caravans
- Jewellery
- Cryptocurrencies
The Age Pension assets limits are adjusted three times a year based on movements in the consumer price index (CPI). The thresholds for the full Age Pension change in July, while thresholds for the part-Age Pension change in March and September.
Assets Limit For A Full Age Pension
To be eligible for either a full or part-Age pension, there are limits on the value of the assets you (and your partner combined) can own.
The limits depend on whether you own your own home, as well as your living arrangements (including if you have a partner and whether they are age-eligible for the pension or not). The asset limits are higher for non-homeowners in recognition of the higher cost of housing for pensioners who rent their homes.
You also need to pass the income test and age and residency requirements.
The asset-free thresholds for full-age pension are the same for couples living together and those separated by illness.
If the value of the assets is above the thresholds, you may still qualify for a part-Age Pension.
The Income Test
The new thresholds also increase the amount pensioners can earn before their pension starts to reduce under the income test. For a couple, the income test cut-off point rises from $336 a fortnight to $360 a fortnight – for singles, it increases from $190 a fortnight to $204 a fortnight.
If you reach the threshold limits in the assets and income tests, your pension will be based on the lower amount.
For example, if you are eligible for $400 per fortnight according to the assets test and $500 per fortnight under the income test, then the $400 per fortnight test will apply.
Questions About The Pension
If you have questions about your retirement plan or pension eligibility, why not start a chat with a trusted advisor (like us) today?
Providing Affordable Housing? You Could Be Eligible For A CGT Discount
Posted on 6 October '23 by admin, under Tax. No Comments.
An additional 10% capital gains tax (CGT) discount may be available when you sell an Australian residential rental property that you used to provide affordable housing.
This will increase the potential maximum capital gains discount percentage on your sale from 50% to 60%.
What Is Affordable Housing?
For the affordable housing CGT discount purposes, affordable housing is any dwelling (house, unit or apartment) where the following conditions are satisfied:
- The dwelling is both a taxable Australian real property (TARP) and residential premises that you rent out or genuinely make available for rent. Caravans, mobile homes and houseboats are not residential premises.
- The dwelling is not a commercial residential premises.
- Management of the tenancy or its occupancy is done exclusively by a registered community housing provider (CHP).
- Each entity that holds an ownership interest in the dwelling has a certificate from the provider showing that the dwelling was used to provide affordable housing.
- No entity that has an ownership interest in the dwelling is in receipt of an incentive from the National Rental Affordability Scheme (NRAS) for the NRAS year.
- If a managed investment trust (MIT) has an ownership interest in the dwelling, the tenant does not have an interest in the MIT that passes the non-portfolio test.
Eligibility For Affordable Housing CGT Discount
When you sell a rental property used to provide affordable housing, you may make a capital gain on the profit. This may qualify you for an additional (up to 10%) affordable housing capital gain discount if you meet the following eligibility criteria:
The capital gain must have been either
- made by you as an Australian resident individual, or
- distributed or attributed to you either
- directly from a trust or managed investment trust (MIT)
- indirectly from a trust through an interposed partnership, MIT or other trusts (this does not include public unit trusts or super funds).
You must have also provided:
- new or existing affordable housing
- rental rates below market rent
- affordable housing to eligible tenants on low to moderate incomes (based on household income thresholds and household consumption)
- Affordable housing for a minimum period of three years (1,095 days) from 1 January 2018. This can be continuous or an aggregation of three years over a longer period.
The additional discount will be pro-rated for periods where you don’t use the property for affordable housing purposes or were a foreign or temporary resident for part of the time you owned the property.
Investing In Affordable Housing Through a Trust
You can invest in affordable housing through a trust.
As an individual investor, only you can claim the additional affordable housing CGT discount. The trust cannot claim this discount.
For you to qualify for the affordable housing CGT discount:
- the trust can be a managed investment trust (MIT), but not a public unit trust or super fund
- the trust must be entitled to the general CGT discount on the capital gain on the property, either in full or part.
The capital gain can be distributed or attributed to you:
- directly from the trust or MIT
- indirectly from the trust or MIT through an interposed partnership, MIT or other trust, but not through a public unit trust or super fund.
Consulting with a tax professional could assist you in determining your eligibility for CGT discounts – why not speak with us today?
What Is A Proprietary Limited Company?
Posted on 25 September '23 by admin, under Business. No Comments.
In Australia, the Pty Ltd Company (proprietary limited company) is one of the most popular business structures chosen by entrepreneurs and business owners. Pty Ltd companies offer both distinct advantages and certain disadvantages that individuals should carefully consider when determining the most suitable structure for their enterprise.
Benefits of a Pty Ltd Company:
- Limited Liability: The most significant advantage of a Pty Ltd company is the limited liability it provides to its owners (shareholders). Shareholders’ personal assets are generally protected from business-related liabilities. This means that if the company encounters financial difficulties or legal issues, shareholders are only liable for the amount they have invested in the company.
- Separate Legal Entity: Pty Ltd companies are considered separate legal entities, distinct from their owners. This separation allows the business to enter into contracts, own property, and engage in legal proceedings in its own name. It provides credibility and professionalism to the business.
- Access to Capital: Pty Ltd companies can issue shares to raise capital, making it easier to attract investors or secure funding. Investors may be more inclined to invest in a company structure as opposed to sole proprietorships or partnerships due to the limited liability protection.
- Perpetual Existence: A Pty Ltd company has perpetual existence, meaning it can continue to operate even if the ownership changes due to the death, sale, or transfer of shares of a shareholder. This stability can be appealing for long-term planning.
- Tax Benefits: Pty Ltd companies often benefit from various tax advantages, including access to corporate tax rates, tax deductions for business expenses, and the ability to distribute profits to shareholders in a tax-efficient manner.
Disadvantages of a Pty Ltd Company:
- Complex Compliance: Pty Ltd companies are subject to stringent legal and regulatory compliance requirements in Australia. This includes the need to file annual financial reports, maintain records, and adhere to corporate governance standards. Complying with these obligations can be complex and time-consuming.
- Costs: Establishing and operating a Pty Ltd company involves expenses such as registration fees, accounting fees, and ongoing compliance costs. These costs can be burdensome for small businesses or startups with limited resources.
- Ownership Restrictions: Pty Ltd companies can have a limited number of shareholders (up to 50), and there are restrictions on transferring shares. This may limit the company’s ability to attract a broad range of investors.
- Disclosure Requirements: Pty Ltd companies must disclose certain financial and operational information to the Australian Securities and Investments Commission (ASIC). This transparency requirement may not be appealing to business owners who prefer to keep their financial affairs private.
- Complex Decision-Making: As Pty Ltd companies typically have multiple shareholders, decision-making can become complex, especially if there are disagreements among shareholders. Formal processes and agreements are often needed to address these issues.
- Capital Raising Challenges: While Pty Ltd companies can issue shares to raise capital, attracting investors can be challenging, particularly for startups or smaller enterprises without a proven track record.
The Pty Ltd Company structure offers numerous benefits, including limited liability, access to capital, and tax advantages. However, it also comes with disadvantages, such as complex compliance requirements, costs, and ownership restrictions.
When choosing a business structure, entrepreneurs should carefully assess their business goals, size, and long-term plans to determine whether a Pty Ltd company fits their needs or if an alternative structure may be more suitable.
It’s advisable to seek legal and financial advice to make an informed decision. Why not start a conversation with your trusted business advisor today to get on the right track?
What’s All The Fuss About SMSFs?
Posted on 17 September '23 by admin, under Super. No Comments.
A Self-Managed Super Fund (SMSF) is a unique and increasingly popular retirement savings vehicle.
SMSFs offer individuals and families greater control, flexibility, and investment choices than traditional superannuation funds.
In this article, we’ll explore what SMSFs are, how they work, their benefits, and some considerations for those interested in establishing and managing one.
What is an SMSF?
An SMSF is a type of superannuation fund that allows individuals to manage their own retirement savings.
Unlike industry or retail super funds, where investment decisions are made by professional fund managers, an SMSF puts the control firmly in the hands of its members, who are also the trustees of the fund. This level of control is what sets SMSFs apart.
How Does an SMSF Work?
An SMSF can have a maximum of four members, all of whom must also be trustees or directors of the corporate trustee. As trustees, members are responsible for making investment decisions, complying with legal obligations, and managing the fund’s assets. SMSFs can invest in a wide range of assets, including shares, property, cash, and fixed income.
Benefits of an SMSF:
- Control and Flexibility: SMSF members have complete control over their investment choices and strategies. This allows for a highly tailored approach to meet specific financial goals and risk appetites.
- Tax Efficiency: SMSFs offer potential tax advantages, particularly for those in retirement. Capital gains, for instance, are often taxed at a concessional rate if the assets are held for more than 12 months.
- Estate Planning: SMSFs provide estate planning benefits, allowing members to dictate how their assets are distributed upon their passing. This can be especially important for complex family situations.
- Asset Diversification: With greater control, SMSF members can diversify their investments across various asset classes, reducing risk and increasing the potential for returns.
- Borrowing for Investments: Under certain conditions, SMSFs can borrow to invest in assets like property, which can magnify returns and portfolio diversification.
Considerations for Establishing and Managing an SMSF:
- Compliance: SMSFs must adhere to strict regulatory guidelines set by the Australian Taxation Office (ATO). Non-compliance can result in penalties or the loss of tax concessions.
- Investment Knowledge: Managing an SMSF requires a strong understanding of financial markets, taxation rules, and investment strategies. It’s essential to keep abreast of changing regulations.
- Costs: While SMSFs can be cost-effective for those with substantial assets, they may not be suitable for smaller balances due to administrative and compliance costs.
- Time Commitment: Trustees need to invest time in managing their SMSF, including record-keeping, administrative tasks, and annual auditing requirements.
- Professional Advice: It’s advisable to seek professional guidance from accountants, financial planners, or SMSF specialists when setting up and managing an SMSF. Their expertise can help navigate complex regulations and optimize investment strategies.
Self-Managed Super Funds (SMSFs) have become a valuable retirement planning tool for many Australians, offering unparalleled control, flexibility, and investment options.
However, the decision to establish and manage an SMSF should not be taken lightly. It requires a solid understanding of financial markets, compliance obligations, and a long-term commitment to effective management.
When approached with diligence and professional guidance, an SMSF can be a powerful vehicle to achieve financial security and retirement success.
Why Are My “Connections” Important To Know During Tax Season?
Posted on 10 September '23 by admin, under Tax. No Comments.
In the realm of tax law, a critical concept revolves around understanding the notion of “entities connected with you.”
This concept serves as a linchpin in several aspects of taxation, from determining one’s status as a Small Business Entity to ascertaining the value of assets when seeking eligibility for Small Business Capital Gains Tax (CGT) Concessions. Furthermore, it holds significance when an individual has sold an asset and claimed it was used by an ‘entity connected with them.’
In various tax scenarios, having an entity connected to you can either prove beneficial or burdensome. A prime example of the former is when you sell a factory unit, and a company affiliated with you operates a mechanics business within that unit. In this case, you become eligible to claim the Small Business CGT Concessions on the sale of the factory unit, potentially leading to substantial tax benefits.
Conversely, connected entities can have adverse consequences, particularly in specific asset tests. When evaluating certain asset-related criteria, the value of assets connected entities hold is aggregated with your own. Consequently, having entities connected with you in such situations may not be advantageous.
Consider a scenario involving a family trust and a distribution made to the adult daughter. In this instance, her assets may need to be added to the overall asset pool when determining your eligibility for tax concessions. A key threshold for determining connection to a trust is if an individual has received 40% of the income or capital of that trust in the preceding four years.
Entities controlled by the same person or entity are also considered connected with each other. For instance, if you oversee two trusts, those trusts are not only connected to you but also to each other. This interconnectedness has implications for tax planning and assessment.
In the eyes of tax law, spouses are not automatically deemed connected to each other. This is not the default assumption; spouses are typically not considered connected entities. For instance, if you are in control of a company, and your spouse independently manages their own separate company, they would generally not be considered connected to each other. The implications of this can vary depending on the specific tax scenario.
While the concept of entities connected with you may seem intricate, it is a dynamic factor that necessitates ongoing attention and evaluation. Circumstances surrounding the connections can change over time. Returning to the example of the factory unit, the nature of its disposal could alter the connection dynamics. For instance, you may have retained ownership of the factory unit while transferring ownership of the company to your son five years ago. In this case, the company is no longer connected with you, potentially affecting your eligibility for specific tax concessions.
Understanding and managing the relationships between entities and their connections is pivotal in navigating the complexities of tax law. It is not a static concept, but one that requires ongoing consideration, as changes in these connections can have significant implications for an individual’s tax obligations and eligibility for various concessions.
Therefore, individuals and businesses should remain vigilant and seek professional advice when dealing with entities connected with them in the realm of taxation. Keeping us apprised of your future plans for your assets and of changes that could impact your connections means that we can ensure that you do not inadvertently miss out on any of the tax concessions available.
Why Should Your Business Engage An Adviser?
Posted on 4 September '23 by admin, under Business. No Comments.
Feel like your business is stuck in a rut? Are you unable to solve a problem that you know will cost you in the long run? Struggling to navigate your way through a difficult time?
It might not be financially tanking, and it might not be that your revenue stream is down; however, if you’re not sure what direction to take with your business, you might need a fresh set of eyes and a bit of extra guidance.
A fresh pair of eyes to take a look at particular issues that your business is facing to deal with them doesn’t have to come from within the business. Sometimes, an outsider’s viewpoint or perspective can be even more informative.
Business advisers can be engaged across many fields with specially focused advice or strategies to a specific area (such as accountants, business bankers or commercial lawyers) or be a business adviser who is dedicated to considering the overall goals and long-term ramifications of your business’s strategies.
A business adviser can be hired on either a one-time basis (to deal with any one-off problems your business is set to face) or on an ongoing basis to provide continued support.
If you are only looking for a particular solution to a particular problem, one-time advice from a business adviser can be an easy and cost-effective solution.
However, if you’re looking for long-term ongoing support that’s backed by years of experience and a perspective that’s looking to preempt these issues, ongoing advice may be more appropriate for your needs.
Engaging a business adviser can provide your business with fresh ideas based on an objective analysis of your business’s current performance and situation.
Experts within their relevant fields are also able to provide you with specialised advice, based on the ongoing consultations you may have had with them previously or plan to have in the future.
As an example, contracting an accountant in a business adviser role means that you are looking for strategic and financial advice like profitability improvement, tax planning and advice regarding business performance. These can be critical to ensuring your business’s longevity and preparing for whatever the future may throw at you.
For example – if you were looking to sell your business, your contracted accountant should be able to map out the tax liabilities involved in doing so, the assets that would entail as part of the sale or even if you may be eligible for certain concessions.
An adviser who can offer timely and relevant advice to your financial situation can make a huge difference to your business in the long run. They can also assist you in plotting out business goals, preparing for hardship, or even working out what to do in the event of bankruptcy.
Looking for assistance in plotting out the financial future of your business, or for a tax specialist who can?
We are more than ready for that conversation to be had with you. We’re well-equipped to assist you with mapping out your business’s plan for the future, so why not speak with us and see how we can help you?
Your Health Has A Place In Estate Planning: What You Should Consider If You Fall Ill
Posted on 27 August '23 by admin, under Super. No Comments.
When estate planning, most people focus on what will happen to their family and their assets after they pass, often neglecting to consider what would happen if they were to become ill or incapacitated.
Falling ill can be a very stressful and traumatic time for you and your family, especially if you are the primary financial provider for your household. Taking the time to become prepared and evaluating your financial situation can help you to prove if you are out of work for health reasons. It is essential to ensure you know of every entitlement available should you become sick or incapacitated.
Income Protection:
Income protection is a form of insurance that pays you a regular cash amount if you are unable to work as a result of a sudden illness, covering up to 75% of your income for a set period of time. You can insure your income through agreed value, where you decide the amount you wish to receive each month, or indemnity, where you prove your income at the time of claim rather than during application. Generally, you can claim part or all of your income protection insurance premiums that are taken outside of your super as a tax deduction, helping you save more on your tax bill. However, you are not entitled to deductions for a policy that compensates for a physical injury. Other insurance policies include health insurance, trauma cover or total and permanent disability (TPD) insurance.
Incapacity Plan:
Incapacity planning is a process through which capable adults make choices and plans about future events that are a possibility. It addresses what you would want to happen in relation to health care decisions and financial matters should you lose your ability to make or express choices. In the event you are seriously injured or develop an illness such as dementia, you may not be able to pay bills, file taxes or manage your assets and investments. Incapacity planning allows for those types of things to still be done by someone with the authority to handle them. An incapacity plan should contain the following documents:
- Living Will: states what kind of health care you wish to receive or refuse to receive, should you lose consciousness or capacity. Unlike a last will and testament, your living will has nothing to do with what happens to your property after you die.
- Financial power of attorney: allows you to choose someone who will have the legal authority to manage your financial affairs if and when you lose the ability to do so yourself.
- Medical power of attorney: allows you to choose someone to have the legal right to make medical choices on your behalf if you cannot make them on your own. You should discuss your wishes with the chosen representative before you are incapacitated and they need to make medical decisions.
Early Release of Super:
There are very limited circumstances in which you can access your super before you retire. You may apply for early release on the grounds of:
- Incapacity: if you suffer permanent or temporary incapacity.
- Severe financial hardship: if you have received Commonwealth benefits for 26 continuous weeks but are still unable to meet immediate living expenses.
- Compassionate grounds: to pay for medical treatment if you are seriously ill.
- Terminal medical condition: if you have a terminal illness or injury likely to result in death within 2 years, as certified by two registered medical practitioners, at least one of whom is a specialist
Doing A Final Tax Return For A Deceased Loved One
Posted on 21 August '23 by admin, under Tax. No Comments.
At the worst time of your life, the last thing you want to think about is tax.
However, when a loved one dies, their affairs must be dealt with at some stage. This includes their tax obligations.
You must lodge a date of death tax return if any of the following apply to the deceased person in the income year in which they died:
- they had tax withheld from their income, including from interest or dividends
- their taxable income was above the tax-free threshold
- they lodged tax returns in the income years before their death or had outstanding tax returns.
To deal with a deceased loved one’s affairs, the help of a solicitor is highly recommended. Someone will be granted the role of executor or administrator of the deceased person’s estate (usually stipulated in a will).
From a tax perspective, there are a few things that the executor or administrator has to do.
The Australian Taxation Office (ATO) must be contacted and informed that your loved one has died. When you notify them of the death, they can tell you if the person had any outstanding tax returns for prior income years.
All their financial documents must be compiled, and you must lodge a date of death (or final) tax return. This will only need to be lodged if your loved one had tax withheld from their income or had earned more than the tax-free threshold.
This final tax return differs from a standard tax return as it doesn’t cover the full financial year – it only covers up to the day that the person died. The date of death tax return covers the period from 1 July of the income year in which the person died up to the date of death. All income and tax deductions until that day are inputted into the final tax return. This differs from a trust tax return for the deceased estate, which is for the period after the person dies.
Tax obligations can still occur after that day, such as income earned from investments or the sale of assets that may or may not be subject to capital gains tax.
In these circumstances, the executor or administrator of the estate will need to apply for a separate and new tax file number for the estate. The estate is treated as a separate taxpayer and will pay tax as if it were an adult individual resident taxpayer.
This special treatment of the estate is received for up to three tax returns after the date of death (in fact, it is for two years from the date of death).
This time is very stressful, even without these additional obligations. The support of a tax professional during this process can ease the burden, as this is a role we are accustomed to taking.
Contact us to find out how we can aid you, even if we weren’t the accountants for your loved one. We’re here to help.
It’s Bigger On The Outside – Faking Business Growth To Grow The Small Business
Posted on 14 August '23 by admin, under Business. No Comments.
Making your business seem more significant than it actually is can go a long way in helping you secure larger clients.
Appearing larger can help customers feel more secure when dealing with you and possibly give your voice or presence more authority. Exaggerating elements of your business regarding first impressions is easier than you might think, and many of the available strategies are cost-effective.
Put Extra Effort Into Your Website:
Your website is one of the first places potential customers will visit to size you up. The impression that your website makes on them can seriously influence how your company is perceived. A website with a dated design, difficult navigation or poorly written copy can instantly give a negative impression. Poor-quality websites suggest you’re a small, amateur company that doesn’t care about online presence. This can alienate an entire group of potential clients.
Work On Your Social Media Presence:
Developing an active and current social media presence can help a business connect with its customers and assist in making it appear more prominent and experienced. Social media sites increase the amount of information that can be found on a business and are usually far more engaging and cost-effective than traditional forms of advertising.
People generally assume that businesses with a lot of online material have been there for a long time. Businesses with many followers on social media can create a sense of age and experience, enhancing the brand’s image.
Invest In Your Promotional Materials:
Professionally designed business cards with consistent stationery and letterheads will give business credibility. For example, printing the details on cheques and envelopes rather than writing on them by hand are small and cost-effective options that can assist in building professional reliability.
Continuity over different marketing platforms also promotes a sense of brand unity. Using professionally designed images on all company material will demonstrate your reach and stability in the market.
Get A Virtual Office:
For businesses that cannot afford a full-time receptionist, setting up a virtual office can have the same effect at a much cheaper cost. Having a virtual employee answer phone calls and manage customer service from an outside location means eliminating the costs of actual employment while giving the impression that the business is much bigger than it is.
Turning A Vehicle Into A Company Car:
Visiting clients is essential in specific industries, such as businesses within construction or maintenance. Pulling up in a company-branded car can build respect and show professionalism. However, check with an accountant about the tax treatment involved with company cars, if buying a company car is the right move for the business or what records may need to be kept for work-related expenses involving the car.
Assess The Location:
There are many external elements of a location that can affect your business. Look at the traffic in the area and work out how it can support or hinder you, as well as what services are in the area in which you choose to locate. Consider asking other businesses in your desired location for some advice on the best providers for services such as gas, electricity, water, phone and internet. Access for both customers and employees is also a large factor when assessing the location. Consider whether it is easy enough for clients to find and employees to travel to every day. Making your business accessible can allow you to obtain a wider pool of staff.
Remember your legal and environmental obligations when choosing a place to set up your business, and check with the local council for any planning and building restrictions if necessary. For example, consider how possible noise produced by your business would affect the local community. Before making any big decisions, consider seeking further legal or professional advice. This gives the added benefit of your brand getting noticed on the street.
Spreading The Word:
To get the attention of more prominent potential clients, it may be necessary to spread the word on some of the other big-name clients the business has had. Once a business has obtained a few large contracts, using them to help promote services and secure other clients can be highly beneficial. Business owners can mention previous jobs in meetings or display work for other clients
Superannuation-Related Obligations Employers Need To Keep In Mind
Posted on 7 August '23 by admin, under Super. No Comments.
While the hustle and bustle of operating and managing a business can occupy your mind, it’s important not to forget your superannuation obligations to your employees.
Those who fail to meet their super obligations risk facing severe and even damaging liabilities, penalties and even potential imprisonment. Are you aware of your obligations?
Employees (after entering the workforce) should have a ‘stapled’ super fund that you must pay their super into or the right to nominate a super fund. However, if an employee is not eligible to choose, does not have a fund or fails to notify the employer, the employer must pay their contributions into an employer-nominated or default fund.
The employer-nominated or default fund must be a complying fund (meets specific requirements and obligations under super law) and be registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.
Some super funds may ask that an employer becomes a ‘participating employer’ before they can pay contributions to them. Participating employers may have to make super payments more frequently, such as monthly instead of quarterly.
For example, you need to make sure that you are meeting the super guarantee contributions now for all of your employees, including those who would have previously fallen under the $450 threshold.
Before 1 July 2022, employers who paid their workers $450 or more before tax in a calendar month had to pay superannuation on top of the employee’s wages. Now super must be paid on any payments you make to domestic or private workers if they work for you for more than 30 hours in a week, regardless of how much you pay them.
The minimum amount of superannuation that an employer must pay to their staff in Australia is called the superannuation guarantee (SG).
Under the superannuation guarantee, employers have to pay superannuation contributions of 11% (from 1 July 2023) of an employee’s ordinary time earnings when an employee is: over 18 years, or. under 18 years and works over 30 hours a week.
Currently, it must be paid at minimum four times per year, but from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages. This will be known as ‘payday super’, as more consistent contributions will mean that superannuation funds should be better able to increase their compounding potential.
Employers can claim a tax deduction for super payments they make for employees in the financial year they make them. Contributions are considered paid when the employee’s super fund receives them.
Missed payments may attract the SGC (superannuation guarantee charge). While the SGC is not tax-deductible, employers can use a late payment to reduce the charge or as a pre-payment of a future super contribution (for the same employee), which is tax-deductible