• paying insufficient superannuation contributions for employees,
• missing the quarterly payment cut-off dates (i.e. 28 October, 28 January, 28 April, 28 July), and
• not understanding that in some circumstances superannuation should be paid for contractors, even if the contractor provides an Australian Business Number.

Previous articles about contractors are Superannuation Guarantee Charge (see article below) and about superannuation are: Year End Superannuation Contributions (see article below) and Incorrect Super on Payment Summaries (see article below).

The ATO has been selecting various industries on which to focus its compliance activities.  This year, in its compliance program, the ATO intends to target the following industries in relation to superannuation guarantee obligations: cafes and restaurants; real estate services; carpentry services; computer system design and related services; and accommodation.

Why have these industries been chosen?  These are the most common non-payers.

Note
Whilst there is an extra month to lodge the December quarter Business Activity Statements, this is not the same for superannuation contributions.

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Superannuation Guarantee Charge
19th-January-2010

The AAT has upheld superannuation guarantee charge default assessments against a partnership for failing to make minimum superannuation contributions for an independent contractor operating within its business.

After considering the factors that indicate the existence of an employee/employer relationship, the Tribunal found on their analysis of circumstances, that the contractor was an employee.

Indicators that suggest an employee/employer relationship exists include:

•  the level of control between an individual and the other party;
•  the mode of remuneration;
•  the provision for annual leave; and
•  the right to suspend or dismiss an individual by the other party.

The classification of an individual as an employee or as an independent contractor is just not based on the legal terms used in a contract. All of the facts and circumstances of the particular situation must be considered.

An individual engaged for their labour can be deemed to be an employee for superannuation guarantee purposes even where the individual is a contractor.

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Year End Superannuation Contributions
25th-June-2010

As 30 June deadline looms, a reminder of the rules for deductible superannuation contributions is useful.

The timing of the deduction for superannuation is interpreted very strictly by the Australian Taxation Office and focuses on the interpretation of paid.  We all know that there is a quarterly obligation for superannuation guarantee contributions of 9% of employee’s salaries, which typically is paid 28 days after the end of each quarter, often by electronic fund transfers.

It has been understood for many years that the contribution made in July is not claimable for tax purposes in the previous financial year.  What is new is the Australian Taxation Office interpretation that an EFT transfer, if made on 30th June and debited to the tax payers bank account, but not credited to the superannuation fund account until a day or two later, is not deductible.

This is a highly contentious opinion.  However, why have an argument with the Australian Taxation Office over a highly technical issue.  Make sure the superannuation fund receipts your contribution it in the same year, by paying a couple of days earlier.

In a different scenario, if the superannuation fund receives a payment by cheque on 30th June and fails to bank it for several days, then a deduction would not be allowed.  If they bank it promptly, then a deduction will be allowed.  To be safe in those circumstances make sure you pay it early or have some proof that the cheque has been received by the super fund – i.e. a courier.

A contribution can be made by a number of payments or EFT’s and it would be quite in order to make an early estimate of the superannuation payable and pay that mid-June, with the balance made up when the precise amounts are known.  Therefore, it is possible to meet the Australian Taxation Office’s interpretation of the rules quite strictly and obtain a deduction for the majority of the contribution.

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Incorrect Super on Payment Summaries
27th-August-2010

Some employers have been incorrectly including compulsory super amounts as reportable employer super contributions on their employees’ payment summaries for the 2009-10 income year.

The reported amounts incorrectly included are:-

• Super guarantee contributions
• Industrial agreement (award) super contributions

However, reportable employer super contributions should only include additional super contributions made by an employer, for example, super contributions made on behalf of an employee under a salary sacrifice.
These mistakes should be corrected before lodgement and the employer provide an amended payment summary.

If a taxpayer has already lodged their individual tax return using the incorrect information and completed any of the income tested items or have rebates, offsets, obligations or entitlements, which use adjusted taxable income, they will also need to lodge an amendment to that return.

This is relevant for anyone with the need for an adjusted taxable income calculation - an arbitrary amount used for determining eligibility for many tax rebates, offsets and eligibility for Centrelink, child support, HECS, SFSS and super contribution.

If unsure whether adjusted taxable income is relevant, refer our previous article Adjusted Taxable Income (see the text from this article below)

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Adjusted Taxable Income
24th-June-2009

A key concept commences 1st July 2009, which affects application of the following measures:-

• Employer share schemes
• Non-Commercial loss rules
• Entrepreneur’s Tax Offset

Adjusted taxable income for an income tax year means an individual’s:-    

• Taxable income
• Adjusted fringe benefits (AFB) total
• Target foreign income
• Net investment losses (NI Losses) (including rental property losses);
• Reportable superannuation contributions, and
• Tax free pension or benefit
  

Less

•     Deductible child maintenance expenditure