ACNC Activities
The Australian Charities and Not-for-profits Commission is urging charities to check that they are maintaining their entitlement to registration.
They must ensure that they are still not-for-profit, their purposes are charitable, their activities lawful, that they are operating for the public benefit, and have an ABN.
ACNC commissioner Gary Johns said charities must maintain their entitlement to registration to avoid revocation. He said the ACNC recommended that charities build in a way of regularly checking their entitlement to registration. The ACNC had a tool to help charities make that assessment, he added.
Each registered charity has a record on the ACNC charity register and is obliged to have a governing document attached as well as a list of current responsible people.
Dr Johns said, ‘Common lapses include charities not keeping their records of responsible people up-to-date, or not having enough responsible people listed as required, and not having a governing document attached to their record [...].’
Charities must also ensure that their purposes and activities are aligned with their registered- charity subtype.
The seventh Australian Charities Report published in May showed that, on average, registered charities had been operating for 32 years.
Dr Johns said, ‘Over the long life-cycle of a charity many things can change, including boards and staff, so it’s crucial charities have an established process for [...] entitlement checks.
‘Our [...] register provides key information about Australian charities to the public. It is critical that this information is up to date because that demonstrates the integrity of the sector and its willingness to be transparent.
‘It is always of public interest to know how charities are run and by whom, how their funds are accrued and spent. Keeping those details accurate is therefore an important [...] task.’
The ACNC has information about maintaining charity registration and a checklist.
Go to https://www.acnc.gov.au/for- charities/manage-your-charity/obligations- acnc/keep-charity-status.
MVA Bennett can provide assurance to those charged with governance of compliance with the ACNC rules.
Hundreds of charities struck off
The ACNC has revoked the registrations of 420 Australian charities that have failed to submit two or more annual information statements.
ACNC assistant commissioner Anna Longley said the organisations were no longer eligible for certain Commonwealth tax concessions.
‘It is important that we keep the ACNC [...] register up-to-date and accurate,’ Ms Longley said.
The commission notified in August more than 600 charities that they risked being struck off the register.
‘We take steps to allow charities that are still active to have every opportunity to maintain registration,’ Ms Longley said.
‘Some charities have since submitted their overdue statements, [...] retained registration, and will continue to access generous commonwealth [...] tax concessions.’
Solvency Essentials
The ACNC’s governance requires a charity’s responsible persons to ensure that their charity is not operating while insolvent.
Charities must take reasonable steps to ensure its responsible persons fulfil duties set out in the standard.
For a charity that is a company, in addition to standard 5, duties set out in the Corporations Act 2001 apply to responsible persons (directors), including the duty to prevent insolvent trading. If a charity that is a company continues to operate while insolvent, its directors may be subject to legal action.
Charities incorporated as associations might also have responsibilities to their state and territory regulators.
The ACNC wants charities to be aware of warning signs that might indicate a charity is facing financial trouble.
The commission nominates:
Annual Information Statement
The ACNC’s 2021 Annual Information Statement Guide aims to help charities complete their annual information statements.
The commission recommends that you use the AIS checklist before filing your statement.
Unlawful behaviour
The federal government has tabled regulations in Parliament that strengthen governance standards, ensuring that registered charities do not engage in or actively promote unlawful activity.
The regulations reaffirm that compliance with Australian laws sets a minimum benchmark by which registered charities should govern themselves.
The changes will empower the ACNC commissioner to investigate registered charities engaging in or actively promoting theft, vandalism, trespass, and assault and threatening behaviour, and to take appropriate enforcement action if warranted.
Registered charities that act lawfully and do not use their resources to promote others to engage in unlawful activities already comply with the amended standards.
Charities will not be deregistered for inadvertent or unintentional non-compliance. Education underpins the ACNC’s regulatory approach, and revoking registration is reserved for serious and deliberate contraventions.
The ACNC will provide guidance to registered charities once the amended standard comes into effect to help them to understand and comply.
Director Identification Numbers
Australian directors have a year to apply for their unique director identification numbers before fines of more than $1.1 million kick in.
Company directors must apply for a DIN by 30 November next year, and directors of Indigenous corporations that are governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 must apply for the unique identifier by 30 November 2023.
The deadline was confirmed in Corporations (Director Identification Numbers—Transitional Application Period) Instrument 2021 made by the Minister for Superannuation, Financial Services and the Digital Economy Jane Hume.
DIN applications are free and will open next month on the newly established Australian Business Registry Service, a single platform administered by the taxation commissioner that brings together ASIC’s 31 business registers and the Australian Business Register.
Directors must personally apply for DINs and will be required to produce myGov IDs, and two identity documents from a list that includes bank-account details, super-account details, ATO notices of assessment, dividend statements, Centrelink payment summaries, and PAYG summaries.
Directors appointed between 1 November and 4 April next year will have just 28 days after appointment to apply for DINs. Directors appointed from 5 April 2022 will be required to apply for DINs before being appointed.
Directors who fail to apply for DINs within the stipulated deadlines can face criminal and civil penalties of 5000 units, which at the moment amounts to $1.11 million. Directors of a CATSI organisation can face penalties of up to $200,000.
Penalties will also apply for conduct that undermines the new requirements, including providing false identity information and intentionally applying for several DINs.
More than 2.5 million directors will need DINs. They will be permanent, even if holders cease to be directors, change their names, or move interstate or overseas.
More information can be found at https:/www.abrs.gov.au/director-identification-number.
Fines for late Lodgement of Tax Returns
After many years of not being punitive, the tax office are now imposing fines for late lodgement of income tax returns.
Due dates for lodgement of tax returns are set by the tax office and vary from 31st October 2021 and May 2022 depending on lodgement history and likely tax payable.
Landholder Duties
The Victorian State Revenue office has issued a Ruling in relation to obligations in relation to a new premium rate of duty that took effect from 1st July 2021 for transactions with a dutiable value of more than $2m.
The rate of duty on the acquisition is $110,000 plus 6.5% of the excess over $2m.
Where fixtures are held separately from the land on which they are located then the fixtures became dutiable after 19th June 2019. However, duty will not be calculated with reference to the value of the interest in the fixtures unless the total value of the fixtures exceeds $2m.
Primary production land continues to be exempt provided the relevant rules regarding exemption are satisfied.
State Revenue office duties and land Taxes continue to grow as a significant impost to the ownership of land and regular review of the relevant regimes are recommended
Construction grants now open
Applications for the Business Costs Assistance Program Round Four – Construction are now open. The program provides one-off payments to eligible employing and non-employing businesses in the construction sector more detailed list link is here.
Grant amount is Once off payments up to $8400 further details can be found in this link.
You can apply for a grant yourself with this link, Please feel free to contact our office should you wish us to assist you with the application and we will get application underway. Cost of application is $300.
Eligibility criteria for grant is as follows:
If you would like to discuss anything raised in the newsletter, please contact our Team.
Unwinding COVID-19 Relief
COVID-19 support will roll back as states and territories reach vaccination targets.
The National Plan, the road map out of COVID-19, does more than provide greater freedoms at 70% and 80% full vaccination rates, it withdraws the steady stream of Commonwealth financial support to individuals and business impacted by COVID-19 lockdowns and border closures. We look at the impact and the support that remains in place.
For individuals
The COVID-19 Disaster payment offered a lifeline to those who lost work because of lockdowns, particularly in the ACT, New South Wales, and Victoria where the Delta strain of the virus and long-term lockdowns had the greatest impact.
In late September, the Treasurer announced that the Disaster Payment will roll back as states and territories reach vaccination hurdles on the National Plan. Over $9 billion has been paid out to date on Disaster Payments and at 70% and 80% full adult vaccination, the disaster, apparently, is over.
At 70% full vaccination in your state or territory
In the first week a state or territory reaches 70% full adult vaccination, the automatic renewal that has been in place will end and individuals will need to reapply each week that a Commonwealth Hotspot remains in place to confirm their eligibility. The COVID-19 Disaster payment will not necessarily end, but anyone currently receiving the payment will need to reconfirm that they meet the eligibility criteria, including living or working in a Commonwealth declared hotspot.
Given that the time gap between 70% and 80% full vaccination might be as little as two weeks in some regions, the impact of the 70% restrictions might be a moot point.
At 80% full vaccination in your state or territory
In the first week a State or Territory reaches 80% full adult vaccination, the COVID-19 Disaster Payment will phase out over a two week period before ending completely.
| Trigger | Disaster payment per week |
| <70% vaccination* | $750 - lost 20 hours or more for that week
$450 - lost at least 8 hours of work $200 - on income support and have lost at least 8 hours of work |
| 70% vaccination* | Automatic renewal ends |
| 80% vaccination | Payment reduced from first week |
| Week 1 | $450 - lost at least 8 hours of work
$100 - for those on income support who have lost at least 8 hours of work |
| Week 2 | $320 - lost at least 8 hours of work |
*First week population +16 years of age reaches vaccination target
Those needing financial support will no longer be eligible for the disaster payment, regardless of whether a Commonwealth hotspot is in place, and instead will need to apply for another form of income support such as JobSeeker. Unlike the disaster payments, JobSeeker and most other income support payments are subject to income and assets tests.
The Pandemic Leave Disaster Payment, for those who cannot work because they need to self-isolate or care or quarantine, or care for someone with COVID-19, will remain in place until 30 June 2022.
Support for business
Each State and Territory manages in different ways the lockdown and financial support provided to businesses impacted by COVID-19 lockdowns and border closures. The way in which support is withdrawn will depend on how support has been provided and the extent of Commonwealth support. In this newsletter we focus on Victoria. Detail on support in other States is available from your MVAB client service staff person.
The Victorian Government has distributed grants to business jointly funded with the Commonwealth. For many of these grants, funding has been topped up in line with lockdown extensions.
The Small Business Hardship Fund has provided one-off grants of $20,000 for businesses that have suffered a 70% or more decline in turnover and were not eligible for other grants or funding, will reopen (see the BusinessVictoria website for details).
The Business Costs Assistance Program will provide automatic top-ups to existing recipients across October and into the first half of November (two fortnightly payments between 1-29 October on a rising scale). Businesses that remain closed or severely restricted between 70% and 80% double dose will receive an automatic payment for the period from 29 October to 13 November.
Licensed hospitality venue fund recipients will also receive weekly top-ups in October of between $5,000 and $20,000, stepped according to venue capacity. Between 70% and 80% double dose, payments for licensed premises in metropolitan Melbourne will be reduced by 25%, and in regional Victoria by 50%.
For Borrowers
While an economic rebound is expected by some when restrictions ease across the country, for many, a funding gap will remain between the assistance provided by Government grants and viable trading conditions.
The expanded SME recovery loan scheme took effect on 1 October 2021. Under the scheme, the Government will guarantee 80% of loan amounts to businesses that have been adversely impacted by COVID-19.
The lending terms, repayment, and interest rates are set by the lenders but cannot be backed by residential property, that is, if the Government is underwriting the loan, lenders cannot ask business owners to use their home as security. However, Directors guarantees are likely to be required.
Under the scheme, lenders can provide:
The recovery loans can be used to refinance existing loans, purchase commercial property, purchase another business, or working capital. But, cannot be used to purchase residential property, financial products, lend to associated entities, or lease, rent, hire or hire purchase existing assets that are more than half way into their effective life.
The loan scheme is generally available to solvent businesses with a turnover of up to $250m, have an ABN, and a tax resident of Australia. Loans remain subject to lending conditions and generally the lenders will look to lend to viable businesses where it is clear that they can trade their way out of the impact of COVID-19 or the assets of the business make the break-up value attractive.
If you default on your loan, you cannot simply walk away from it. The Government is guaranteeing 80% of the lender’s risk not your debt. Director guarantees are still likely to be required and for many loans, it will be secured against a business asset. On the plus side, interest rates are very attractive right now and many of the lenders are providing a repayment holiday of up to 24 months and in some cases,existing debt can be bundled into the loan arrangements.
Capital Gains Tax – subdividing the Main Residence
Subdivision of the main residence is a popular activity in Melbourne suburbs. Excising the unused and maybe oversize back yard is an example or more we are seeing houses demolished and the land split in two with two adjoining houses on the former single block.
The main residence exemption applies only to the “dwelling” when the land remains immediately under the accommodation.
If the accommodation is removed from the land and the land is sold (or half of it sold), the land does not come within the definition of dwelling and the main residence exemption does not apply.
Land under the accommodation qualifies for the main residence exemption for capital gains tax only if the land and the accommodation are sold together.
If you are contemplating changing the use of your main residence then taxes are complex and the proposition should be planned in advance for the likely tax consequences.
Cryptocurrency
The use of cryptocurrency is growing and there are taxation ramifications.
The term cryptocurrency is generally used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.
If you are involved in acquiring or disposing of cryptocurrency, you need to be aware of the tax consequences. These vary depending on the nature of your circumstances. The default position is to tax the crypto currency transaction as a capital gain.
Everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions.
If you have dealt with a foreign exchange or cryptocurrency there may also be taxation consequences for your transactions in the foreign country.
Residency
Many of our family clients have a next generation living outside Australia.
Australia seeks to tax the world-wide income of its residents for tax purposes and the Australian taxable assets of its non-residents.
Like all tax matters there are shares of grey, complexities and unintended consequences.
If non residency or a likely change in residency applies in your family, you should be reviewing the implications of:
If you have parents who reside outside Australia where assets maybe inherited into Australia, again planning is recommended well in advance.
Superannuation and Contractors
We continue to see business confused by the compliance rules of Superannuation Guarantee Charge obligations for service providers of business who might invoice rather than being on the payroll.
The definition of employee for SGC purposes is narrow and is not cross referenced to other definitions of generally accepted concepts of employment. If your business pays for labour to suppliers then you should be reviewing your compliance obligations to pay 10% superannuation in accordance with the Superannuation Guarantee Charge rules.
Superannuation - Rule changes for new employees
When your business hires a new employee, the Choice of Fund form is used to identify where they want their superannuation to be directed. If the employee does not identify a fund, generally the employer directs their superannuation into a default fund.
From 1 November 2021, where an employee does not identify a fund, the employer is required to contact the ATO and request details of the employee’s existing superannuation fund or ‘stapled’ fund (the fund stapled to them). The request is made through the ATO’s online services through the ‘Employee Commencement Form’.
If the ATO confirms no other fund exists for the employee, contributions can be directed to the employer’s default fund or a fund specified under a workplace determination or an enterprise agreement (if the determination was made before 1 January 2021).
Superannuation Funds - payments made on death
Superannuation is not like other assets as it is held in trust by the trustee of the superannuation fund. When you die, it does not automatically form part of your estate but instead can be paid to your eligible beneficiaries by the fund trustee according to the rules of fund, superannuation law, and the death nomination you made.
Fund members have a death nomination in place to direct their superannuation to their nominated beneficiaries on their death. There are four types of death benefit nominations:
Binding death benefit nomination - Putting in place a binding death nomination will direct your superannuation to whoever you nominate. As long as that person is an eligible beneficiary, the trustee is bound by law to pay your superannuation to that person as soon as practicable after your death. Generally, death benefit nominations lapse after 3 years unless it is a non-lapsing binding death nomination.
Non-lapsing binding death benefit nomination - Non-lapsing binding death nominations, if permitted by your trust deed, remain in place unless the member cancels or replaces them. When you die, your super is directed to the person you nominate.
Non-binding death nomination - A non-binding death nomination is a guide for trustees as to who should receive your superannuation when you die but the trustee retains control over who the benefits are paid to. This might be the person you nominate but the trustees can use their discretion to pay the superannuation to someone else or to your estate.
Reversionary beneficiary – if you are taking an income stream from your superannuation at the time of your death (pension), the payments can revert to your nominated beneficiary at the time of your death and the pension will be automatically paid to that person. Only certain dependants can receive reversionary pensions, generally a spouse or child under 18 years. If a reversionary pension is in place the benefit is not directed by the BDBN. Therefor direct two binding outcomes could be effected - one via BDBN of an accumulation account or no reversionary pensions, and on via reversionary pension account.
If no death benefit nomination is in place - If you have not made a death benefit nomination, the trustees will decide who to pay your superannuation to according to state or territory laws. This will often be a financial dependant to the legal representative of your estate to then be distributed according to your Will.
Is your death benefit valid?
There have been a number of court cases over the years that have successfully contested the validity of death nominations, particularly within self managed superannuation funds. For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. If you nominate a person, ensure you use their legal name and if the superannuation is to be directed to your estate, ensure the wording uses the correct legal terminology.
Who can receive your superannuation?
Your superannuation can be paid to a SIS dependant, your legal representative (for example, the executor of your will), or someone who has an interdependency relationship with you.
A dependant is defined in superannuation law as ‘the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship’. An interdependency relationship is where someone depends on you for financial support or care.
Do beneficiaries pay tax on you superannuation?
Whether or not the beneficiaries of your superannuation pay tax depends on who the superannuation was paid to and how. If your superannuation is paid as a lump sum to a tax dependant, the superannuation is tax-free. The tax laws have a different definition of who is a dependant to the superannuation laws. A tax dependant for tax purposes is your spouse or former spouse, your child under the age of 18, or someone you have an interdependency relationship with. Special rules exist if you are a police officer, member of the defence force or protective service officer who died in the line of duty.
If your superannuation is paid to your estate, the tax laws use a ‘look through’ approach when superannuation death benefits are distributed to the deceased’s legal representative. This involves determining whether the final recipient of the superannuation is a dependant or a non-dependant of the deceased.
If the person is not a dependant for tax purposes, for example an adult child, then there might be tax to pay.
Should you have any questions regarding the above, please do not hesitate to contact our office on 03 9642 8000, or email us on info@mvabennett.com.au
MVA Bennett is pleased to announce that the accounting and advisory practice known as Aberdeen Advisory merged with MVA Bennett on 1st October 2021.
Chris Hall, Chartered Accountant, established Aberdeen Advisory some 10 years ago to enable him to serve clients with his particular passion and professional expertise. The practice has grown steadily, and the time is right to broaden the base so that the depth and capacity needed to service clients can continue at the expected standards.
We welcome Chris and his team into our La Trobe Street offices. Chris has joined our partnership as one of eight equity partners in the combined business and, as both businesses have aligned values, culture, and software, we expect that you will notice very little difference in the day-to-day support of your needs as a valued client. Further information is included on our website at www.mvabennett.com.au
We welcome all the valued clients of Aberdeen Advisory and look forward to supporting their professional services needs into the future. In particular, MVA Bennett looks forward the having the expertise of Chris Hall and his team to further develop their passion and skills in respect to advising on complex taxation issues.
If you have any questions kindly contact our Managing Partner Andrew Ellem on 9642 8000 orandrew@mvabennett.com.au
What’s happening across our client base
Lockdown continues and this one seems to be tougher than those that we have endued before. Our client service with telephone and online continues albeit with the office being physically closed. Our conversations with clients cover wide ranging topics and here are just a few.
Hardship Grants from Government have been available and procured for many eligible clients with our guidance.
The booming share and property markets have been extraordinarily good for investors at a time when interest rates have not much more to fall and inflation is low.
However, there are shortages of supply particularly in steel and timber. Labour is also in short supply and salaries are rising. Other countries of the world are receiving high demand for their locally manufactured product reducing the availability of their exports to our importers.
If interest rates cannot go down then presumably they can stay the same or go up. Rising interest rates generally have a negative influence on capital markets.
Good businesses have used these times to innovate with new ways of doing business. The use of the “zoom“ meeting has significantly reduced internal costs of travel and maybe improved overall communication. The use of on-line ordering with home delivery is becoming a common method of shopping. Strategic reviews of business models continue.
Tax rules to encourage investment and 100% write-offs continue. Corporate tax rates are reducing to 25% this year which sounds great for the reinvestment of after-tax profits but may not be as good for recipients of fully franked dividends.
New rules surrounding tax residency will start to affect our clients. Many families find themselves with a next generation member living in another country and no longer being a resident for Australian Tax purposes. Non residency affects income tax rates on Australian assets and can even extend to State Land taxes. Leaving certain assets in a Will to non-residents can be a taxable event. Changes in residency can be a Capital Gains Tax event.
Compulsory employer superannuation contributions (SGC) are now at 10%. Grey areas exist in relation to sub-contractors and whether SGC contributions are required because of fitting within the SGC definition of employee when they are not an employee for any other purpose.
We look forward to a return to the post COVID world – suspecting life will be different to what it was.
Mental Health Support for Business Owners
Running a business can be an isolating experience. And, with COVID-19 lockdowns and disruptions to trade, the pressure can be intense.
NewAccess for Small Business Owners is a free and confidential mental health program developed by Beyond Blue to give small business owners the support they need. Whether you’re just feeling stressed, or completely overwhelmed about everyday life issues, they can help.
Understandably, a lot of small business owners are reporting that COVID-19 has negatively affected their mental health.
NewAccess is designed to appeal to people who might not otherwise seek support for their mental health and to provide support early, preventing symptoms from potentially getting worse.
Coaches of the NewAccess for Small Business Owners program all have a small business background and are trained in Low-intensity Cognitive Behavioural Therapy - a structured, evidence based psychological treatment. Put simply, it allows us to recognise the way we think, act and feel.
The program is open to small business owners (under 20 employees) who are not currently seeing a psychologist or psychiatrist. The program starts with an initial assessment, then works with you over five sessions to tackle unhelpful thoughts and behaviours, using an individual plan that you develop with your coach. Together you will develop an understanding of what is causing distress and then work on practical tools and strategies that can be used in day-to-day life.
For more visit:
https://www.beyondblue.org.au/get-support/newaccess/newaccess-for-small-business-owners
COVID-19 business grants and programs
| The COVID-19 Disaster Payment has been expanded and increased on 28 July 2021. Eligible Victorian workers and sole trader business owners in lockdown in a Commonwealth hotspot from 6 August who lose work and do not qualify for Victorian Government support programs will be able to access:Payments of $750 pw (up from $600 pw) to individuals who lose 20 or more hours of work a week during the period of the lockdown
Payments of $450 pw (up from $375 pw) to individuals who lose between 8 and 20 hours of work, or a full day of work, during the period of the lockdown There is no liquid assets test to receive these payments. The payment will be available from day one of any lockdown, with claims made from day eight in arrears, with a weekly payment then made for the duration of the Commonwealth hotspot declaration. The vast majority of Victorian microbusinesses not registered for GST will also be eligible for the COVID-19 Disaster Payment. Micro-businesses and sole trader business owners can obtain assistance with their application by making an appointment with the Business Victoria Concierge Service on 13 22 15. The Victorian Government has assumed responsibility to fund payments in areas that are not declared a Commonwealth hotspot. The COVID-19 Disaster Payment is non assessable income and non exempt income for tax purposes. This applies to assessments for the 2020-21 income year onwards. In addition, the Business Continuity Fund provides $5,000 grants to businesses that remain impacted by capacity limits due to public health restrictions. Businesses located in the CBD will receive an additional $2,000 ($7,000 in total). All recipients must have received or been eligible for previous Business Cost Assistance Program Round Two (or extension), and no application is necessary (i.e. eligible recipients receive the payments automatically). |
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Divorce and Superannuation
New legislation will help prevent superannuation assets from being hidden during divorce proceedings.
From 1 April 2022, the Australian Taxation Office (ATO) will be able to release details of an individual’s superannuation information to a family law court.
The recently enacted laws are designed to ensure that there is procedural and economic fairness in divorce proceedings to prevent the under-reporting of superannuation assets. While a spouse’s superannuation information can be obtained now through legal action, if it is not provided willingly, it is often expensive and time consuming to obtain factual information through subpoenas or court orders.
From April 2022, when a couple have entered into divorce proceedings, if one of the parties believes the other is not being forthcoming about the value of assets held in superannuation, they can apply to a family law court registry to request their former partner’s superannuation information held by the ATO. They will then be able to seek up-to-date superannuation information from their former partner’s superannuation fund.
What happens to superannuation in a divorce?
In a divorce, superannuation is treated like any other asset and included in the division of assets in a property settlement or financial agreement. Depending on how the total assets of the couple are split, the superannuation balances of each individual may remain intact with each party taking their respective entitlement from the asset pool, or split between the couple.
For superannuation to be split, there must be:
If a superannuation account is split, it does not convert into cash unless the receiving spouse is aged 65 or over, or has reached preservation age and has retired. In most cases, the superannuation is immediately rolled over into the receiving spouse’s superannuation account and remains there until they are legally able to access it.
The tax-free and taxable components of the super payment to a receiving spouse will be calculated immediately before the payment is made with the relevant payment retaining the tax components of the account the funds are being transferred from.
For self-managed superannuation funds (SMSFs), generally SMSF cannot acquire assets such as residential property from a related party but there is an exemption when the acquisition is a result of marriage breakdown. Where a property like a residential rental property is involved, the superannuation rules allow an in-specie rollover under a court order or financial agreement rather than forcing the former couple to sell the property. For example, where a couple have an SMSF together, it’s common for one member to step down when they divorce (until that point it’s important to remember that the trustees are legally obliged to act in the best interests of all members). This same member might then set up their own SMSF and utilise the exemption to receive the residential rental property as an in-species rollover.
Capital gains tax relief is also available where property is transferred to a spouse’s superannuation fund as a result of divorce proceedings so that any potential capital gains tax does not apply on transfer. Instead, the spouse or former spouse who receives the asset will effectively ‘inherit’ the transferor’s cost base of the asset for CGT purposes. That is, when the property is transferred, the tax implications are generally the same as if the receiving spouse or their superannuation fund owned the property from the time it was acquired.
The superannuation divide
On average, women earn 14.2% less than men based on full time earnings. If you take overtime into account, the gap is 16.8%. When part-time work is taken into account, this figure blows out to 31.3%. And, the COVID-19 pandemic has only worsened the pay gap.
Given that 93% of all primary carer leave is taken by women, it’s not surprising that there is a divide between the superannuation balances of men and women on retirement. While the gap is diminishing over time reflecting the positive shifts in work participation and the earning potential of women, it is currently estimated to be around 42%. That is, when a woman retires, she retires with around 42% less superannuation than a man.
While the situation is much better in SMSFs, a gap remains. Over the five years to June 2019, the average member balances of women increased by 28% to $654,000, however the average balance of a male was $784,000.
The Federal Budget proposal to remove the $450 threshold on superannuation guarantee payments (the minimum amount someone needs to earn in a month before an employer is required to pay superannuation guarantee) will help reduce the superannuation divide, but this is not intended to commence until 1 July 2022.
Superannuation equalisation
Where couples have significantly different superannuation account values but are of a similar age, there are practical reasons why they might look at evening out any gap.
Where one spouse is close to or likely to reach their transfer balance cap (between $1.6m and $1.7m), redirecting superannuation contributions to the spouse with the lower balance means that together, they maximise their tax-free income in retirement. Together, the couple can accumulate between $3.2 and $3.4 million tax-free.
You can make a contribution to your spouse’s superannuation fund up to their non-concessional cap (currently up to $110,000 depending on their superannuation balance). If they are under 67 years of age, you might also be able to use the bring-forward rule and contribute up to 3 years’ worth of non-concessional contributions in one year (up to $330,000 depending on their superannuation balance).
If your spouse is not working or a low income earner (assessable income less than $40,000), there is also a tax offset of up to $540 available on contributions you make on their behalf.
If your spouse is under 65 and not retired, you can split your superannuation with them. Up to 85% of your concessional superannuation contributions from your employer or salary sacrifice each year, can be directed to your spouse’s fund.
Actively addressing the value of each spouse’s superannuation account might also help to manage some of the issues that can occur when a spouse dies. While superannuation will pass to the beneficiary nominated in the death benefit nomination or estate, this does not always occur in the most practical or tax effective way. The superannuation rules in this area are complex, particularly when there have been family breakdowns in the past. It’s important to seek advice to ensure your superannuation is managed in a way that delivers the best possible outcome for your beneficiaries.
What lockdown support is available to Victorian business?
Support is available if you are impacted by the Victorian lockdowns.
A series of grants and top-up grants are available to support Victorian business. There are two main streams for grants in Victoria:
New grants - Grants or grant extensions for businesses that previously did not qualify or did not access the available grants:
New and existing grant beneficiaries – top-up support for those who successfully qualify for the:
As many of the Victorian support programs are industry specific, it’s important that your business’s ANZSIC classification is correct (this is the industry category identified when your registered your business’s ABN). This code can be updated on the Australian Business Register through your MyGovaccount.
New and Open Grants
Licensed Hospitality Venue Fund 2021 July Extension
Grant applications close Friday, 20 August 2021. Liquor licensees without an eLicence email address need to set one up on their VCGLR Portal by 11.59pm on Monday, 16 August 2021.
The $10,400 July extension grant is for businesses that did not apply or qualify for the June Licensed Hospitality Venue Fund 2021. Successful businesses will also be eligible for the August top-up payment.
Eligibility
To be eligible for the Licensed Hospitality Venue Fund 2021 July Extension, you must:
If your business is an employing entity, your business must also attest that the business is supporting its workers to access any paid leave entitlements, or that if a person can work from home, to work from home during the COVID-19 restrictions, and supporting their casual workers, where possible.
Businesses that are eligible for any other support packages launched on or after 27 May 2021, will not be eligible for grants under the July extension fund. In addition, organisations that operate a private gender-exclusive club where membership is only by invitation or nomination by an existing member are not eligible for assistance under the Program.
The grant might also be denied to businesses subject to adverse findings by a Government agency or local council, is subject to external administration or a petition for bankruptcy or deregistration, or becomes deregistered.
How to apply
Eligible liquor licensees with an eLicence email address registered with the Victorian Commission for Gambling and Liquor Regulation (VCGLR) should receive an email containing their grant application link from Business Victoria. Liquor licensees without an eLicence email address need to set one up on their VCGLR Portal by 11.59pm on Monday, 16 August 2021 to receive their grant application link.
Applications for a grant can only be submitted through the link emailed by Business Victoria and close on Friday, 20 August 2021. If you have not received your link, call the Business Victoria hotline on 13 22 15.
Business Costs Assistance Program Round Two July Extension
Grant applications close Friday, 20 August 2021 or until funding is exhausted.
The $10,400 July extension grant is for businesses that did not previously receive funding through the Business Costs Assistance Program Round Two (May and June 2021).
Eligibility
To be eligible for the Business Costs Assistance Program Round Two July Extension, you must:
Be registered with the responsible Federal or State regulator (ASIC, ACNC or Consumer Affairs Victoria).
If your business is an employing entity, your business must also:
Organisations that operate a private gender-exclusive club where membership is only by invitation or nomination by an existing member are not eligible for assistance under the Program. The grant might also be denied to businesses subject to adverse findings by a regulator, is subject to external administration or a petition for bankruptcy or deregistration, or becomes deregistered (including a lapse in registration).
How to apply
Applications are made online through the Business Victoria website and close on 20 August 2021 or until funds are exhausted.
Small Business COVID Hardship Fund
Grant applications close 10 September 2021.
The Small Business COVID Hardship Fund offers grants of up to $10,000 to businesses that have been severely impacted by COVID-19 experiencing a decline in turnover of at least 70% but are ineligible for other business grants programs.
Eligibility
To be eligible for the hardship fund, you must:
If your business is an employing entity, your business must also:
Businesses that are eligible for any other support packages launched on or after 27 May 2021 will not be eligible for the hardship fund. In addition, organisations that operate a private gender-exclusive club where membership is only by invitation or nomination by an existing member are not eligible for assistance under the Program.
How to apply
To apply for the hardship grant, you can:
Alpine Resorts Winter Support Program
Grant applications close Friday, 20 August 2021 or until funding is exhausted.
The Alpine Resorts Winter Support Program provides funding though two streams: on-mountain and Dinner Plains; or off-mountain businesses. Eligible businesses should have received a phone call from the Department of Jobs, Precincts and Regions to assist with the application process. If you believe your business qualifies but you have not been contacted, contact alpineprograms@ecodev.vic.gov.au.
The program is open until Friday 20 August 2021 or until funding is exhausted.
Funding amounts are less any funding received through the Business Costs Assistance Program Round Two and Licensed Hospitality Venue Fund 2021 (capped at a deduction of $7,000, top-up funding through these programs is not deducted from the total amount).
To be eligible, your business must:
Funding may be denied to businesses subject to adverse findings by a regulator, is subject to external administration or a petition for bankruptcy or deregistration or becomes deregistered (including a lapse in registration).
On-mountain and Dinner Plain stream
The On-mountain and Dinner Plain stream provides funding of:
To be eligible for this program, in addition to the general eligibility criteria, your primary business must be:
Located within a Victorian Alpine Resort or Dinner Plain, and
Operate:
A business is responsible for managing lift operations at an Alpine Resort is not eligible for funding under this program.
WorkSafe registered employers can apply for funding for up four premises. Non-WorkSafe businesses are limited to one per ABN.
Off-mountain stream
The Off-mountain stream provides funding of up to $18,000.
To be eligible for this program, in addition to the general eligibility criteria, your business must be:
Located within one of the following regional Local Government Areas: Alpine Shire; Mansfield Shire; Murrindindi Shire; Baw Baw Shire; East Gippsland Shire; and provide:
Top-up support for existing grant beneficiaries
The Victorian Government is using the existing grant funding channels to provide top-up and additional funding for those that receive support through the:
Business Costs assistance program top-up
Top-up payments are made automatically to businesses that qualified for the Business Costs Assistance Program Round Two or the Business Costs Assistance Program July Extension.
A round 3 top-up payment of $2,800 was announced on 12 August 2021 and is expected to be paid within 7 days.
In addition to the ‘top-up’ payments, 24 sectors including gyms, cafes, restaurants, catering services and hairdressers, will automatically receive a business continuity fund payment of $5,000 with an additional separate $2,000 paid to businesses located in Melbourne’s CBD. The 24 sectors are based on ANZSIC classifications (see the full list here). Recipients will be contacted by Business Victoria from mid-August to confirm they will receive a payment.
The top-up and business continuity payments are made automatically.
Licensed Hospitality Venue Fund 2021 top-up.
Top-up payments are made automatically to businesses that qualified for the June Licensed Hospitality Venue Fund 2021 and the Licensed Hospitality Venue Fund 2021 July Extension.
On 12 August, additional payments were announced for licensed hospitality venues in metropolitan Melbourne. The value of the payments is based on venue capacity:
| Top-up payment | Venue capacity |
| $5,000 | Up to 99 patrons |
| $10,000 | 100 to 499 patrons |
| $20,000 | 500 plus patrons |
Support for commercial tenants and landlords
From 28 July, commercial landlords must provide rental relief to eligible tenants that matches the tenants’ COVID-19 impacted decline in turnover under the reintroduced Commercial Tenancy Relief Scheme.
To be eligible for relief, commercial tenants must have:
To support landlords, the Victorian Government will create a Landlord Hardship Fund.
Where an agreement cannot be reached between the tenants and landlord, the parties are encouraged to enter negotiations directly, with the Victorian Small Business Commission (VSBC) available to provide mediation if required. See Commercial tenancy relief for Victorians in small business, for further details.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information. If expert assistance is required, professional advice should be obtained.
Lockdown support: Update
The support available to individuals and business has been constantly evolving and changing. Here’s a summary of where support stands around the country.
We note that offers of government support are changing constantly and care should be taken in assuming applicability for ant particular grant
For individuals
From 2 August 2021, the Federal Government COVID-19 Disaster Payment has increased to a maximum of $750 per week for those who have lost 20 hours of work or more, and $450 for those who have lost between 8 and 20 hours of work. In most cases, the payment now applies from day 1 of a lockdown. In general, you need to be living in, or impacted by Commonwealth declared lockdown to receive the payment although some States have funded an extension of the payment beyond hotspot areas.
A special separate $200 a week ‘top-up’ payment has been added for those currently receiving an income support payment through social security, ABSTUDY Living Allowance, Dad and Partner Pay or Parental Leave Pay in addition to their existing payment, if they can demonstrate they have lost more than 8 hours of work and meet the other eligibility requirements for the COVID-19 Disaster Payment. The payment was put in place because people receiving income support payments are not eligible for the COVID-19 Disaster payment.
More funding for Victorian SMEs
There are two main streams for grants in Victoria:
If your business previously received the Business Costs Assistance Program Round Two or the Licensed Hospitality Venue Fund 2021, additional grants of $2,800 for the Business Costs Assistance Program Round Two and up to $20,000 for the Licensed Hospitality Venue Fund 2021 have been announced. Your business cannot retrospectively apply for these grants. See Helping Victorian Businesses Who Need It Most.
For businesses that did not access previous grants, the Business Costs Assistance Program Round Two July Extension offers new grants of $4,800 for employing and non-employing business depending on your sector. For those in the hospitality sector, a new Licensed Hospitality Venue Fund 2021 July Extension is available offering grants of up to $7,200 for each eligible premises. Applications for both grants close 13 August 2021.
A new Small Business COVID Hardship Fund grant of up to $8,000 has been announced for businesses that are not eligible for existing support funding. To access the grant, your business must be severely impacted by the COVID-19 lockdowns with a decline in turnover of 70% or more. No further details are available at present.
Other support
For Alpine businesses, additional grants between $5,000 and $20,000 will be available to 430 Alpine based businesses. See the Alpine Resorts Winter Support Program (closes 20 August 2021).
Rent relief for commercial tenants is also now in place for businesses that have suffered a decline in turnover of at least 30% as a result of COVID-19. Landlords will be required to provide proportional rent relief in line with a business’s reduction in turnover and mediation is available through the Victorian Small Business Commission. A hardship fund will be established for landlords providing rent relief although no details are available as yet.
Please contact us if you would like support to prepare for, or to access, the support you need.
New South Wales business
In New South Wales, the following grants and payments are accessible:
Up to $100,000 in weekly JobSaver cashflow support payments. Payments are based on 40% of your NSW payroll payments. Eligible businesses without employees that meet the eligibility criteria (such as sole traders with no employees), can access a payment of $1,000 per week.
The decline in turnover test required for the JobSaver, COVID-19 business and micro-business grants has been causing a lot of angst but some additional flexibility has been provided. Businesses and non-profit entities can now pass this test if they can show a decline in turnover of at least 30% due to the Public Health Order over a minimum 2-week period within the relevant test period compared to:
The test period depends on which payment you are looking at:
This additional flexibility is helpful for businesses that started after the comparison period in 2019 and for those that have undertaken an acquisition, disposal or restructure.
Queensland business
$5,000 Business Support Grants are available for those impacted by the lockdown from Saturday, 31 July 2021. Your business does not have to be in the local government areas locked down but needs to be impacted by it. To access the grant, you will need to show a decline in turnover of at least 30%. The grants are available to businesses with a turnover of $75,000 or more and annual Queensland payroll of less than $10 million. Applications open mid-August. See Business Queensland for details.
South Australia
Grants of $3,000 for employing businesses and $1,000 for non-employing businesses are available to businesses that experienced a decline in turnover of at least 30% as a result of the health restrictions from 20 July 2021. The grants are available to those with a turnover of $75,000 or more and Australia wide payroll of less than $10 million. See COVID-19 Business Support Grant – July 2021 for details
Are COVID-19 grants and funding tax free?
Most people would think that money provided by the Government to support people and business during a crisis would be tax free? Otherwise, it’s like giving money with one hand and then taking it away with the other, isn’t it?
But, the tax laws don’t work like that. To make a payment tax-free, legislation is required to enable it to be classified as exempt income or non-assessable non-exempt income. In general, any income received will be assessable unless the Government has legislated for it to be tax-free. JobKeeper for example was not tax free and anyone who received it in 2020-21 will need to declare it in their income tax return. Businesses also will need to declare JobKeeper income in their tax return even if the full amount flowed directly to employees.
At the Federal Government level, the Prime Minister recently announced that the COVID-19 Disaster Payment will be tax free and legislation enabling this change is before Parliament. Prior to this, disaster recovery grant payments to primary producers and small businesses for floods between 19 February and 31 March 2021 were also made tax-free. Other payments however, such as Pandemic Leave Disaster Payment, are taxable.
The Treasurer has also been granted the power to make COVID-19 relief provided by the States and Territories tax-free but only from 13 September 2020, and only if they request the Commonwealth Government to make it tax free. If you’re confused, it’s not surprising. The result is a mix of tax treatments depending on what support you received and from whom.
To date, only a series of Victorian business grants are tax-free. The recent business grants in New South Wales, Queensland and South Australia have not as yet been declared tax free (but we expect that this will change).
The general rule is that grants are likely to be taxable unless they are specifically excluded from tax. If the grant relates to your continuing business activities, then it is likely to be included in assessable income for income tax purposes. The position can be different in cases where the payment is made so that the entity can commence a new business or cease carrying on a business but there will still often be some tax implications.
Margaret Thatcher, former British Prime Minister
Welcome to our first newsletter update on useful information for directors and senior management of Not-for-Profit Enterprises.
At MVA Bennett, celebrating 80 years in 2021, we have a rich history of supporting the needs of Not-for-Profit Enterprises with accounting, governance, risk, audit and assurance services. In addition, despite the sector being income tax exempt, there is an increasing need for advice on other taxes including GST and Fringe Benefits.
With the onset of COVID and resulting restrictions on the movement of people, we have also seen an increased need for Not-for-Profit Enterprises to access advice on issues ranging from accessing government grants, to business continuity and cyber-security to solvency and cashflow management.
In this newsletter we focus on current governance matters of interest. The team at MVA Bennett stands readily available to support directors and senior management through the challenges of their ever-changing responsibilities.
In this newsletter:
Director Identification Number (DIN)
As part of the Treasury Laws Amendment (Registries Modernisation and Other Measures Act) 2020, directors, including alternative directors and those of registered foreign companies and companies governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 will be required to apply for a director identification number (DIN).
DINs hope to combat illegal phoenixing by providing more effective tracking of directors and their corporate histories. The move also improves data integrity and security.
A DIN will be a permanent unique identifier and will be issued only once a director has established his or her identity to the satisfaction of the registrar of the Australian Business Registry Services. The registrar is the commissioner of taxation.
DIN provisions began on 4 April, and testing, which ends on 31 October, aims to ensure their effective operation.
Deadlines set by Treasury through various legislative instruments for DIN implementation are:
Penalties for non-compliance, such as applying for several DINs or misrepresenting a DIN, include infringement notices and civil and criminal penalties, including imprisonment.
Governance Institute – Board papers Guidance
The Governance Institute of Australia has released Board papers guidance aiming to arm decision-makers with clear, relevant information.
Well-prepared board papers are vital in equipping directors with the information they need to make effective, timely decisions.
Too often board papers are overwhelming in volume and information while providing insufficient detail for good decision-making.
Sub-standard board papers can cause serious consequences, recent corporate crises having highlighted inadequate information flows as contributing to failures.
The guidance outlines:
Ancillary Funds must lodge returns
Public and private ancillary funds must lodge annual information returns.
Ancillary funds that are ACNC-registered charities must complete an online ACNC annual information statement. Funds that are not registered as charities with the ACNC must continue to lodge a return with the ATO and might also need to lodge an income-tax return.
Funds must meet respective ancillary-fund guidelines, and failure to comply might mean penalties.
Self-assessment changes on the way
Non-charitable Not for Profit (NFP) entities may self-assess their eligibility for income-tax exemptions without an obligation to report to the Australian Taxation Office (ATO)
From 1 July 2023, the ATO will require income-tax-exempt NFPs with an active Australian Business Number to submit online annual self-review forms with the information they ordinarily use in self-assessing.
NFPs will need to ensure that as part of governance they satisfy requirements to retain income-tax exemptions.
Salary and Wages Compliance
Paying in accord with legislated requirements is a hot top for management and governance. The laws are complex and vary from State to State and include the Commonwealth.
The Fair Work Ombudsman is reminding employers that the national minimum wage increases to $20.33 an hour (up from $19.84) or $772.60 a week (up from $753.80).
The Fair Work Commission announced on 16 June a 2.5 per cent increase to the national minimum wage following its annual review. This increase applies from the first full pay period starting on or after 1 July.
Employees covered by awards will also have base rates increased by 2.5 per cent, the increases beginning on different dates for different groups of awards.
Victoria pioneers wage-theft laws
Victoria has become the first Australian state to pass laws – the Wage Theft Act 2020 (Vic) – establishing criminal penalties for employers who deliberately underpay or don’t pay their workers.
On 1 July, it became a crime for an employer in Victoria to deliberately underpay employees or dishonestly withhold employee entitlements.
Wage-theft offences involve deliberate and dishonest conduct. Honest mistakes made by employers who exercise due diligence in paying wages and entitlements are not included.
It becomes a crime for an employer in Victoria to:
Wage crimes are punishable by a fine of up to $198,264 or up to 10 years’ jail for individuals, and a fine of up to $991,320 for companies.
Wage Inspectorate Victoria will educate businesses and workers about their rights and obligations, investigate wage theft, prosecute offenders, and respond to reports and tip-offs about wage theft.
For more information visit www.vic.gov.au/vHYPERLINK "http://www.vic.gov.au/victorias-wage-theft-laws"ictorias-wage-theft-laws.
Other States have their own legislation.
Super-guarantee rate rises
The rate of the Superannuation Guarantee Charge (SGC) rose on 1 July from 9.5 to 10 per cent. Entities will need to ensure that payroll and accounting systems are updated to incorporate the increase.
Grey areas on the eligibility for SGC contributions exist particularly in respect of contractors.
The super rate is scheduled to progressively increase to 12 per cent by July 2025.
ASIC focus areas for 30 June financial reports
ASIC has highlighted key focus areas for financial reporting for periods ending 30 June 2021.
ASIC expects directors, preparers of financial reports, and auditors to pay particular attention to asset values, provisions, solvency and going-concern assessments, events occurring after year end and before completing reports.
The Commission has extended the deadline for both listed and unlisted entities to lodge financial reports under chapters 2M and 7 of the Corporations Act 2001 by a month for balance dates from 23 June to 7 July.
The extended deadlines will assist with any pressures on smaller entities’ resources and provide adequate time for completing audits given COVID-19.
When deciding whether to depart from normal statutory deadlines directors should consider the information needs of shareholders, creditors, and other users of their financial reports. They should ensure that they meet borrowing covenants and other obligations.
Pandemic-related rent concessions extended
AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessionsamends AASB 16 Leases to extend by a year the application period of a practical expedient.
The expedient permits lessees not to assess whether rent concessions that occur as a direct consequence of the COVID-19 pandemic are lease modifications.
The standard extends the practical expedient to rent concessions that reduce lease payments originally due on or before 30 June 2022, provided other conditions for applying it are met.
This standard applies to annual periods beginning on or after 1 April.
Transitioning to simplified disclosures
The Australian Accounting Standards Board has issued AASB 2021-1 Amendments To Australian Accounting Standards – Transition To Tier 2: Simplified Disclosures For Not-For-Profit Entities.
It provides entities with optional relief from presenting comparative information in the notes to financial statements where they failed to disclose comparable information in their most recent general-purpose financial statements.
NFP definition stays
The AASB has decided to discontinue an attempt to redefine ‘not-for-profit entity’ and will retain the current definition in Australian accounting standards.
The board noted that initial feedback to the invitation to comment ITC 37 The AASB’s Standard-Setting Frameworks for For-Profit Entities and Not-for-Profit Entities amounted to a request for more guidance. It failed to indicate significant issues with the current definition.
The AASB also recognised that while the majority of the respondents to exposure draft ED 291 Not-For-Profit Entity Definition and Guidance supported the proposals, many raised reservations about the clarity of the implementation guidance, the level of judgement required, and the expected transition effort and cost for some entities.
The board acknowledged stakeholders’ concerns and concluded that the potential benefits of the proposals were unlikely to justify the cost of their implementation.
MVA Bennett team is available to support your needs, or if you wish for further information.
Shaun Evans – 0439 355 654
David Gibbs AM – 0488 488 707
MVA Bennett acknowledge the Traditional Custodians of the land on which we work and live, and recognise their continuing connection to land, water and community. We pay respect to Elders past, present and emerging.