The Superannuation Guarantee Rate Increases up to 10%
Since 2014, the Superannuation Guarantee (SG) rate first time increases up to 9.5% to 10% on July 1, 2021. It will keep on increasing each year until it increases up to 12% on July 1, 2025. With a 0.5% rise, everyone is not going to get an automatic pay increase, but it’ll be based on employment consent. If your employment agreement declares that you get paid based on ‘total remuneration,’ your take-home pay could be minimised by 0.5%. For those who paid a rate plus superannuation, then their take home will be the same, but superannuation fund will be beneficial from the increase.
Employers should pay accurate SG amount in the new financial year, so they can avoid the SG charge. Employees are paid at a specific point other than the month’s first day, make sure that calculations are accurate across the month.
Annual SG Rate Amendments
|1 July 2020 – 30 June 2021||9.5%|
|1 July 2021 – 30 June 2022||10%|
|1 July 2022 – 30 June 2023||10.5%|
|1 July 2023 – 30 June 2024||11%|
|1 July 2024 – 30 June 2025||11.5%|
|1 July 2025 – 30 June 2026||12%|
New Superannuation Employer Responsibilities for New Staff
When an employer hires new staff, the employees have given a choice of fund form to recognise where they want their superannuation to be managed. If the employees don’t recognise a fund, then it’ll automatically direct into a default fund.
If an employee doesn’t recognise a fund, then legislation before Parliament will need the employer to connect the employee to an already existed superannuation fund, it will be done from July 1, 2021. An employer needs to request the ATO recognise the employee’s stapled fund. If the ATO declares that there is no other fund exists for the employees, then contributions will be moved to the employer’s default fund or a fund that is specified underneath a workplace determination or enterprise consent.
Indexation Maximises the Contribution as well as the Transfer Balance Caps
Indexation will make sure that the caps on superannuation that restrict how much you transfer into super and how much you can hold in a tax-free retirement account, remain appropriate with pre-determined increases in line with inflation. To activate indexation, the CPI i.e. Consumer Price Index required to reach 116.9. And, in December 2020, Australia already reached 117.2 triggering increases to the transfer balance and contribution caps from July 1, 2021. A further increase will trigger, when a December quarter consumer price index reaches 123.75.
Concessional and Non-Concessional Caps
The concessional contribution cap will be maximised from $25,000 to $27,500. These contributions are made into your super fund before tax such as salary packaging or superannuation guarantee. The non-concessional cap will be maximised from $100,000 to $110,000.
If you’ve used bring forward rule in 2018-2018 or 2019-2020, then your contribution cap will not be maximised until 3 years have passed.
|1 July 2017 – 30 June 2021||After 1 July 2021|
|Total Superannuation Balance (TSB)||Contribution and bring forward available||Total Superannuation Balance (TSB)||Contribution and bring forward available|
|Less than $1.4m||$300,000||Less than $1.48m||$330,000|
|$1.4M -$1.5m||$200,000||$1.48M – $1.59m||$220,000|
|$1.5M – $1.6m||$100,000||$1.59M – $1.7m||$110,000|
|Above $1.6m||Nil||Above $1.7m||Nil|
Transfer Balance Cap – Why do you need to have a personal cap?
Transfer balance cap means how much money you can transfer into a tax-free retirement account.
From July 1, 2021, everyone will have their own personal transfer balance cap of between $1.6 and $1.7 million, and it’ll depend on circumstances.
However, if you’ve begun receiving an income stream – you’ve retired or are transitioning to retirement, then your indexed transfer balance cap will be calculated proportionately depend on the highest ever balance of your account between July 1, 2017, and June 30, 2021. If your account reaches the $1.6m cap, then it’ll have less indexation impact. For anyone who reaches the $1.6m cap at any time between July 1, 2017, and June 30, 2021, indexation will not be applied, and your cap will reach to be $1.6m.
|My super is…||TBC to 30 June 2021||TBC from 1 July 2021|
|In accumulation phase||$1.6m||$1.7m|
|In retirement phase and I reached the $1.6m cap limit between 1 July 2017 and 30 June 2021||$1.6m||$1.6m|
|In retirement phase and I have never reached the $1.6m cap limit at any time between 1 July 2017 and 30 June 2021||$1.6m||$1.6m plus indexation on the amount between your highest ever balance and the $1.6m cap.|
The ATO will calculate your personal transfer balance cap based on the information lodged with them. If your superannuation is in the retirement stage, it’ll be very essential to ensure that your transfer balance account compliance obligations are updated. For SMSFs, i.e. Self-Managed Superannuation, it is important that you inform about any changes that impact your transfer balance account.
Minimum Superannuation Reduction Rates
The government has declared an extension of the temporary minimum superannuation reduction rates for a further year until June 30, 2022.
|Age||Default minimum drawdown rates||2019-20, 2020-21 & |
2021-22 reduced rates
|95 or more||14%||7%|
Single Touch Payroll Reporting
Single touch payroll will be applied to most businesses from July 1, 2021, and this will include small businesses and businesses with closely held employees.
For employers with closely held employees, there are some concessions on how reporting is handled with the option to report one of 3 ways: reporting actual payments in real-time, reporting actual payments quarterly, or reporting a reasonable estimate quarterly.
Work from Home Expenditure under Scrutiny and the Perils of Surfing Facebook
The ATO has announced that it is considering work-related deductions that are being claimed. You can use the following methods if you want to claim your expenses:
- An 80 per cent/hour cut method (evidence of working hours)
- 52 per cent/hour method(excluding, internet, phone)
- The actual expenses method
In a recent case, a taxpayer claimed 100% of his home internet expenses, but when the ATO reviewed the claim and minimised the deduction amount to $50. In a record, the family’s internet use showed that the internet was used to browse Facebook amongst other non-work-related websites.
Am I Taxed on an Insurance Payment?
Some people assume that if they require claiming on their insurance, the insurance payout will cover the damage and will not be income assessed for tax purposes, but it doesn’t happen in all cases. Insurance payouts for destroyed or damaged personal items are not taxed.
But when insurance exceeds the original cost of the asset, then the capital gain tax could be applied.
Business Premises, Depreciating Assets, and Trading Stock
For businesses that have had damaged trading stock, any insurance payout would be taxable. If business premises are destroyed, and the insurance also covers repairs, and then the amount that you’ve got would be taxed as income.
For depreciating assets, it becomes more complex. If the insurance payout surpasses the written down value, then the payout will be included in the business’s assessable income, if it is less, then you can claim a deduction.
A rental property is considered as an income-producing asset and insurance policies’ cost related to the property would be claimed as an expense. The treatment of the insurance proceeds will depend on the purpose of payout, how the insurance is utilised, and whether the rental property is in use or vacant.
If you have been affected by a natural disaster and how any insurance proceeds will be taxed, then Reliable Melbourne Accountants, which is an accounting firm in Melbourne, can help you understand your position and will offer you a solution. Despite this, you’ll receive recent announcements made by the government and the ATO.