ATO cracking down on super schemes

The tax office is in the process of reviewing a number of cases where it appears taxpayers are inappropriately using their superannuation funds to minimise or avoid paying tax.

Late last week, the ATO issued a taxpayer alert indicating it is reviewing arrangements where individuals divert their personal services income to an SMSF to minimise or avoid tax.

The arrangements under review are typically used by SMSF members at or approaching retirement age as income received by the SMSF trustee is concessionally taxed or treated as exempt current pension income of an SMSF in pension phase.

“In other words, the SMSF member purportedly avoids paying tax on their income at the marginal tax rate,” said deputy commissioner James O’Halloran.

“Under these arrangements an individual performs services for a client for which the individual does not directly receive adequate remuneration for the service provided. Instead the client refers remuneration for the service to a company, trust or other non-individual entity. The entity then distributes the income to an SMSF, of which the individual is a member, as a return on investment,” Mr O’Halloran said.

The ATO are currently undertaking reviews of a number of cases involving arrangements of this type and  will be engaging with taxpayers whose affairs concern them over the coming months.

Single Touch Payroll – ATO discussion paper

The ATO has issued a discussion paper on the proposed introduction of single touch payroll for employers from 1 July 2016. Under Single Touch Payroll, employers will be required to electronically report payroll and superannuation information to the Tax Office when employees are paid using Standard Business Reporting-enabled software.

In addition, Single Touch Payroll will streamline tax file number (TFN) declarations and Super Choice forms by providing a digital channel to simplify the process of bringing on new employees. Single Touch Payroll will be available from July 2016.

To meet their obligations employers would be required to use appropriate payroll software. The discussion paper seeks views on transitional issues, suggestions on how to minimise compliance costs and the potential for employers to remit employee Pay As You Go Withholding and the Superannuation Guarantee Charge contributions at the same time employees are paid.

In a nutshell, you won’t have to fill in the wages section on your BAS but you may have to send the tax withheld from wages to the ATO every week when you do the wages instead of every quarter when you do your BAS.