Phone (08) 8981 5585

Top Tax Tips – 30 November

Drastic superannuation changes from 1 July 2017

From 1 July 2017 drastic changes will occur to our superannuation system.

Some of the main changes include:

  • A $1.6 million superannuation transfer balance cap (i.e. a member of a superannuation fund can only have $1.6 million of superannuation savings in the tax-free retirement phase);
  • Lowering the concessional (tax deductible) contributions cap to $25,000 (regardless of age);
  • An extra 15% tax on concessional contributions made by individuals earning $250,000 or more a year;
  • Lowering the annual non-concessional contributions cap to $100,000 per year (currently $180,000 per year); and
  • All but abolishing the use of TRIS (transition to retirement income streams).

Because we have about seven months before the changes take effect on 1 July 2017, we look forward to working with you during this time to ensure that you are in a position to make an informed decision on how to manage your superannuation assets and implement tax effective and wealth creating strategies that may be applicable to your individual circumstances.

Please watch this space for more analysis on what the new changes will mean for you.

Are your workers employees or contractors?

Business owners must know whether their workers are employees or contractors because the tax, superannuation and other government obligations are different depending on the worker’s status:

  • If a worker is an employee, PAYG withholding tax must be deducted from their wages, reported and paid to the ATO. Superannuation guarantee contributions must be paid (at the rate of 9.5% of wages) at least quarterly for eligible employees. FBT must be reported and paid to the ATO if an employee receives fringe benefits.
  • In contrast, if a worker is a contractor, PAYG withholding tax need not be deducted from payments to them unless they have not quoted their Australian Business Number (ABN). FBT is not payable on benefits given to a contractor but the contractor will be taxed on the value of the benefits.  However, depending on the arrangement with the contractor, superannuation guarantee contributions for the contractor may be payable if the contract is principally for a contractor’s labour.

In some situations, determining whether a worker is an employee or contractor is difficult.  The whole working arrangement should be examined to determine whether the worker merely works in the business (i.e. an employee) or whether the worker operates their own business and does work for your business (i.e. a contractor).

A business that treats employees as contractors may be subject to PAYG withholding penalties and superannuation guarantee charges and in a worst case scenario, prosecution in a Court.  Please contact us if you would like us to determine the correct status of your workers.

Remember to account for trading stock you use for private purposes

Business owners who take an item of trading stock for their personal use (e.g. if they consume a cake that was baked in their bakery) – cannot ignore the transaction – and will have to treat this transaction as a sale of trading stock and include the value of the trading stock in the business’s assessable income.

Because keeping track of the value of trading stock used for private purposes over the course of the year may be difficult, the ATO publishes industry–specific guidelines each year that sets out what is a reasonable estimate of the value of such “withdrawals” from trading stock in that particular year.

Please contact us if you are involved in an industry that has a high turnover of items (e.g. such as a bakery, butcher, restaurant, caterer, delicatessen, greengrocer, takeaway food shop or convenience store) so that we can ensure that you treat private use of trading stock items correctly.

How can Nexia Edwards Marshall NT help you?

For any questions or to discuss any of the above in relation to your personal situation, please contact Sarah McEachern or your Nexia Edwards Marshall NT Advisor.

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall advisor.

Latest News