On 25.6.2021, the Morrison Government has released exposure draft legislation to support companies and their officers using technology to satisfy Corporations Act 2001 requirements.
Specifically, this legislation will facilitate technology in meetings to execute company documents and send meeting-related materials.
These reforms make permanent the temporary measures put in place during the COVID-19 pandemic relating to the electronic execution of company documents and meeting notifications, which received overwhelming stakeholder support.
Building on the reforms to facilitate the use of technology in meetings, the exposure draft will also:
- make it clear that companies can hold hybrid meetings.
- make it clear that members, as a whole, must be given a reasonable opportunity to participate in meetings whether the meeting is a physical meeting, a hybrid meeting, or a virtual meeting.
- ensure that using a show-of-hands is the default method for voting at both physical and hybrid meetings, and
- allow members who hold at least 5 per cent of voting capital to have polls independently scrutinised.
These changes will provide shareholders with enhanced opportunities to both participate in and scrutinise company meetings.
The exposure draft legislation also includes further reforms to modernise business communications. This reform allows sole directors who are not appointed as the company secretary to execute documents electronically, delivering on a commitment under the Government’s deregulation agenda to improve the technology neutrality of Treasury portfolio laws.
This issue never goes away and certainly has hurt some employees after superannuation guarantee audits. In June, the ATO released a fact sheet on this topic.
Suppose you pay contractors mainly for their labour. In that case, they are employees for superannuation guarantee (SG) purposes, and you may need to pay super to a fund for them.
It does not matter if the contractor has an Australian business number (ABN).
Super Contributions for Contractors
Make super contributions for contractors if you pay them:
- under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour)
- for their personal labour and skills (payment is not dependent on achieving a specified result)
- to perform the contract work (work cannot be delegated to someone else).
Example: Employee for Super Guarantee Purposes, Not A Contractor
David’s Caravan Park has a contract with Amanda, a freelance administrative assistant, to answer phones and do administrative work for 15 hours per week.
The contract specifies Amanda herself must perform the work. Amanda has an ABN and invoices David’s Caravan Park weekly for the hours she works. Amanda is an employee for SG purposes because:
- her contract is wholly for the labour and skills she provides.
- she is paid according to the number of hours worked.
- she performs the work herself.
Assuming that Amanda is paid at least $450 per month, David’s Caravan Park pays SG contributions for her in addition to her pay.
If you enter into a contract with a company, trust, or partnership, you do not have to pay super for the person they employ to do the work.
Example: Contractor, Not Employee for Super Guarantee Purposes
Harry’s Hobby Shop wants to paint their new shop. They contract Pete’s Paints for the job. One painter from Pete’s Paints completes the entire job.
- The contract is between Harry’s Hobby Shop and Pete’s Paints.
- Harry’s Hobby Shop paid Pete’s Paints to achieve a result.
- The painter is not an employee of Harry’s Hobby Shop for SG purposes.
Harry’s Hobby Shop does not have any SG obligations for the painter or Pete’s Paints. This is the case even if Pete is a sole trader and does the work himself because he was contracted to achieve a result.
Pete’s Paints may have SG obligations for the painter.
How Much Super to Pay for Contractors?
The minimum super you must pay is the super guarantee percentage (from 1.7.2021, 10%) of the worker’s ordinary time earnings. This is the labour component of the contract. Do not include:
- any contract payments that are for material and equipment.
- overtime for which the worker was paid overtime rates.
Suppose the values of the different parts of the contract are not detailed in the contract. In that case, the ATO will accept their market values and consider standard industry practices. If you cannot work out the contract’s labour part, you can use a reasonable market value of the labour section.
Paying an additional amount equal to the SG rate to the contractor on top of their usual pay does not count as a super contribution. To avoid the super guarantee charge, you must make the SG contribution to the contractor’s super fund each quarter.
The ATO website contains valuable additional information.
These measures aim to provide tax relief, incentivise businesses to invest and ensure our superannuation system is more effective.
Retaining The Low-And Middle-Income Tax Offset
The Government has extended further personal income tax cuts to support more than 10 million low‑and middle-income earners. These tax cuts are worth up to $1,080 for individuals or up to $2,160 for couples. This is more money to spend in local businesses, giving them the confidence to take on an extra worker, offer an extra shift or buy a new piece of equipment.
Providing Tax Incentives for Businesses
The Government is further supporting businesses by extending its temporary full expensing and temporary loss carry-back measures beyond this financial year.
This will allow more than 99 per cent of businesses employing 11.5 million Australians to deduct the full cost of eligible depreciable assets of any value in the year they are installed until 30 June 2023.
These measures are estimated to boost GDP by around $7.5 billion in 2021‑22 alone and create around 60,000 jobs by the end of 2022-23.
Cutting Taxes for Small and Medium Businesses
The tax rate for small and medium companies with turnover below $50 million will decrease from 26 per cent to 25 per cent. For a small unincorporated business such as sole traders, the tax discount rate will increase from 13 per cent to 16 per cent (up to the existing cap of $1,000). Access to a range of small business tax concessions will also be expanded with the turnover threshold rising from $10 million to $50 million, providing tax relief and reducing red tape for eligible businesses.
Supporting Business Research and Development
Reforms to the Research and Development Tax Incentive take effect from 1 July. This includes generous tax offset rates above the company tax rate and includes an intensity test to reward companies that commit a more significant proportion of their expenditure to R&D. In addition, the cap on eligible R&D expenditure will rise from $100 million to $150 million per annum.
Providing Tax Relief for Small Brewers and Distillers
As announced in the 2021‑22 Budget, the Excise remission scheme for alcohol manufacturers will provide brewers and distillers with full remission of any excise they pay, up to an annual cap of $350,000.
This builds on the Government’s 2020‑21 MYEFO announcements to automatically allow eligible alcohol manufacturers to automatically receive their excise duty remission, reduce administrative overheads, and provide additional assistance by addressing cash flow concerns. These changes also commence from 1 July.
Exempting Granny Flat Arrangements from Capital Gains Tax (CGT)
The Government supports older and disabled Australians and their families by providing a targeted CGT exemption for granny flat arrangements. From 1 July, CGT will not apply to the creation, variation or termination of formal written granny flat arrangements providing accommodation for older Australians or people with disabilities.
This change removes the CGT impediments to families entering into legally enforceable granny flat arrangements, reducing the risk of financial abuse to vulnerable Australians.
Supporting First Home Buyers and Single Parent Families
From 1 July, the Government will release an additional 30,000 places to eligible applicants under the First Home Loan Deposit Scheme, the New Home Guarantee Program, and the Family Home Guarantee.
As announced in the 2021-22 Budget, the Government will establish the Family Home Guarantee to support single parents with dependants. From 1 July, 10,000 guarantees will be made available to eligible single-parent families to build a new home or purchase an existing home with a deposit of as little as 2 per cent.
The Government will also extend the New Home Guarantee for a second year. Providing an additional 10,000 places in 2021-22 for first home buyers seeking to build a new home or purchase a newly built home with a deposit of 5 per cent.
Making Superannuation Work Harder for Australians
As part of the most significant changes to superannuation in nearly 30 years, the Government is holding underperforming funds to account and strengthening protections for the retirement savings of millions of Australians.
The Government will require superannuation products to meet an annual objective performance test. Funds with products that fail the test will be required to inform members. Members will be notified by 1 October 2021 if their product fails this test, and the Government will prevent persistently underperforming products from taking on new members.
Australians will also have access to a single, trusted, and independent source of information to compare superannuation products through a new interactive online YourSuper comparison tool from 1 July. In addition, trustees will be required to demonstrate how their actions are in the best financial interest of members.
The Your Future, Your Super reforms are estimated to save Australian workers $17.9 billion over ten years.
Increasing Flexibility for Self-Managed Superannuation Funds
The Government is providing Australians with more flexibility and control in managing their retirement savings. From 1 July, the maximum number of allowable members in self-managed superannuation funds and small APRA funds will increase from four to six.
Extending The Temporary Reduction in Superannuation Minimum Drawdown Rates
As part of the Government’s COVID-19 response, the superannuation minimum drawdown rates were reduced by 50 per cent for the 2019‑20 and 2020‑21 income years. To further support retirees and provide extra flexibility, the Government has recently extended the temporary reduction to the 2021-22 income year.
Implementing Financial Services Royal Commission Recommendations
Consumers will continue benefitting from the Government’s strong record on implementing recommendations of the Hayne Royal Commission, with several reforms taking effect from 1 July.
The Financial Regulator Assessment Authority will be established to review and report on the effectiveness and capability of the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority. This will be a new independent body.
The enhanced framework around providing financial advice to clients under ongoing fee arrangements starts to address the Royal Commission’s concerns about fees for no service. To assist with this transition, the Government has recently made a regulation to lower compliance costs for generating fee disclosure statements. There is also a new disclosure obligation to ensure financial advisers who are not ‘independent’ provide clients with a clear and concise written disclaimer.
In superannuation, there are new measures to prohibit the deduction of ongoing advice fees from MySuper products and increase the transparency of fees to members. There is a new measure prohibiting superannuation trustees from having a duty to act in the interests of another except those arising from its role as trustee to address concerns about conflict. The Royal Commission recommendation that individuals be ‘stapled’ to a single super account has passed the Parliament and will commence on 1 November 2021.
Cutting Cross-Border Red Tape for Tradies and Skilled Workers
Automatic mutual recognition (AMR) of occupational licences comes into effect across New South Wales, Victoria, the Australian Capital Territory, and the Northern Territory. This will enable licensed workers, including plumbers, builders, and architects, to operate across jurisdictions without applying, paying for, and waiting for a further licence to perform the same type of work in another state or territory. These measures, which will be implemented progressively, will provide a $2.4 billion boost to the economy and directly benefit over 168,000 workers each year. Other states are expected to join the scheme subject to the passage of legislation.
Extending the Junior Minerals Exploration Incentive (JMEI)
The Government is extending the JMEI by four years to incentivise new investment in small minerals exploration companies undertaking greenfields minerals exploration in Australia.
Balancing The Rights of Franchisors and Franchisees
Significant changes to the Franchising Code of Conduct commenced from 1.7.2021. This includes reforms to balance franchisors and franchisees’ rights and improve access to justice through additional, more efficient dispute resolution processes.
Improving Payment Times for Suppliers in Government Contract Supply Chains
From 1 July 2021, large businesses awarded government contracts valued above $4 million will be required to pay their suppliers with subcontracts of up to $1 million within 20 calendar days or pay interest.
Rolling Out the Consumer Data Right
Starting from 1 July 2021 — exactly 12 months after the big four banks — the rollout of Open Banking by the remaining banks is set to occur. This means that even more Australians will now securely access and share their banking data to access better value products and services.
Introducing licencing obligations for debt management services
From 1 July, providers of debt management services will be required to hold an Australian credit licence and meet ongoing obligations imposed on licensees. These regulations form part of the Government’s consumer credit reforms.
When you give your work to the accountant this year, consider the following:
- Check for missed GST credits on purchases you have claimed income tax deductions on – a four-year time limit applies for claiming GST credits. This may occur if you occasionally use a personal account or credit card to make business acquisitions.
- Ensure you are registered for GST if required and backdate if needed. You need to register if:
- Your enterprise meets the GST turnover threshold ($75,000).
- A hobby has become a business.
- You are a ride-sourcing driver who needs to be registered regardless of turnover.
- Suppose you are renovating houses for sale or developing and selling property for a profit. In that case, you may be running an enterprise and should be registered for GST, even for one-off sales.
- Make sure you are using the most suitable accounting method to meet your business needs. Ask whether the accrual or cash methods are suitable.
- Check that stimulus vouchers are accounted for correctly, where you have participated in a government voucher subsidy program.
Suppose you are in the pay as you go (PAYG) instalment system. In that case, it’s important to lodge your outstanding activity statements before lodging your tax return, so your tax assessment accounts for instalments paid throughout the year.
Landmark reforms to Australia’s superannuation system passed through Parliament on 17.6.2021.
These reforms will help ensure superannuation works in the best financial interests of all Australians by removing unnecessary waste, increase accountability and transparency, and providing more flexibility for families and individuals.
The passage of the Treasury Laws Amendment (Your Future, Your Super) Bill 2021 will save Australians $17.9 billion over 10 years.
- Having your superannuation follow you, preventing the creation of unintended multiple superannuation accounts when employees change jobs. This will commence from 1 November 2021.
- Making it easier to choose a better fund, with access to a new interactive online YourSuper comparison tool. This commenced from 1 July 2021.
- Holding funds to account for underperformance, to lower fees and protect members from poor outcomes. The Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members, and persistently underperforming products will be prevented from taking on new members. Members will be notified by 1 October 2021 if their fund fails this test.
- Increasing transparency and accountability, with the Government strengthening obligations to ensure trustees only act in members’ best financial interests. And provide better information regarding how they manage and spend members’ money in advance of Annual Members’ Meetings and through enhanced Portfolio Holdings Disclosure.
The passage of the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 will also increase the maximum number of allowable members in self-managed superannuation funds (SMSFs) and small APRA funds from four to six from 1 July 2021.
This will provide Australians with more flexibility and control in managing their retirement savings.
In addition, the passage of the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 will help boost the retirement savings of Australians by giving them more options to contribute to their superannuation.
The Bill extends the bring-forward arrangements to people aged 65 and 66 for non-concessional contributions made on or after 1 July 2020. These changes complement previous actions by the Government to improve the flexibility of the retirement system that allowed people aged 65 and 66 to make contributions without meeting the work test.
The Bill will cut red tape by removing the excess concessional contributions charge, which currently applies to contributions in excess of the concessional contributions cap. This will ensure that from 1 July 2022, Australians saving for their retirement are not financially disadvantaged by inadvertent breaches of the cap.
Australians will also be supported to make additional contributions to their superannuation to make up for amounts that they may have withdrawn due to COVID-19. From the 2021-22 financial year, individuals who released superannuation under the COVID-19 Early Release Scheme will have the option of recontributing these amounts as non-concessional contributions, over and above the existing caps.
Together, these are the most significant reforms to super since the introduction of compulsory superannuation in 1992 and build on the Government’s prior reforms, which have included consolidating 3.3 million unintended multiple accounts worth $4.3 billion, capping fees on low balance accounts, banning exit fees and ensuring younger Australians do not pay unnecessary insurance premiums.
Through these measures, the Federal Government aims to ensure the superannuation system works harder for all Australians by reducing waste, holding underperforming funds to account, and strengthening protections around the retirement savings of millions of Australians.
Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.