Employer SG obligations: annual report

Grahame Allen • Nov 24, 2023

Each year the ATO releases a report containing the latest annual statistical results for employer super guarantee (SG) compliance and obligations, and this year is no exception. According to the 2022-23 report, the amount of employers complying with their SG obligations without intervention from the ATO remained the same as the 2021-22 year, at 94%. This is the case even though the number of employees and employers reporting through single touch payroll (STP) has increased; 915,000 employers reporting through STP for around 14.3m employees in 2022-23 compared with 819,000 employers reporting through STP for approximately 13.6m employees in 2021-22. The data collected in relation to the super guarantee gap, which estimates the difference between the amount of SG paid and what should have been paid if every employer met their SG obligations, increased slightly from 4.9% or $3.4bn in the 2021-22 report compared with 5.1% or $3.6bn in the 2022-23 report. This indicates an increase in unpaid SG obligations which could be collected by the ATO. While there was a noticeable drop in the number of employee notifications of unpaid super cases completed in 2022-23, around 77% of cases completed in 2021-22, compared to 54% of the cases completed in 2022-23, and also a drop in the total number of ATO initiated cases for unpaid super (2,100 in 2021-22 and 1,400 in 2022-23), the number of voluntary disclosures of unpaid super from employers sharply rose from 30,800 instances in 2021-22 to 56,000 instances in 2022-23. The overall picture would seem to indicate that employers are self-disclosing before the initiation of any ATO compliance action. The ATO also notes that the drop in the completion number of employee notification cases were due to some employee notifications not requiring action to be taken and resolved through other means, such as the complaint being withdrawn, the ATO already raising an assessment against the employer for late or unpaid super, the employer already lodging a super guarantee charge statement to correct their obligations, or duplicate notifications being received from employees. Going forward, as a part of the government announced package to move to “pay day” super (ie SG contributions made at the same time as salary and wages are paid), the ATO will have improved SG recovery targets each year. This is set to commence from the 2026-27 financial year, to give the ATO time to upgrade its data compliance capabilities, and reassess debt recovery processes and policies to ensure that employees receive their SG contributions. In the meantime, two new compliance measures for recovery of unpaid SG have been published, which consist of: SG distributed as a proportion of SG raised: the proportion of SG charge liabilities raised for a financial year which has been collected and distributed to individuals or superannuation funds. Results would be reported two years after the financial year has ended to account for liabilities collected after the financial years have ended. SG charge raised and distributed within 12 months: The value of SG charge liabilities raised, then collected and distributed to individuals or superannuation funds within 12 months. All this points to an increase in focus for the ATO in the SG space now and in the future. Employers are therefore advised to stay on top of their SG obligations to avoid penalties including the super guarantee charge and/or any Part 7 penalties. Those that discover they have failed to comply with SG obligations should make a voluntary disclosure promptly and pay any outstanding SG debt. The ATO notes that it is open to accepting reasonable payment plans for SG debt.

Federal Budget 2024: Business Measures

By Grahame Allen • 17 May, 2024
On Tuesday 14 May 2024, Treasurer Jim Chalmers handed down the 2024-25 Federal Budget, his 3rd Budget. The major SME business tax-related measures announced in the Budget include the following. Instant asset write-off for small businesses extended The Government will extend the instant asset write-off concession for another 12 months. This will allow small businesses with turnovers capped at $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025. Depreciating assets that are first used or installed ready for use for a taxable purpose on or after 1 July 2023 will be subject to the $20,000 threshold. The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter. In terms of black letter law, the increased instant asset write-off concession ceased on 30 June 2023. However, the Government announced in the 2023-24 Federal Budget (ie last year's) that it would be extended by one year, ie to finish on 30 June 2024. That measure was contained in a Bill which is currently before Parliament (ie it is not yet law). It passed the Senate with one amendment (which extended the coverage to businesses above $50m and increased the threshold from $20,000 to $30,000) which was subsequently voted down in the House. The Bill has now returned to the Senate for further consideration. Changes to foreign resident CGT rules The Government will amend the following areas of CGT as it applies to foreign residents, ie it will: clarify and broaden the types of assets that foreign residents will be liable for; amend the point-in-time principal asset test to a 365-day testing period; and require foreign residents disposing of shares and other membership interests exceeding $20m in value to notify the ATO, prior to the transaction being executed. Energy relief payments extended The Government will provide $3.5 billion over 3 years from 2023-24 to extend and expand the Energy Bill Relief Fund to provide a $300 rebate to all Australian households and a $325 rebate to eligible small businesses on 2024-25 energy bills. Future Made in Australia incentives The Government will provide 2 tax-related incentives relating to its Future Made in Australia program: the Critical Minerals Production tax incentive and the Hydrogen Production tax incentive. There are no specific details in the Budget Papers as to how these incentives will be implemented. BAS notification period extended The Government will extend the time the ATO has to notify a taxpayer if it intends to retain a BAS refund for further investigation. The ATO's mandatory notification period for BAS refund retention will be increased from 14 days to 30 days to align with time limits for non-BAS refunds. More ATO funding; compliance programs extended The Government will provide $187.0m over 4 years from 1 July 2024 to the ATO to strengthen its ability to detect, prevent and mitigate fraud against the tax and superannuation systems. Funding includes: $78.7m for upgrades to information and communications technologies to enable the ATO to identify and block suspicious activity in real time; $83.5m for a new compliance taskforce to recover lost revenue and intervene when attempts to obtain fraudulent refunds are made; $24.8m to improve the ATO's management and governance of its counter-fraud activities, including improving how the ATO assists individuals harmed by fraud. In addition, the government will extend both the ATO Shadow Economy Compliance Program for 2 years from 1 July 2026 and the ATO Tax Avoidance Taskforce for 2 years, also from 1 July 2026. These measures are expected to increase receipts by $1.9 bn and $2.4bn respectively. Funding for new Administration Review Tribunal The Government will provide $1.0bn over 5 years from 2023-24 (with $210.8m per year ongoing from 2028-29 and an additional $194.2m from 2028-29 to 2035-36) to establish and support the sustainable operation of the new Administrative Review Tribunal (ART), replacing the AAT. Some of the funding will be used to clear court backlogs associated with high numbers of applications for judicial review of migration decisions.

ASIC warns consumers to beware of cold callers

By Grahame Allen • 10 May, 2024
ASIC has issued a warning to consumers to remain vigilant against high-pressure sales tactics and deceptive online advertisements used by certain cold calling operations offering unsuitable superannuation switching advice. This type of high-pressure sale tactics has been a blight on the superannuation/financial services landscape since 2020 when ASIC first started taking action against various AFS licensees. Following an extensive review, ASIC has uncovered a worrying trend where cold callers, after procuring personal details from third-party data brokers or through online baiting techniques (eg running competitions for prizes such as phones or gift cards or using certain online comparison websites), have been aggressively pushing consumers to switch their superannuation funds. These callers often have ties to a minority of financial advisers who then suggest moving the consumers' funds into superannuation products that carry hefty fees. ASIC has expressed particular concern about these practices, noting that individuals aged between 25 to 50 - the primary targets of these operations - are at risk of significant retirement savings depletion. This may be due to either reduced super value owing to unsuitable investments, excessive fees and/or other charges. In addition, ASIC has also observed a substantial flow of super savings into high-risk property managed investment schemes. These schemes are either channelled through super products offered by APRA-regulated funds or SMSFs, with subsequent kickbacks going to the cold calling entities. ASIC has reiterated its commitment to safeguarding consumers and urged financial advice licensees and superannuation trustees to intensify their efforts in rooting out the nefarious elements causing consumer detriment. It notes that it will continue to take appropriate action, including enforcement action, to deter cold calling. For financial advice licensees, ASIC suggests that they improve their monitoring and supervisory systems to identify and address any concerning behaviours, ensuring their advisers are prioritising their clients' best interests. It also expects super trustees to be proactive in preventing the erosion of superannuation balances and mandating the implementation of stringent systems to oversee the deduction of financial advice fees from member accounts. In its ongoing efforts to combat these unscrupulous practices, ASIC has reviewed how trustees oversee advice fee charges and plans to publish a report detailing its key findings. In addition, to raise public awareness, it has launched a campaign advising consumers to hang up on cold callers and scroll past social media click bait offers to compare and switch super funds. ASIC notes that a typical super cold calling experience does involve receiving a statement of advice (SOA) prepared by a financial advice firm – often one that the cold caller has an existing arrangement with – it is usually “cookie cutter” advice that is expensive, unnecessary and does not consider a consumer’s individual needs, and may eventually leave individuals in a worse financial position. It reminds consumers that quality financial advice takes weeks, not days to prepare. Consumers who believe they have received financial advice that was not appropriate for their circumstances are able to initiate a complaints process, which includes contacting the business before contacting AFCA (an independent complaints body). Consumers who believe they have been a part of a scam should report it to their super fund at the first instance, and also to Scamwatch and ASIC.

Navigating complexities of crypto investments: SMSFs

By Grahame Allen • 03 May, 2024
The digital currency landscape continues to be treacherous terrain for Self-Managed Super Fund (SMSF) trustees, with a growing number of reports indicating significant losses due to a variety of factors, including scams, theft, and collapsed trading platforms. As the allure of high returns from crypto investments tempts many, the ATO is emphasizing the need for increased vigilance and education to safeguard superannuation benefits. The ATO has identified several causes of crypto investment losses: Trustees are being duped by fraudulent crypto exchanges, which promise high returns but are designed to siphon off investors' funds. Cybercriminals are increasingly targeting crypto accounts, hacking into them to steal valuable cryptocurrencies. A number of crypto trading platforms, particularly those based overseas, have collapsed, leaving investors with significant losses. Some trustees find themselves permanently locked out of their crypto accounts due to forgotten passwords, losing access to their investments. Scammers impersonating ATO officials are tricking individuals into revealing wallet details under the guise of investigating tax evasion, leading to losses. The ATO is urging trustees to educate themselves on the potential pitfalls of crypto investing. Resources such as the ACCC's Scamwatch and ASIC's MoneySmart provide valuable information on recognising and avoiding scams. Moreover, the ATO highlights that many crypto assets are not classified as financial products, meaning that the platforms facilitating their trade often lack regulation. This increases the risk of loss without recourse. For those SMSF trustees faced with the loss of a digital wallet, the first step is to determine whether the loss is simply one of lost access or if there is loss of evidence of ownership. In either case, meticulous record-keeping is the key to navigating the situation. The ATO allows for the claim of a capital loss if trustees lose their crypto private key or if their cryptocurrency is stolen. However, to substantiate such a claim, trustees must provide comprehensive evidence, including the date of acquisition and loss of the private key, the associated wallet address, the cost to acquire the lost or stolen cryptocurrency, and the amount present in the wallet at the time of loss. Additionally, proof that the wallet was under the trustee’s control, such as transactions linked to their identity or hardware that stores the wallet, is essential. It is important to note that while some may still consider cryptocurrency to be private and anonymous, and may baulk at reporting gains made, the reality is much different. The ATO has the ability to track cryptocurrency transactions through electronic trails, in particular where it intersects with the real word. In addition, through data matching protocols, the ATO requires cryptocurrency exchanges to furnish them with information on transactions, making it possible to trace and tax crypto trades. Trustees are therefore encouraged to report all transactions. For SMSFs that run businesses and accept cryptocurrency as payment, the approach to accounting is akin to dealing with any other asset, the value of the cryptocurrency needs to be recorded in Australian dollars as a part of the business’ ordinary income. In addition, where business items are purchased using crypto, including trading stock, a deduction is allowed based on the market value of the item acquired. SMSFs that run businesses should also be aware that there may be GST issues with transacting in crypto.
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