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EOFY 2021 – Final Reminder Superannuation Contributions

The end of the 2020-2021 financial year is nearly here.  This is a reminder about getting a tax deduction in the current financial year for superannuation contributions.

Generally, to get a tax deduction for a superannuation contribution for your employee, the superannuation fund must have received the payment by 30 June.  Making the payment before 1 July will not guarantee that this has happened.

If you want to get a tax deduction for the contributions, make sure they are paid well before 1 July 2021 so there is time for the money to be received by your employees’ superannuation funds.  Otherwise, the deduction will have to be claimed in the year ending 30 June 2022.

There is a slightly different position if you use the ATO’s Small Business Superannuation Clearing House (“SBSCH”).   If you make the superannuation contributions to the SBSCH on or before close of business on 30 June, the ATO will consider that the payment has been received by the employees’ superannuation funds and you will get a tax deduction.  This concession only applies to the SBSCH and not other clearing houses.

Also, please remember that the super contribution rate increases to 10% from 1 July 2021.  Payments of wages on or after this date will be subject to this superannuation contribution rate, even if some of the wages have been earned in the current financial year.

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2021 Federal Budget Report Summary: Tax Compliance & Superannuation

Source: Tax & Super Australia

On Tuesday, 11 May 2021, Treasurer Josh Frydenberg handed down the 2021-22 Federal Budget, his 3rd Budget.

1. Tax-related measures announced:

  • Personal tax rates - no changes were made to personal tax rates, the Government has already brought forward the Stage 2 tax rates to 1 July 2020. The Stage 3 personal income tax cuts remain unchanged and will commence in 2024-25 as already legislated.
  • LMITO retained for 2021-22 - the Government will retain the low and middle-income tax offset for the 2021-22 income year. The LMITO provides a reduction in tax of up to $1,080.
  • Temporary full expensing extended - the Government will extend the 2020-21 temporary full expensing measures for 12 months until 30 June 2023. This will allow eligible businesses with aggregated annual turnover or a total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30 pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
  • Loss carry-back extended - the loss years in respect of which an eligible company (aggregated annual turnover of up to $5 billion) can currently carry back a tax loss (2019-20, 2020-21 and 2021-22) will be extended to include the 2022-23 income year.
  • Individual residency test reformed - the Government will replace the existing tests for the tax residency of individuals with a primary "bright line" test under which a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
  • Employee share schemes - the Government will remove the cessation of employment as a taxing point for the tax-deferred employee share schemes.
  • ATO debt recovery - the AAT will be given the power to pause or modify ATO debt recovery action in relation to disputed debts of small businesses.
  • Self-education expenses - $250 threshold to be removed.

2. Superannuation and related measures:

The key superannuation and related measures announced in the Budget include:

  • Superannuation contributions work test - to be repealed from 1 July 2022 for voluntary non-concessional and salary sacrificed contributions for those under age 75. However, the work test will still apply for personal deductible contributions by those aged 67-74.
  • SMSF residency rules - to be relaxed by extending the central management and control test safe harbour from 2 to 5 years, and removing the active member test for both SMSFs and small APRA funds.
  • Conversions of legacy income streams - individuals will be permitted to exit certain legacy retirement income stream products (excluding flexi-pensions or lifetime products in APRA-funds or public sector schemes), together with any associated reserves, for a 2-year period. Any commuted reserves will not be counted towards an individual's concessional contribution cap. Instead, they will be taxed as an assessable contribution to the fund.
  • Super Guarantee $450 per month threshold - to be removed from 1 July 2022.
  • Downsizer contributions - eligibility age to be lowered from 65 to 60.
  • First Home Super Scheme - to be extended for withdrawals up to $50,000, plus some technical changes for tax and administration errors in applications.
  • Victims of domestic violence - the Government will not proceed with its previous proposal to extend the early release of super to victims of family and domestic violence.
  • Pension Loans Scheme - will be expanded to allow access up to 2 lump sums in any 12-month period (up to a total of 50% of the maximum annual Age Pension); together with a Government guarantee that "No Negative Equity" will apply.

At the same time, the Budget did not contain any change to the legislated Super Guarantee rate increase from 9.5% to 10% for 2021-22.

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