SuperStream compliance deadline extended to 28 October 2016

BY SCOTT JAGO

The ATO has extended the deadline for small business clients to become SuperStream compliant until 28 October 2016. The previous cut off was 30 June 2016. This new deadline applies to all clients, regardless of size. Those that are large (over 20 employees) should already be compliant.

The extension will be a one –off so if your business is not compliant by Oct 28 you can expect to be fined.  We ran a story on SuperStream and the associated requirements in the SBIA newsletter last October. https://sbia.com.au/paying-your-employees-super-made-easy/ 

SuperSteam is a Government reform aimed at improving the superannuation system and it is mandatory. Employers must make superannuation contributions on behalf of their employees by submitting data and payments electronically in a consistent and simplified manner.

self-managed-superannuation

For businesses with less than 20 employees, the small business clearing house offers a free and simple solution. Most retail funds will also offer a service where they are nominated as the employer’s default fund.

Businesses that are already lodging and paying super contributions via electronic means are likely to already be complying so will not need to do anything. The clearing house can still be a good solution however, as it allows details of the contributions to be lodged in one place and a single payment to be made, rather than multiple payments to each employee’s choice of fund.

SELF MANAGED SUPER FUNDS

The new financial year, coupled with all of the recent and proposed superannuation changes, means there is a list of things that we will be looking at this year with our SMSF clients to ensure funds are taking advantage of any current opportunities and are ready to be able to implement future changes easily. There is intense speculation the new government will be forced to reconsider some of the recent Federal Budget announcements. There is clearly a lack of stability in the sector at present from the government’s tinkering, despite warnings from industry advocates and the results played out in the recent election, so it will be interesting to see what happens in the coming months.

‘There is clearly a lack of stability in the sector at present from the government’s tinkering, despite warnings from industry advocates and the results played out in the recent election.”

Nevertheless, some of the things those with SMSFs should be looking at this year include:

  • Maximising concessional contributions this year – $35,000 for those age 49+ or $30,000 for those under age 49 as both caps may drop to $25,000 from 1 July 2017.
  •  Reviewing existing limited recourse loans – the proposed lifetime cap of $500,000 for non-concessional contributions will severely restrict some funds’ ability to repay their limited recourse loans. Further, the ATO have introduced new rules for non-bank related party SMSF loans which means some changes may be required to loan terms, interest rates and security details.
  •  Transition to retirement pensions – under which tax concessions may end this financial year. Clients over 55 and still working can start a pension and draw up to a maximum of 10 per cent of their account balance each year. The investment earnings on the assets in the fund paying the pension are exempt from tax. It is proposed to remove this tax exemption from 1 July 2017, however those funds already paying pensions to a person over 55 and retired, or to a person age 65+, will continue to receive the tax exemption.
  • Review current and future cash flows – proposed changes to super will severely restrict the amount of money that can be contributed to super and will limit super benefits that can be converted to pension. Clients may need to restructure or change the asset mix in the fund between accumulation and pension in order to maintain cash flow and minimise tax payable. This may also mean stopping or reducing pensions in the SMSF, especially as members might not be able to recontribute their pension income without exceeding their $500,000 cap. This could be problematic for SMSFs with illiquid assets such as property, particularly where the SMSF has borrowed to acquire the property and also needs to make interest repayments. Stopping or reducing the amount in a pension means the SMSF may pay additional tax on the earnings of these assets returned to accumulation.

Due to the significant changes likely to come in from 1 July 2017, together with the new accountant licensing rules discussed below, this new financial year is shaping up to be a watershed year for super.

* Scott Jago is an accountant and business advisor at Allan Hall Business Advisors, a northern-beaches based accounting firm with a large number of surf retail clients.: (02) 9981 2300 www.allanhall.com.au