The importance of paying employee superannuation on time

By Chris Blomquist - Client Manager

At the end of each quarter many small businesses face a number of bills including quarterly Business Activity Statements and employee superannuation obligations. 

Unfortunately, employee superannuation is sometimes forgotten about. It is important to be aware that to ensure your employees receive their agreed superannuation on time, the ATO imposes heavy penalties if superannuation guarantee (SG) is not paid on time. 

SG is due on a quarterly basis and is due by the 28th day following the end of each quarter. Importantly, remember that any concessional lodgment dates for Business Activity Statements (such as the general extension for the due date of quarterly December BASs to the 28th of February) do not apply to superannuation obligations. The December quarter super is always due on the 28th of January. 

What are the consequences of not paying employee superannuation guarantee on time?

First, it’s important to note that penalties apply whether SG is paid one day late or six months late. This means that even if you are one day late, there can be significant administrative and financial consequences. 

If employee superannuation is not paid by the due date, the employer becomes liable for the superannuation guarantee charge (SGC). The SGC consists of: 

• the amount of the superannuation guarantee shortfall on your employee’s salary and wages; plus 
• interest on the late amounts; plus 
• an administration fee that is currently $20 per employee, per quarter. 

However, this does not tell the whole story. Most significantly, the SGC is not tax deductible. 

For example, say you have $10,000 of employee SG payments due for the quarter and your marginal income tax rate is 30%. SG payments are normally tax deductible, so this would reduce your overall income tax liability for the year by $3,000 ($10,000 x 30%). 

But if you are just one day late with your SG payment, you are now liable for the superannuation guarantee charge. The $10,000 is no longer tax-deductible, and you no longer receive the $3,000 income tax benefit. In addition, you need to lodge the required SGC forms, and pay interest and administration fees. 

The proposed superannuation guarantee amnesty

If you are already behind on super for any period from 1 July 1992 to 31 March 2018, it is proposed to introduce a one-off Amnesty. During the period 24 May 2018 to 24 May 2019, employers would be able to self-correct past SG non-compliance without penalty. 

It is important to note that the Amnesty is currently a proposed measure and that its introduction is subject to the passage of legislation. Also, the proposed Amnesty does not apply to any period after 31 March 2018. 

If you would like further information about the Amnesty or ensuring you meet your employee superannuation obligations, please do not hesitate to contact us.

Don't forget to read the legal stuff

Business Activity Statements – What are they and who need to complete them?

By Amanda Eggins - Client Services

I see you cringe at the sign of the word but the ATO have made this a necessary evil in the business world. But it doesn’t need to make you cringe anymore. 

The stress associated with BAS time can be more easily managed when you fully understand what activity statements are, when and if they need to be lodged and when they need to be paid by. 

If you have a system in place that prepares you for BAS time, the “red tape” process can be a positive experience for you and your business. 

Firstly, let me explain to you a little bit about activity statements. 

Activity Statements 

Activity statements are issued by the ATO so that businesses can report and pay a number of tax liabilities on the one form at the one time. 

There are two types of activity statements – an instalment activity statement (IAS) and a business activity statement (BAS). 

Instalment Activity Statement (IAS) 

The IAS is the simpler of the two forms and is only issued quarterly. 

On the IAS, the ATO tells you what your GST instalment amount is and where applicable what your PAYG instalment amount is. 

If the ATO considers you to be eligible for the IAS system, you will have the option to take advantage of this easier method on your September BAS – the first BAS of the financial year. If you elect this option, for each of the next three quarters you will simply be sent an amount that needs to be paid to the ATO. 

If you feel the instalments advised are too much or not enough to cover your liabilities, you may vary the amounts. Alternatively, you can wait until the end of the year. Any adjustments for GST will be calculated when your annual GST return is lodged and any adjustments on PAYG will result in an amount payable or refundable when your income tax return is lodged. 

If you choose to pay the amount shown on the form, you do not need to physically lodge anything with the ATO. However, if you wish to vary the amount shown, you will need to lodge the form by the due date. 

The instalment amounts will be payable as follows: 

Quarter                                             Due 

July – September                              28 October 

October – December                        28 February 

January – March                               28 April 

April – June                                       28 July 

Business Activity Statements (BAS) 

BASs are a little more complicated. They can include some or all of the following payments. Remember only those marked by an asterisk (*) are included on the IAS. 

Goods and services tax (GST)* 

Pay as you go (PAYG) income tax instalment* 

Pay as you go (PAYG) tax withheld 

Fringe benefits tax (FBT) instalment 

Luxury car tax (LCT) 

Wine equalisation tax (WET) 

Fuel tax credits 

BASs are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows. 

For monthly BASs: within 21 days of the end of the month on the form 

For quarterly BASs: as above for IASs 

How can IASs and BASs be good for your business? 

IASs and BASs can help you keep an eye on your business finances. 

Since you need to track your income and expenses to be able to calculate your GST and other liabilities on your BAS, why wait until the end of the quarter to do so? 

Each and every day you are collecting money for the ATO, so why not track each week to see what your likely liability will be? Wouldn’t it be great if there were no surprises at BAS time? 

By being organised, capturing information regularly, and setting aside money by generating weekly and monthly reports, you will start to focus more on your numbers. You will gain more confidence in this area of your business and you will be more prepared when it comes to meeting your obligations – including those relating to the ATO. 

My tip for the new financial year is to embrace technology, use your accounting software for your own benefit (daily, weekly and monthly) and then lastly use it to produce your BAS for the ATO. 

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Is your public member super in the top 10?

By Kristy Churchill - Financial Planning Assistant

Since the global financial crisis of 2007/08, Australian Super has earned an average of 117% for its public offer funds[1] members in the past 9 years.

You may say that after 9 years the rally in markets since the global financial crisis may be getting a little long in the tooth, but research carried out by SuperRatings noted, that the last dip in markets in February this year, was just a one-month dip, in the 9 years since the global financial crisis. 

Over the period of 9 years since the bull market started rally, the median balanced option fund has delivered an average return of 9 per cent per annum, reflecting an accumulated growth of 117%.

Meanwhile, those public offer fund members with growth options, saw a median return of 9.99% pa or an accumulated 134%.

Market corrections can certainly cause pain for their investors and members, it causes uncertainty and panic; these are however often to balance and check that the market is capable of self-reflection, and Australian investors are focused on valuations as well as the broader economic picture.

This research shows why it is important for investors to caution away from making decisions based on short periods of performance, and SuperRatings CEO Kirby Rappell said “The lesson for superannuation members is that a focus on long-term performance is essential.  While members may be unnerved by recent market volatility, it is impossible to ignore the significant gains that super funds have delivered since the start of the bull market in 2009.”

Obviously fund choice does matter in all of this, as the significant difference between the best performing and worst performance balance and growth fund options.

Top Ten Public Offer Funds[2]

The Legal Stuff

[1]Public Offer Fund

A public offer fund is a superannuation fund that can be joined by members of the public. It is a regulated fund consisting of pooled superannuation sold commercially, for example, through life companies, bank subsidiaries or financial planners.

This category includes master trusts (where a large number of unconnected individuals or companies operate their superannuation arrangements under a single common trust deed) and personal superannuation products.

[2] as measured by SuperRatings over the 10 years to 31 January 2018

Four types of insurance for the newly divorced

Financial discussions during divorce tend to focus on dividing assets and cash, but managing your insurance is an area which can make a big difference for you and your family. 

Over 40% of Australian marriages fail, with nearly half of these involving families with young children1. While insurance protection may have been something that both parties had considered while married, it’s no less important after the relationship has ended. 

Insurance is about preparing for those unexpected situations which may make it difficult to care for yourself or manage your responsibilities, whether as the main caregiver or financial provider. These situations include temporary or permanent disablement, critical illness or death. Protection can be key when you are on your own, but can also make a difference to the ongoing welfare and care of children. If you already have insurance, it can be important to reassess the level of cover you have to see if it is still adequate for your new circumstances. 

Here’s four types of insurance cover you might consider taking out or reviewing, after a marriage or relationship breakdown. 

1. Living insurance 

Living insurance (also known as trauma insurance) can provide a lump sum payment for people suffering from one of a range of specified medical events. This can be crucial to assisting with medical and accommodation expenses if you suffer from a serious illness or injury and could also help you with more flexibility with work arrangements and continued family expenses. 

2. Income protection 

Whether you are the main caregiver or financial provider to your children, income protection can help you continue to provide stability and financial support in the event of temporary or permanent disability. 

In determining your level of cover, consider the financial contribution you make for your children, and/or the cost of someone to perform childcare and household duties. 

3. Term life insurance 

Term life insurance pays a lump sum benefit if you pass away or are diagnosed with a terminal illness. If you pass away, the benefit is paid to your nominated beneficiaries. It may be helpful to seek further advice on your beneficiary nomination. Where there are minor children involved, and you wish to ensure that there are ongoing financial provisions to cover their education, medical needs and care; you may need to allow for a testamentary trust in your will. 

You could also use a Term Life payment to pay out a mortgage, so children are able to inherit and live in a property debt-free. 

4. Different Total and Permanent Disability (TPD) definitions for your changing circumstances 

While people tend to be more aware of occupation based TPD insurance which covers a situation where you would no longer be able to work, there are also options for homemakers. A payment from this type of policy can be used to hire a professional to perform normal household duties if the homemaker is unable to as a result of permanent disability. 

TPD insurance can be important in helping you manage your own needs, as well as supporting your children. 

While the end of a relationship can be a stressful and difficult time for you and your family, reviewing and revising insurance cover so that it meets your new requirements can eliminate one area of concern for you – the ongoing needs of your children. 

It can also be helpful to discuss financial protection with your former partner. This can provide comfort to both of you that your children will have continued security and financial support. 

If you would like to determine your current insurance needs and establish what policies may be suitable for you and your family, please feel free to arrange a time to speak to our Advisor.  Make an appointment by calling (07)4616 9000.  

1 Australian Institute of Family Studies - Marriage in Australia, and Divorce in Australia

Don't forget to read the Legal Stuff

Learn the share market: a school holiday activity?

Wondering what to do with your kids these school holidays?  How about adding “sensible money management” to your to-do lists.  

It's never too early to teach your kids about money.  

Encourage kids to take interest in everyday living, the cost of groceries, how your earn money and how long it will take save for certain items. This way you’ll give them a firm financial foundation from the outset, one of the best gifts a parent can give their kids.

Giving kids a good grounding in sensible money management sets them up for life.

For older children, you could use online share games, like the one offered by the ASX to encourage children to explore the processes of investment markets and how to buy and sell shares while monitoring their portfolios.

Parents looking to encourage financial literacy can also consider giving pocket money digitally by opening up a bank account for their children and setting up a direct debit that can be cancelled if the kids slack off on their chores, or boosted if the kids take on more responsibility.

Opening up about the family’s finances – to an appropriate level – is also an important step in helping children understand money.

Parents should talk about the different pay rates of jobs, the costs of buying a house or renting and the ways in which home loans work.  In a way children can understand.

For example, if your child gets $5 per week pocket money for doing their chores and wants a $20 toy.  they need to understand it is four weeks worth of chores to get that toy.  Get them to weigh up the value of their time against the possession.  

Teaching your children young to understand money, will hopefully set them up to manage their funds better as their life stages change.  

A Super Idea

By Shane Wilson - Director DC Advisory Group

A Super Idea

Superannuation is something I am quite passionate about. This concept around investing money throughout your working life to provide for your retirement. Some people, depending on how much super they retire with, may be required to also rely on the government aged pension to meet their lifestyle needs. 

For most people, superannuation begins when you commence your working life. It was not until approximately 1983 that the government and trade unions agreed to forgo a pay increase of 3% for employees but rather have that increase placed into super. In 1992 the Keating government introduced the compulsory employer contribution scheme of which is very similar to what we know today. The superannuation concept made sense in that we were addressing Australia’s ageing population and retirement income dilemma which in time, was going to put a massive strain on the Australia economy through meeting aged pension commitments. 

According to the Association of Superannuation Funds of Australia (ASFA), superannuation assets at the end of December 2017 tipped a staggering $2.6 trillion. That amount is set to grow substantially in the years ahead due to not only organic growth but also the proposed increase in the contribution level beyond 9.5% (to increase by 0.5% each year until it reaches 12% by 2025). 

I find it interesting however, that there is a message or incentive to promote superannuation and to save for your retirement, yet the government are forever shifting the goal posts and changing laws. For me these changes often negatively influence a retirement benefit (and ultimately your retirement income) and generally disincentivises people from wanting to contribute to super. 

What do I mean? 

Some Incentives: The superannuation environment offers a concessional tax rate of 15% in accumulation phase (pre-retirement). Further, superannuation will also provide a potential tax-free income stream once retiring or in pension phase. Earnings outside super at the highest marginal tax rate is 45% plus Medicare. Superannuation is simply the best taxed structure to house your wealth leading up to and during retirement. 

Some Disincentives: The government continues to reduce annual limits for both concessional (deductible) contributions ($35,000 to $25,000) and non-concessional (non-deductible) contributions ($180,000 to $100,000) which prevents people from committing more money to super and increasing their member balances. Further, the super reforms introduced a new Transfer Balance Cap (TBC) which means that you can only ever commit a maximum of $1.6M to pension (subject to indexation). Anything over this limit will become subject to tax (earnings at 15%). If your total super balance is over the $1.6M TBC you will not be able to contribute any further to super. That means a potential ceiling on what you can get into super and also no more completely tax-free earnings within super. 

Recently we learned of a government announcement where qualifying individuals can withdraw up to $30,000 of personal super contributions (plus earnings) to help purchase their first home. Should this be allowed if you consider the long-standing sole purpose test (that funds are for the sole purpose of retirement)? Is this providing for your old age retirement? I guess that is another debate for another day. 

I still love superannuation

So, what does all this mean? I still love superannuation – my position has not changed, and this savings vehicle still carries huge benefits for all of us. I want to stress that any negative commentary should be taken with a grain of salt and we should not discount super as an integral part of any holistic financial plan. It is important to have a long-term approach to super and to saving for retirement. I want my clients to retire comfortably without having to rely on any government pension. Don’t change your mindset but rather condition yourself to adapt to change and updates to legislation. My key message if you take anything from this article would be to start saving for your retirement early because if you leave it too late and the superannuation window closes, you will lose your opportunities to get money into this great tax environment. 

It is important to note that this article is general in nature and you should seek your own independent financial advice in considering personal and specific circumstances. You should really embrace the relationship you hold with your tax professional and your financial planner. A favourite cliché of mine that you should all consider adopting is ‘failing to plan is planning to fail’. Be on top of your world. 

5 ways work is making us fat

Written by Dr Vincent Candrawinata for Wellness Daily 23 May 2018 - comments by our very own Marketing Coordinator - Candice Dolley

I received this inbox, five ways work is making you fat!  Finally a reason I am overweight, it isn't because I make bad eating choices, it is works fault.  BOOM!  Love it.  As I read Dr Vincent Candrawinata article, I realised, it is still about me and the choices I make, and not avoiding the temptations of a "free lunch".  

Dr Vincent Candrawinata writes... 

There are different reasons as to why your work causes you to pack on kilograms. Stress, lack of physical activity, free cakes and chocolate in the office, business lunches and dinners or even commuting all play a part. 

You should take a moment to really dissect your daily life to understand what aspects of your work habits need changing.

Some of the key reasons are:

Stress 

Do you know that an estimated 17.3 million people will die each year from heart disease and stroke?

This number accounts for around 30 per cent of all total deaths! Stress is one of the causes and precursors for many health conditions, including heart disease. 

Stress triggers the release of hormones that can increase appetite, which make you crave more sugary and fatty foods while at the same time, lower your metabolism. Managing your stress level is key to stop the domino effect of work-related weight gain. 

You are too busy

Poor time management could be an underlying cause of stress and unhealthy habits. When you are late, you take a taxi instead of walking. When you are late, you don't have time for breakfast, so you snack on a chocolate bar. When you are late, you have less time to prepare for a meeting which in turns gives you a tremendous amount of stress and we all know what stress can do to us!

My father always tells me that being late is expensive and now I know why, it doesn't only cost you more money, being late could actually take a toll on your health.

Lunching out with colleagues

If you pay attention to the lunch options around offices, at least three out of five options are actually unhealthy.

A study proved this by showing that the group with the most exposure to takeout joints at work was almost twice as likely to be obese in comparison to those with who were least exposed.

Sure, we can always choose a healthier option on the menu but let's be honest and realistic, would you really swap those fries with the sad looking salad in a fast food joint? And if you say yes, let me ask you this, how often do you actually do it? A key way to stop eating junk food is to stop going out to lunch with colleagues. 

Packing your own lunch helps you to eat healthy at work and it is socially acceptable to take your lunch box and sit with your co-workers who order salted egg pork ribs with fried rice. Not only will it save you on the unnecessary calorie intake, it will save you dollars and without you knowing it, it does save you time!

Stop drinking coffee and start drinking water (I read this as I head for another coffee)

In this modern lifestyle, 50 per cent of the time when we think that we are hungry is actually a sign that we are thirsty. So, before you reach for a handful of M&M's or a packet of chips, drink a glass of water first.

Staying hydrated also helps to ensure that your body's systems work well which means you could be less likely to experience headache, cramping and even bad breath! And stop drinking coffee. While everyone drinks coffee and it is good to catch up for a cuppa with the boss to pretend you are interested in what they are saying, you could be drinking water instead. Drink out of a mug and no one will know the difference.

Eat well

You are what you eat, right? Your first and main source of nutrients should always be fresh and healthy food. Eat your veggies, fruit, protein, healthy carbs and fat.

Some people need supplementation, like Vitamin D, B12 and B6, but these have to be customised for the individual.

The two supplements I take are Activated Phenolics and fish oil, because we live in the highly polluted world, if you eat enough fish to supply your body with enough omega-3, you’d likely die of mercury poisoning first! And you can eat all the apples, grapes and acai berries in the world, but at those low [antioxidant] absorption rates, you are taking in more sugar and water than anything else.

Be more active

Take charge of your life. If you want to change something, do something. Every little thing counts, taking the stairs instead of the lift, waking up half an hour earlier to do a quick workout, skipping a happy hour drink after work and do a meal prep instead.