STP extension for small businesses

The ATO has released a statement in relation to transitioning to Single Touch Payroll (STP) for small employers. Parliament has passed legislation to extend STP to include employers with fewer than 20 employees from 1 July 2019. STP is payday reporting by employers to the ATO as it happens.

The initiative is designed to help keep up with advances in technology and firmly establish business reporting. As some small employers do not currently use commercial payroll software, the ATO is working with software providers to develop low and no-cost reporting solutions including simplifying payroll systems.

It has been highlighted that to further assist in the transition, the ATO is offering:

• micro employers (1 to 4 employees) help to transition to STP and a number of alternative options.
• Small employers can start reporting any time from the 1 July start date to 30 September 2019. Deferrals will be granted to small employers who request additional time to start STP reporting.
• No penalties for mistakes, missed or late reports for the first year.
• Exemptions can be provided from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

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Tax on super death benefits for dependants vs non-dependants

July 9, 2020

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

• A child of the deceased who is under 18 years of age,
• A spouse or former spouse of the deceased,
• A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship),
• A financial dependant of the deceased.

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

• Withdraw it as a lump sum, or
• Receive an account based income stream.

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

• The deceased was at least 60 years of age at the time of death
• The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap.

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

• The payment is made as a result of the SMSF member passing away,
• The payment is provided to a non-dependent for tax purposes,
• The payment has a taxable component.

Non-dependants must calculate how much money in the super account is a:

• Tax-free component,
• Taxable component the super provider has paid tax on (taxed element),
• Taxable component the super provider has not paid tax on (untaxed element).

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).

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