Raelene Berryman

As the race to secure supplies of COVID-19 Rapid Antigen Tests (RAT) heats up due to the ongoing wave of Omicron throughout the community, it is important for businesses purchasing RATs for employees to be aware of potentially triggering a Fringe Benefits Tax (FBT) event.

While businesses who provide testing kits to employees or reimburse the cost of tests purchased by employees are contributing to creating a safe workplace for their teams, they could simultaneously and unintentionally be triggering an FBT problem.

It is understood that by providing test kits to employees for use outside of the workplace for personal reasons is likely to attract an FBT, but there are some ways around this.

The ATO’s stated position is that tests are exempt from FBT as “work-related medical screening” when both of the following apply:

1. the test is administered by a legally qualified medical practitioner or nurse, and
2. testing is made available to all employees.

For the second point above, as long as tests are offered to all employees it will not trigger an FBT event, irrespective of employees choosing not to take a test.

Given that RATs are self-administered tests and therefore are not conducted by a nurse or doctor, they are likely to attract an FBT, unless another FBT exemption can be applied.

Relevant FBT exemptions that should be considered are the Minor Benefits Exemption and the Otherwise Deductible Rule.

In order for the Minor Benefit Exemption to apply, tests need to be provided on an infrequent basis and the cumulative value of the tests, per employee, over the course of the FBT year, e.g., 1 April to 31 March, need to be less than $300.

For the Otherwise Deductible Rule to apply, the supply of RAT tests would need to be a mandated requirement of the relevant jurisdiction.

Businesses should prepare for an FBT consequence in the upcoming FBT year if they are currently providing test on a regular basis to key employees as a means of keeping their day-to-day operations functioning, especially if there is an absence of mandatory testing.

However, the subject of deductibility and FBT consequences is likely to be an evolving issue where rules will be adjusted according to developing circumstances.

On a positive note, tax deductions can be made by employers who supply rapid antigen tests to employees with it being considered an employment related expense as it is intended to provide a safe working environment.

It is important for businesses to take into consideration their decision to supply rapid antigen tests to employees, with those who continue to supply RATs to expect a fringe benefit tax in the upcoming FBT year. Seeking professional accounting guidance could bring relief to many businesses as advisors will be able to guide you through relevant FBT exemptions while providing an independent perspective on whether or not continuing to supply RAT tests is the best decision for your business.

By Raelene Berryman, Partner and Greg Wilkins, Client Director

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The list, compiled for The Australian newspaper by US publication Barron’s, looks at key factors including assets, fees, professional credentials, client retention and quality of practice.

Former number one spot holders Sue Dahn from Pitcher Partners Melbourne and Charlie Viola from Pitcher Partners Sydney remain strong on the list, as does Adam Stanley from Pitcher Partners Melbourne. New entrants to the list, Kellie Davidson from Pitcher Partners Melbourne and David Lane from Pitcher Partners Brisbane, round out Pitcher Partners’ representation.

Sue Dahn said that success is about the whole team.

“While five financial advisors from Pitcher Partners have been included on the list, there are dozens of others who are an integral part of the team that provide consistent and high-quality service to our clients,” Sue said.

“Our practice relies first and foremost on the ongoing trust and support of our loyal clients many of whom are multi-generations of families who have been with the firm for more than 20 years. There is no better advocate than a happy client”.

Charlie Viola noted that 2020 has been one of the busiest years for financial advisers, from market movements, new styles of client interaction due to COVID-19 and the ever-changing landscape of the advice industry.

“This accolade is a testament to the team around me. They give me the support and infrastructure to add real value to our clients day in and day out. We very much approach our roles with a cool head and a warm heart, taking the view that we have a great responsibility and the privilege of looking after our clients life savings,” Charlie said.

New comer to the list, Kellie Davidson, credits her father and her fantastic Year 11 economics teacher with her decision to become a financial planner.

“The highlight for me is building lasting relationships with clients. Often, you are more than a financial adviser. You’re a counsellor, a sounding board and trusted confidant,” Kellie said.

Every advisor reviewed by the survey answered more than 50 questions covering client assets, fees generated on assets, size of staff (relative to client list) professional credentials and a range of other key factors.

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Brad Twentyman

Economic pain has been on the horizon for some time now, but no one wins in a race to the bottom.

There’s no doubt that the remainder of 2020 is going to be particularly tough for Australian businesses and their employees. Until earlier this year, the economy had been slowing for some time. It was looking likely that the world would slide into a recession, and unfortunately, a black swan event like the COVID-19 pandemic has seen us there much sooner.

Dealing with the fallout of recent events is number one on the global agenda. As various stimulus packages and monetary policy measures are put into place around the world, people are unsurprisingly nervous about how this economic downturn is going to play out. If the historic stimulus measures being rolled out are able to cushion the economic blow – and that’s about all they can do at this point – we need to think about what can be done next to recover and grow.

Are we headed for a GFC-style 18-month bear market, or are we in for something more protracted? No one can be sure at this point, but this uncertainty can emphasise some latent issues in our economy, particularly when it comes to superannuation and doing business in Australia.

Super debate overlooking societal and economic issues

The debate over the last few months around increasing the superannuation guarantee and the superannuation amnesty is leaving a number of societal and economic issues overlooked.

We’ve seen several policy changes over the last five years. Increasing penalties for employers who inadvertently make late super payments being one of these changes that demonstrate how we’ve lost sight of the original policy objectives of super.

These changes aren’t making businesses more productive, nor are they improving people’s retirement position. It’s also becoming increasingly difficult for employers to have any certainty that super payments for employees are correct.

Some may argue that the recent increase in penalties for employers that underpay or make late payments, whether inadvertently or not, balances out a “pro-business” environment. However, without a policy and economic environment that fosters business productivity, these businesses are being placed in jeopardy. As a result, the jobs they support may cease to exist too.

Increasing the SG is not a super idea

One of the first superannuation issues dominating headlines earlier this year was the debate around increasing the superannuation guarantee to 12%. At the time when this issue was front of mind for policymakers, retail and industry super funds and employers, the economy was already in a fragile position.

Clearly, things are now much worse. In an already fragile economy, increasing the super guarantee won’t improve the retirement position of low-income earners, and it will reduce many Australians’ vitally needed take-home pay.

Compulsory super arguably doesn’t improve the retirement income position of low-income earners at all. This group often needs to use the lump sum available at retirement to pay off debt, while relying on the age pension for their retirement income.

Would the compulsory super contributions of low-income earners be better off going towards earlier debt reduction? Possibly. Is there any guarantee these funds wouldn’t be spent elsewhere? No.

The Federal Government’s recent announcement that financially struggling Australians will be able to access up to $10,000 of their superannuation in this financial year and a further $10,000 in the next financial year indicates the financial benefits of earlier access to super earnings outweigh saving for retirement for this group.  

Business growth will be jeopardised with an SG increase

Employees aren’t the only people who will bear the brunt of an increase in the super guarantee.

Businesses that have employees on hourly rate arrangements will need to pay for the super guarantee increase on top of their employees’ hourly wages. This additional cost comes straight from a business’s bottom line, further diminishing their capacity to invest profit into growing the business to bounce back after a recession, such as through employing more people.

While businesses may be able to recoup the extra costs of a super guarantee increase over time, with changes to pricing arrangements to absorb costs across the supply chain, it still puts businesses at risk. If the super guarantee increase isn’t parked, we’ll likely see more businesses close their doors, and the unemployment rate will continue to rise more than it already will in the wake of recent events.

Review our industrial relations framework, again

The current debate around the super guarantee and super amnesty, plus the widespread reports of employee underpayments, which, a lot of the time, are unintentional, highlights a persistent issue in our economy.

Australia’s complicated industrial relations framework directly contributes to this trend. If employers need to review up to four, sometimes competing, sources of information to get their employees’ pay right – legislation, the industry award, an enterprise bargaining agreement and the employment contract – it’s no wonder issues and mistakes arise. Thankfully, with data becoming an integral part of business, it’s becoming easier to identify and rectify mistakes. The policy response to these mistakes, however, is concerning.

Recently, the Government has made penalties for employers who don’t meet their super payment obligations even more severe. After the amnesty period ends on 7 September 2020, employers will be required to pay the super guarantee owing, nominal interest (10%), an administration fee ($20 per employee, per quarter) and the Part 7 penalty (no less than 100% but up to 200% of the total super guarantee charge). None of these costs are tax deductible. If the policy objective of superannuation is to ensure Australians have enough money saved for retirement, these penalties reach far beyond this objective.

It’s true that the ATO has a role to play in ensuring employers do the right thing. It’s also true that most businesses want to do the right thing by their people. The danger with the current environment is that the core issue, Australia’s IR complexity, isn’t being addressed. Without ensuring that Australia’s industrial relations framework is simplified, the current measures are only increasing the risk that businesses will fail through inadvertent mistakes.

The broader national conversation, the 24-hour news cycle and general scepticism toward people who put everything on the line to build their businesses has shifted negatively over the last decade. When did we start assuming businesses want to do the wrong thing?

What’s next?

We’ve lost sight of the bigger picture in the super debate. With the economy already experiencing below-trend growth for years, recent events are demonstrating the glaring weaknesses in our financial and economic systems and highlighting how critical strong businesses are to society.

If the best is truly yet to come in Australia, and I believe it is, it’s time for us to ask some tough questions after the dust settles.

Let us reflect on the lessons we are learning in this crisis and place an emphasis on fostering a stronger environment for the businesses which prop up our economy. This will, in turn, fuel employment opportunities and economic growth.

No one wins in a race to the bottom.

By Brad Twentyman, Client Director – Superannuation Services

The post We need to talk some common sense about super appeared first on AdviserVoice.

John Brazzle

The Pitcher Partners network congratulates the federal government for legislating a comprehensive $189 billion economic stimulus package.

These measures were announced in several tranches. Last week, the government announced a $17.6 billion package, alongside an additional $90 billion from the Reserve Bank of Australia, plus $15 billion to deliver easier access to finance. Over the weekend, a further $66.1 billion has been announced, bringing the total economic support to around 9.7% of GDP.

“In particular we are pleased to see the focus on small-to-medium enterprises and mid-market businesses. Often referred to as the engine room of Australia’s economy, our mid-market clients are responsible for $625 billion – or just under 25% – of the nation’s revenue,” says John Brazzale, Partner and National Chairman of the Pitcher Partners network.

“We welcome the announcement of tax-free, cash payments from $20,000 up to $100,000 for small and medium sized businesses (SME), and not-for-profits (including charities) that employ people.”

As an incentive to hold onto workers for another month, from 28 April 2020, employers will receive a payment equal to 100 per cent of staff wage tax withholdings (up from 50 per cent). The maximum payment is also being increased from $25,000 to $50,000, and the minimum payment is being increased from $2,000 to $10,000.

“It remains to be seen whether this payment will come soon enough to save jobs in smaller enterprises,” says Mr Brazzale. “We will certainly see clients asking whether holding onto their staff will benefit them in the longer term.”

A second stimulus will also be made available to businesses from 28 July 2020. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.

“The measure is meant to encourage continued employment, hence the link to staff wages.”

“This means all small and medium business entities with employees and an aggregated annual turnover under $50 million are eligible.”

Lending will be on the rise due to a new SME Guarantee Scheme. The government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs, to allow $40 billion of lending to SMEs.

The government has also offered its support to the RBA’s announcement of a $90 billion term funding facility for ADIs. This measure will reduce the cost of lending, with particular incentives to lend to small and medium enterprises.

The government has flagged dramatic changes to insolvency law which will act as a safety net for anxious business owners, directors and managers.

While increased insolvency numbers in the near future appears almost certain, the measures seek to support business owners and company the directors who consider themselves to have a profitable and viable underlying business, but need temporary assistance to make it past current crisis.

The government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000. They are also increasing the time companies have to respond to statutory demands, and relieving directors of their duty to prevent insolvency over the next 6 months.

“Interestingly, the wide-sweeping relief from personal liability under this measure represents a significantly stronger and broader measure than the ‘safe harbour provisions’ previously announced,” says Brazzale.

“Those provisions have, by and large, been generally found to be most useful to larger businesses. This announcement has far more wide-sweeping implications, particularly to small and medium enterprises.”

The Corporations Act 2001 will be amended to provide temporary and targeted relief, including temporary relief for directors from any personal liability for trading while insolvent.

Households – including casuals, sole-traders, retirees and those on income support – will also see some benefits over this period.

For those on income support, an additional $550 a fortnight will be paid over the next six months on top of existing payments. Waiting periods for the jobseeker payment will be waived if the job loss has occurred as a result of the coronavirus.

An extra $750 will be sent to around 5 million social security, veteran income support recipients and eligible concession card holders from 13 July 2020. This does not include those who are already on the increased income support payments.

In an unprecedented move, the government has allowed individuals in financial stress to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21, without any tax or income payment penalty.

They have also announced a superannuation minimum drawdown. This means that requirements for account-based pensions and similar products will be temporarily reduced by 50 per cent for 2019-20 and 2020-21.

“These measures are directed to those retirees with account-based pensions and similar products and are aimed to reduce the need to sell investment assets to fund minimum drawdown requirements,” says Brazzale.

Finally, social security rates will be reduced as of 1 May 2020, to a lower deeming rate of 0.25 per cent and upper deeming rate of 2.25 per cent.

Mr Brazzale says that these measures, while decisive and welcome, may not be adequate to prevent the damage of a worst-case-scenario virus.

“Businesses will no doubt struggle with uncertainty over the coming months. They will require advice particularly around how to update their financial modelling and forecasts during this time.”

“We expect to see further policy measures rolled out by state and federal governments to ensure that Australians can return to a ‘business as usual’ lifestyle and economy as soon as it is safe to do so.”

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Lawrence Dujmovic

The NSW Government has announced a major $2.3 billion health and economic stimulus package to protect the community and help protect jobs in the face of the COVID-19 outbreak over the next six months.

This package has two key components: $700 million in extra health funding and $1.6 billion in tax cuts to support jobs.

The health funding is intended to double ICU capacity, fund additional ventilators, establish acute respiratory clinics, purchase additional testing and other critical equipment. This funding injection will also bring forward elective surgeries to private hospitals, freeing up capacity at public hospitals.

A further $1.6 billion in tax cuts has been rolled out to business to support jobs.

The key tax elements include:

• A $450 million tax cut by proving a waiver of payroll tax for businesses with payrolls of up to $10 million for three months ending on 30 June 2020. The NSW Government believes this means these businesses will save a quarter of their annual payroll tax bill for the 30 June 2020 year.
• A $56 million tax cut by increasing the payroll tax threshold from $900,000 to $1 million, effective from 1 July 2020 (previously this measure was planned to commence on 1 July 2021); and
• An $80 million waiver of a range of fees and charges for small businesses including bars, cafes, restaurants and tradespersons.

These measures are designed to help business as they face the effects of the COVID-19 virus on the NSW economy.

What are the potential opportunities from the measures?

The announcement will have the immediate effect of saving cash otherwise payable to the State Government in the form of payroll tax.

“At its height, an employer with an average payroll amount of $833,330 per month will save approximately $41,330 in payroll tax per month, or $123,990 over the 3-month period to 30 June 2020,” explains Lawrence Dujmovic, a client director in tax consulting at Pitcher Partners Sydney.

“These cash savings can be redeployed by business owners into areas where their business may be suffering due to social isolation, ill staff and low consumer confidence.”

There are also a range of federal government concessions that were announced in the Economic Stimulus Package that was released last week. The cash saved from the temporary payroll tax waiver could be used acquire business assets for which the Federal Government provides 100% write-off.

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Charlie Viola

Charlie Viola, Partner, Pitcher Partners Sydney has announced a joint venture partnership with leading risk specialist practice MBS Insurance that will provide comprehensive protection solutions and consulting services for clients and business owners.

The JV will be marketed as Pitcher Partners Sydney Insurance Services (PPSIS) and Pitcher Partners and MBS clients will have access to the collective expertise, insight and experience of a network of leading insurance practitioners, business consultants, industry experts and specialists that will operate under the new structure.

Commenting further on the announcement, Charlie Viola said Pitcher Partners has a well-deserved reputation as one of Australia’s leading and premier client focussed business advisory firms that is constantly refining and adding specialist services to address the needs of clients.

“The importance of insurance protection in any business undertaking or wealth creation aspiration cannot be underestimated. However, insurance and its myriad of variations, options and offerings is highly complex and care needs to be taken to ensure that the correct product and offering is utilised to address each and every individual requirement”, added Charlie Viola.

“Contrary to many of the advertisements that proclaim insurance can be purchased online or over the phone as a ‘one size fits all solution’ – this is not the case in reality, especially for HNW professionals and business owners”.

Adding his voice on behalf of MBS Insurance, Kris Mason said although the number of product providers in the Australian marketplace has become concentrated the sheer volume of offerings and complexity between standalone insurance products and offerings inside superannuation has quite frankly become bewildering for those outside the advice sector.

Pointing to superannuation as one example, Kris Mason said group insurance has not kept pace with consumer expectations and pricing has also risen dramatically over the last few years – in some cases it has more than doubled. “Many superannuation clients are simply not aware of the terms and conditions of their fund that can be changed by the Trustee without reference to the member.

“PPSIS will be able to provide clients with a detailed review their insurance and advise if the cover is appropriate to their needs and expectations”.

MBS Insurance is headquartered in Sydney and was started in 2006 and is headed up by Kris Mason, Trevor Shipton and Drew Burden. Over the years it has grown steadily through adherence to the highest standards of best practice and dedication to develop a focussed and specialised business infrastructure to provide a comprehensive risk offering to clients.

Today, MBS has three advising partners and two non partner advisers that are supported by an internal operational model and staff that ensure all clients receive exemplary service and attention.

Independence of institutional influence has always been a priority for MBS and this underpinned the decision to join the highly regarded non-aligned national risk specialist licensee Bombora Advice to further separate product from advice – and this has enhanced its highly regarded reputation in the independent sector.

A further benefit of being part of Bombora Advice is access to the group’s network of Australia’s leading risk insurance advice practitioners who work collaboratively in a collegiate environment to share insights, experiences and the latest industry developments.

“Today clients face complex challenges in an economy that is constantly changing as the result of new legislation, technology and commercial pressure. Through our shared initiative PPSIS, Pitcher Partners and MBS will be able to offer a specialised service platform to address the insurance needs of clients by providing our collective experience, knowledge and insight in these times of change”, said Charlie Viola and Kris Mason jointly.

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