Welcome to the March 2021 edition of the Spry Roughley Report.
Its been just over one year since the Prime Minister announced social distancing measures and business restrictions in response to the COVID-19 pandemic on 18 March 2020, and I thought it worth reflecting on the impacts of COVID-19 on business and the economy.
In considering recent business performance it is easy to lose sight of our economic trajectory during this turbulent period. The Australian Bureau of Statistics has summarised the dramatic impacts of COVID-19 on jobs, industry and the economy over the last 12 months, from the record lows through to the first signs of economic recovery.
In the March 2020 quarter Australia closed its borders to non-residents and schools began to close. Two-thirds of businesses reported a reduction in turnover and daily reported COVID-19 cases peaked at 464. The Australian Government announced business and childcare support packages, and the underemployment rate hit an historic high of 13.8% with 1.8 million people working reduced or no hours for economic reasons. In April, overseas arrivals plummeted to just 21,000 from a record high 2.3 million in January.
In the June 2020 quarter the GDP dropped by a record 7%, the second quarter in a row of falls. The following month the unemployment rate peaked at 7.5% - the highest in over 20 years.
By August there were signs of economic and employment recovery in all states bar Victoria, which was hit by a second COVID-19 wave and lockdown. Nationally, job vacancies recovered 78% of the vacancies lost and the economy rose 3.4%.
At the start of 2021 things continued to improve with employment recovering almost 93% of the March-May loss. As we emerge from the crisis with vaccinations and clear recovery signals there is an emerging tension between the market and the Reserve Bank about inflation and interest rates. The old adage "don't bet against the Reserve" may be worth minding which means low rates until 2023. Get your planning in line but expect more volatility as our economy and society hook into the mega trends around social, environmental and governance issues. No business would want to be caught on the wrong side of these public issues.
On world economic trends an interesting Macquarie presentation to the Western Sydney Business Connection last week highlighted three dominant trends that will drive the world in the next decade. These arise from the massive world infrastructure spend as 1 billion people seek urbanisation – a spend of $45trn; changes to the energy landscape with $6trn investment and energy consumption up by 30%, and the accelerating integration of devices into a connected world of around 75 billion devices, expected to add $1trn of economic value by 2025. Wow – what opportunity!
Whilst the prospect of an economic recovery is encouraging we recommend that businesses prepare and maintain budget and cash flow models to assist in the management of the business but also to help drive strategic decision making. If you need any assistance with this we are ready to help.
For other news and updates, read on below...
With the FBT end of year approaching, we have also included an FBT Checklist for your reference.
As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email.
Anthony Saccaro, Director
Spry Roughley Services Pty Limited
Liability limited by a scheme approved under Professional Standards Legislation
With insecure, contract and casual work becoming increasingly common, particularly in the current COVID-19 affected economy, it's no surprise that many young and not-so-young Australians may have income from more than one job. If you are working two or more jobs casually or have overlapping contract work, you need to be careful to avoid an unexpected end of financial year tax debt.
This type of debt usually arises where a person with more than one job claims the tax-free threshold in relation to multiple employers, resulting in too little tax being withheld overall. To avoid that, you need to look carefully at how much you'll be making and adjust the pay as you go (PAYG) tax withheld accordingly.
Currently, the tax-free threshold is $18,200, which means that if you're an Australian resident for tax purposes, the first $18,200 of your yearly income isn't subject to tax. This works out to roughly $350 a week, $700 a fortnight, or $1,517 per month in pay.
When you start a job, your employer will give you a tax file number declaration form to complete. This will ask whether you want to claim the tax-free threshold on the income you get from this job, to reduce the amount of tax withheld from your pay during the year.
A problem arises, of course, when a person has two or more employers paying them a wage, and they claim the tax-free threshold for multiple employers. The total tax withheld from their wages may then not be enough to cover their tax liability at the end of the income year. This also applies to people who have a regular part-time job and also receive a taxable pension or government allowance.
The ATO recommends that people who have more than one employer/payer at the same time should only claim the tax-free threshold from the employer who usually pays the highest salary or wage. The other payers will then withhold tax from your payments at a higher rate (the "no tax-free threshold" rate).
If the total tax withheld from of your employer payments is more than needed to meet your year-end tax liability, the withheld amounts will be credited to you when your income tax return is lodged, and you'll get a tax refund. However, if the tax withheld doesn't cover the tax you need to pay, you'll have a tax debt and need to make a payment to the ATO.
If you have two or more incomes, for example from casual or contract jobs or because you get a pension and have part-time employment income, we can help you figure out your tax withholding arrangements and avoid a surprising bill at tax time.
Learn more about this...
Small employers with closely held payees have been exempt from reporting these payees through single touch payroll (STP) for the 2019–2020 and 2020–2021 financial years. However, they must begin STP reporting from 1 July 2021.
STP is a payday reporting arrangement where employers need to send tax and superannuation information to the ATO directly from their payroll or accounting software each time they pay their employees.
For STP purposes, small employers are those with 19 or fewer employees.
A closely held payee is an individual who is directly related to the entity from which they receive a payment. For example:
- family members of a family business;
- directors or shareholders of a company; and
- beneficiaries of a trust.
Small employers must continue to report information about all of their other employees (known as "arm's length employees") via STP on or before each pay day (the statutory due date). Small employers that only have closely held employees are not required to start STP reporting until 1 July 2021, and there's no requirement to advise the ATO if you're a small employer that only has closely held payees.
The ATO has now released details of the three options that small employers with closely held payees will have for STP reporting from 1 July 2021:
- option 1: report actual payments through STP for each pay event;
- option 2: report actual payments through STP quarterly; or
- option 3: report a reasonable estimate through STP quarterly – although there are a range of details and steps to consider if you take this option.
If your business will need to lodge through STP soon, we can help you find an easy and cost-effective STP-enabled solution, or we can lodge on your behalf. Whatever you choose, remember that STP reports can't be lodged through ATO online services and isn't a label on your BAS, so early preparation is needed.
Learn more about this...
The ATO is kicking into gear in 2021 with another two data-matching programs specifically related to the JobMaker Hiring Credit and early access to superannuation related to COVID-19. While the data collected will mostly be used to identify compliance issues in relation to JobMaker and early access to super, it will also be used to identify compliance issues surrounding other COVID-19 economic stimulus measures, including JobKeeper payments and cash flow boosts.
As a refresher, the temporary early access to super measure allowed citizens or permanent residents of Australian or New Zealand to withdraw up to two amounts of $10,000 from their super in order to deal with adverse economic effects caused by the COVID-19 pandemic. The JobMaker Hiring Credit is a payment scheme for businesses that hire additional workers. Both measures have particular eligibility conditions to meet for access.
The ATO expects that data relating to more than three million individuals will be collected from Services Australia (Centrelink) for the temporary early access to super program, as well as data about around 450,000 positions related to JobMaker. Approximately 100,000 individuals' data will also be collected from the state and territory correctional facility regulators.
While the data collected will primarily be used to verify application, registration and lodgment obligations as well as identify compliance issues and initiate compliance activities, the ATO will also use it to improve voluntary compliance, and to ensure that the COVID-19 economic response is providing timely support to affected workers, businesses and the broader community.
Learn more about this...
If you're nearing retirement and have a large amount in your transfer balance account, it may be wise to delay until 1 July 2021 to take advantage of the upcoming pension transfer cap increase from $1.6 million to $1.7 million due to indexation.
At the time you first commence a retirement phase superannuation income stream, your "personal transfer balance cap" is set at the general transfer balance cap for that financial year.
Essentially, the transfer balance cap is a lifetime limit on the total amount of super that you can transfer into retirement phase income streams, including most pensions and annuities, so a larger cap amount means you can have a bit more money in your pocket throughout your retirement.
This cap amount takes into account all retirement phase income streams and retirement phase death benefit income streams, but the age pension and other types of government payments and pensions from foreign super funds don't count towards it.
The ATO has confirmed that when the general transfer balance cap is indexed to $1.7 million from 1 July 2021, there won't be a single cap that applies to all individuals. Rather, every individual will have their own personal transfer balance cap of between $1.6 million and $1.7 million, depending on their circumstances.
Commencing a pension is a complex area and care needs to be taken to get it right for a comfortable retirement. Talk to us today to find out how we can help.
Learn more about this...
The Treasury Laws Amendment (Your Future, Your Super) Bill 2021 has been introduced to Parliament to implement some of the "Your Future, Your Super" measures announced in the 2020–2021 Federal Budget. Treasurer Josh Frydenberg has said the measures are intended to save $17.9 billion over 10 years by holding underperforming super funds to account and strengthening protections around people's retirement savings. The changes include:
- "stapling" your chosen super fund so it follows you when you change jobs, and you don't end up paying fees for multiple accounts;
- requiring funds to pass an annual performance test, and report underperformance to fund regulators and members;
- strengthening trustees' obligations to only act in the best financial interests of fund members; and
- creating an interactive online YourSuper comparison tool which will encourage funds to compete harder for members' super.
Learn more about this...