As the end of the financial year is approaching, we take this opportunity to remind you of the superannuation obligations for each of the following three groups:

1. Self-employed & other taxpayers;
2. Employers with only related-party employees; and
3. Employers with unrelated employees.

Each group will be considered below under three separate headings and we recommend you consider the group most relevant to your circumstances.

1.   SELF-EMPLOYED & OTHER TAXPAYERS

Self-employed persons, substantially self-employed persons and other persons aged less than 75, are entitled to a tax deduction for their personal superannuation contributions for the year ending 30 June 2022.

Individuals can claim a tax deduction for their personal contributions (even when they receive income as an employee).

Concessional tax treatment for contributions that are tax deductible to the self-employed person (and/or the employer) is generally limited to $27,500, per person. 

Concessional contribution limits

The concessional contribution limits apply to the total of contributions from all sources. We note that from 1 July 2021, the general concessional contributions cap increased to $27,500 for all individuals regardless of age. Between 1 July 2017 and 30 June 2021, the concessional cap for each year was $25,000.

In certain circumstances, a member may be able to access a carry forward balance of unused contributions from 1 July 2018, for a maximum of five years before the unused cap expires. Please talk to us first to confirm if you are eligible for this special concession.

We note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

We recommend that care is taken not to exceed the concessional cap without talking to us first.

Income tax deductions

Self-employed persons can claim a full tax deduction for concessional contributions, subject to notifying their fund accordingly and receiving an acknowledgement letter from the fund.

In order to obtain a tax deduction for the year ending 30 June 2022, please ensure that contributions are paid into the fund to allow time for them to be cleared through your bank account prior to Friday 24 June 2022.

Non-concessional contribution caps

From 1 July 2021, the non-concessional contributions cap increased from $100,000 to $110,000, and members under 65 years of age may be able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year. 

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years. If you are considering making non-concessional contributions for the year ending 30 June 2022, please talk to us first about your specific cap limit and eligibility.

Again, we note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

Further we note that a member will only be eligible to make a non-concessional contribution where they have a total superannuation balance which is less than the general Transfer Balance Cap on 30 June of the previous financial year (ie. FY2020-21 is $1.6 million).

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

2.  EMPLOYERS WITH ONLY RELATED-PARTY EMPLOYEES

Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500, per person.

Concessional contribution limits

The concessional contribution limits apply to the total of contributions from all sources, including employer contributions (including SGC) and salary sacrificed amounts. We note that from 1 July 2021, the general concessional contributions cap increased to $27,500 for all individuals regardless of age. Between 1 July 2017 and 30 June 2021, the concessional cap for each year was $25,000.

In certain circumstances, a member may be able to access a carry forward balance of unused contributions from 1 July 2018, for a maximum of five years before the unused cap expires. Please talk to us first to confirm if you are eligible for this special concession.

We note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis).

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

Also, the member (employee) may ‘elect’ to withdraw up to 85% of the ECC from their super fund to help pay the additional income tax on the assessed ECC amount. Any ECC amount not removed from the member’s super fund will count towards their non-concessional contributions cap (and we note that for some members this cap may be $Nil).

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Superannuation Guarantee Scheme contributions

To comply with the Superannuation Guarantee Scheme (SGC), contributions must be made by 28 July 2022 in respect of the June 2022 quarter. Failure to do so will result in the imposition of penalties and interest charges and the requirement to lodge superannuation guarantee shortfall forms with the Australian Taxation Office (ATO).

Under the SGC, an employer must make superannuation contributions of at least 10.0% of gross salary earned by each eligible employee (up to a maximum salary of $58,920 per quarter in 2022 and rising to $60,220 per quarter in 2023). Employees also include working directors.

Income tax deductions

In order to obtain a tax deduction for the year ending 30 June 2022, please ensure that contributions are paid into the fund to allow time for them to be cleared through your bank account prior to Friday 24 June 2022.

Single Touch Payroll reporting

For the 2022 year, employers continue to be required to report on their employees' payslips, the amount of and the date on which, the employer expects to make the employees' superannuation contributions. 

If you do not currently report employer superannuation contributions through Single Touch Payroll (STP), you must provide this information to the employee on a payment summary. Furthermore, you must provide the ATO with a payment summary annual report which must not include amounts reported through STP (to avoid double counting).

Small employers (with 19 or fewer payees) were exempt from reporting amounts paid to closely held payees through STP until 30 June 2021. However, from 1 July 2021, amounts paid to closely held payees needed to be reported through STP on or before each payday or you can choose to report this information quarterly.

Paying contributions electronically

For the 2022 year, it remained compulsory for all employers to pay contributions to superannuation funds (including SMSFs) electronically. There is an exception to the rule where contributions are made to funds for ‘related parties’ of the employer.

Under these rules, superannuation funds are required to receive contributions using an e-commerce standard so that contributions can be received by direct credit or BPay and the contribution data message is received electronically via a nominated Electronic Service Address.

Non-concessional contribution caps

From 1 July 2021, the non-concessional contributions cap increased from $100,000 to $110,000, and members under 65 years of age may have been able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year. 

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years. If you are considering making non-concessional contributions for the year ending 30 June 2022, please talk to us first about your specific cap limit and eligibility.

We again, we note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

Further we note that a member will only be eligible to make a non-concessional contribution where they have a total superannuation balance which is less than the general Transfer Balance Cap on 30 June of the previous financial year (ie. FY2020-21 is $1.6 million).

Changes for next year 2022-23

From 1 July 2022, employees can be eligible for super guarantee, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid is being removed.

The super guarantee rate will also increase from 10% to 10.5% on 1 July 2022. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2022, even if some or all of the pay period is for work done before 1 July. The super guarantee rate is legislated to increase to 12% by 2025.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

3.  EMPLOYERS WITH UNRELATED EMPLOYEES

Superannuation Guarantee Scheme contributions

Under the Superannuation Guarantee Charge (SGC) scheme, an employer must make superannuation contributions of at least 10.0% of gross salary earned by each eligible employee (up to a maximum salary of $58,920 per quarter in 2022 and rising to $60,220 per quarter in 2023). This means that employers will be required to contribute superannuation for all employees (include working directors), regardless of age.

To comply with the SGC scheme, contributions must be made by 28 July 2022 for the June 2022 quarter. Failure to do so will result in the imposition of penalties and interest charges and the requirement to lodge superannuation guarantee shortfall forms with the Australian Taxation Office (ATO).

Concessional contribution limits

Concessional tax treatment for contributions that are tax deductible to the employer is generally limited to $27,500 per person. We note that from 1 July 2021, the general concessional contributions cap increased to $27,500 for all individuals regardless of age. Between 1 July 2017 and 30 June 2021, the concessional cap for each year was $25,000.

In certain circumstances, a member may be able to access a carry forward balance of unused contributions from 1 July 2018, for a maximum of five years before the unused cap expires. Please talk to us first to confirm if you are eligible for this special concession.

We note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis).

These concessional contribution limits apply to the total of contributions from all sources, including employer contributions (including SGC), salary sacrificed amounts, and personal concessional contributions.

Excess concessional contributions

Contributions in excess of the concessional limit will still be deductible to the employer, but the member (employee) will be taxed on any excess concessional contributions (ECC) at their actual marginal tax rate. The member (employee) will receive a tax offset equal to 15% of the ECC to account for the contributions tax that has already been paid by the member’s super fund.

Also, the member (employee) may ‘elect’ to withdraw up to 85% of the ECC from their super fund to help pay the additional income tax on the assessed ECC amount. Any ECC amount not removed from the member’s super fund will count towards their non-concessional contributions cap (and we note that for some members this cap may be $Nil).

We note that it is critical to talk to your usual adviser if you receive any ATO notice in relation to excess contributions.

Income tax deductions

In order to obtain a tax deduction for the year ending 30 June 2022, please ensure that contributions are paid into the fund to allow time for them to be cleared through your bank account prior to Friday 24 June 2022.

Single Touch Payroll reporting

For the 2022 year, employers continue to be required to report on their employees' payslips, the amount of and the date on which, the employer expects to make the employees' superannuation contributions. 

If you do not currently report employer superannuation contributions through Single Touch Payroll (STP), you must provide this information to the employee on a payment summary. Furthermore, you must provide the ATO with a payment summary annual report which must not include amounts reported through STP (to avoid double counting).

Small employers (with 19 or fewer payees) were exempt from reporting amounts paid to closely held payees through STP until 30 June 2021. However, from 1 July 2021, amounts paid to closely held payees needed to be reported through STP on or before each payday or you can choose to report this information quarterly.

Paying contributions electronically

For the 2022 year, it remained compulsory for all employers to pay contributions to superannuation funds (including SMSFs) electronically. There is an exception to the rule where contributions are made to funds for ‘related parties’ of the employer.

Under these rules, superannuation funds are required to receive contributions using an e-commerce standard so that contributions can be received by direct credit or BPay and the contribution data message is received electronically via a nominated Electronic Service Address.

Non-concessional contribution caps

From 1 July 2021, the non-concessional contributions cap increased from $100,000 to $110,000, and members under 65 years of age may have been able to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year. 

We also note that a member’s non-concessional cap can be $nil after they have used the bring-forward concession in prior years. If you are considering making non-concessional contributions for the year ending 30 June 2022, please talk to us first about your specific cap limit and eligibility.

We again, we note that where a member is 67 years or older when they make a contribution, they may need to satisfy a work test (ie. gainfully employed on at least a part-time basis) for certain types of contributions.

Further we note that a member will only be eligible to make a non-concessional contribution where they have a total superannuation balance which is less than the general Transfer Balance Cap on 30 June of the previous financial year (ie. FY2020-21 is $1.6 million).

Changes for next year 2022-23

From 1 July 2022, employees can be eligible for super guarantee, regardless of how much they earn, as the $450 per month eligibility threshold for when super guarantee is paid is being removed.

The super guarantee rate will also increase from 10% to 10.5% on 1 July 2022. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2022, even if some or all of the pay period is for work done before 1 July. The super guarantee rate is legislated to increase to 12% by 2025.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

If you have any questions please contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.