Month: March 2025

Intentionally underpaying Employees is now a criminal Offence

A NEW criminal offence for intentionally underpaying employees in Australia was a change, commencing 1 January 2025, made to the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. Employers found guilty could face substantial fines or even a custodial sentence.

Honest mistakes, assessed by the Australian Taxation Office (ATO), may be deemed exempt. Employers will ideally act in good faith to ensure payroll errors, if any, are accidental, are corrected quickly and are well-documented to show no intent to underpay.

YML Business Services offers a team of dedicated and trained professionals who, using cloud-based technology to work seamlessly, partner with employers to help businesses streamline and manage their day-to-day accounting activities, including payroll.

For many small to medium Australian businesses (SMEs) accessing highly skilled accounting professionals is made easy by adopting virtual bookkeeping services to monitor their business’s financial health.

Using your company’s established internal resources alongside external specialists – namely outsourcing and co-sourcing – to manage your payroll functions and mitigate the risk of underpaying your employees could be a wise decision for your business considering the recent change to the Fair Work Australia legislation.

YML Business Services can provide expert, specialised know-how to assist you with:

How can you be a first-rate employer?

By adopting virtual bookkeeping services through YML Business Services, you can gain and maintain better control of your payroll and other financial operations, as well as ensure your business is abiding by the latest Fair Work Australia legislative changes.

How can YML help?

Talk to our YML Business Services Team today to see how YML Group can assist you with your payroll obligations. For more information, view our website and contact us on (02) 8383 4455 or by using our Contact Us page on our website.

How to boost your spouse’s balance and make the most of contribution caps

Why boost your spouse’s balance?

  1. Maximising the opportunity to contribute to super

The option to carry forward unused concessional contributions is restricted to those with a total super balance below $500,000 on 30 June of the prior financial year. If one spouse’s balance is coming close to the threshold and they are at risk of losing this opportunity, contribution splitting can be used to transfer funds out of their super balance.

Also, individuals with a total super balance above the general transfer balance cap (currently $1.9 million) cannot add further non-concessional contributions to super. Spouse contribution splitting and/or withdrawals after retirement can reduce the balance of a partner that would otherwise exceed this limit, so they can retain the option to make non-concessional contributions.

  1. Equalising balances

At retirement, the transfer balance cap places a per-person limit on the amount that can be transferred into the tax-free retirement phase. Equalising balances can maximise the total a couple can transfer if only one of them would otherwise have a balance above the cap (currently $1.9 million).

Example – maximising tax-free super

Terry and Gillian are currently aged 50, and planning retirement at 60. Terry’s balance is much lower than Gillian’s because he took some time out of the workforce recovering from a serious injury and now works part time earning a lower wage.

Based on projections if they take no action, Gillian’s expected balance at retirement is $2.5 million and Terry’s is $900,000 (in today’s dollars).

Their financial planner recommends they employ a range of strategies to reduce the gap in their balances. If they put these in place, their expected retirement balances are $1.8 million for Gillian and $1.6 million for Terry.

This will ensure that both partners can transfer their whole balances into the retirement phase at age 60 and enjoy tax-free investment earnings.

Without action, Gillian would have $600,000 in super at retirement that she could not transfer to the retirement phase. She could either retain this amount in a super accumulation account (where earnings would be taxed at up to 15%) or cash the amount out of super where earnings would be subject to income tax. She may also consider the option of cashing a lump sum to contribute to Terry’s super, but would be limited by the non-concessional contribution cap.

  1. Enhancing Age Pension

When one partner is older than the other, retaining super in the account of the younger spouse can enhance Age Pension entitlements while the younger spouse is under the Age Pension age (currently 67).

Using contribution splitting and/or cashing benefits from the older spouse’s account to contribute to their partner’s super reduces the amount counted in Centrelink’s income and asset tests because the superannuation balance of a person under the pension age is not assessable.

With a lower amount being assessed in means tests, the older partner may receive a higher rate of Age pension or qualify for a pension that would not otherwise be payable.

Split your super contributions

One way to boost your spouse’s super account balance is to split the concessional contributions made into your own super account and transfer some of them into your spouse’s account.

This can be a good way to equalise your super account balances if your spouse has less super than you, or if they are on a lower income and receiving lower SG contributions. It may also be of benefit if your spouse is younger than you and transferring your contributions into their account will help you qualify for higher Age Pension payments.

Contribution splitting is different from splitting or dividing your super in the case of a relationship breakdown or divorce. The division of super (or payment split) in these situations is part of a financial agreement reached under the Family Law rules.

You can split contributions where you are any age, but your spouse receiving those split contributions needs to be less than their preservation age, or age between preservation age and 65 and not yet retired. So that rule is just to stop us splitting contributions to a spouse who can then immediately withdraw the money.

Split super contributions remain preserved until the receiving spouse reaches their preservation age.

Splitting your concessional (before-tax) contributions with your spouse does not reduce the amount counted towards your annual concessional contributions cap ($30,000 in 2024-25).

Your super fund still reports all the super contributions made into your account during a financial year, including any contributions later transferred to your spouse.

What super contributions can be split?

You can ask your super fund to transfer up to 85% of your taxed splittable contributions from a particular financial year into your spouse’s super account.

Taxed splittable contributions are generally any employer contributions (including salary-sacrifice contributions) and any personal super contributions you have claimed as a tax deduction in your income tax return.

Need to know

The maximum amount of taxed splittable contributions you can split with your spouse in a particular financial year is limited to your concessional contributions cap for that year ($30,000 in 2024-25).

You can only split the lesser of 85% of your concessional contributions for that year, or the amount of your concessional contributions cap for that year.

Contributions that cannot be split with your spouse generally include:

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your SMSF estate plan. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.

Why comparing your Business with Others in the same Industry is good for Business

To ensure tax compliance and fairness among Australia’s small businesses, the Australian Taxation Office (ATO) sets out two types of business benchmarks – performance benchmarks and input benchmarks. These benchmarks exist to assist small businesses in meeting their taxation obligations, to help small businesses measure their financial health and identify how to improve financial performance.

What are the ATO’s Small Business Benchmarks?

The ATO analyses data from tax returns, Business Activity Statements (BAS) and other sources to establish an industry’s benchmarks. Using these industry benchmarks, the ATO can determine which businesses fall outside the expected range for a specific industry and investigate further, possibly leading to financial audits and or penalties.

Being above or below benchmarks does not automatically mean an issue with a business, but it may raise a red flag and prompt the ATO to look further into a business’s financials, typically conducting an audit.

To check if a business’s financials align with industry standards, performance benchmarks measure key financial ratios such as:

To help the ATO assess if reported income by a business is realistic within its industry, input benchmarks are calculated using the appropriate price or charge for a service based on the relevant labour and materials used. Turnover is estimated based on business inputs, such as materials purchased for a job. This benchmark is most often used for tradespeople, and high cash transaction businesses such as cafes and hairdressers and other cash-based businesses where there might be under-reporting of cash income.

What raises the ATO’s interest in a small business?

Small businesses should be aware that the ATO looks for significant deviation from industry benchmarks, including underreported income and sales, hidden income, inflated expenses, false deductions, and discrepancies between a business’s financials and its owner’s lifestyle.

How small businesses can benefit from the ATO’s Small Business Benchmarks

 

Mitigate the risk of an ATO audit by making regular comparisons to ensure your tax reporting aligns with industry standards.
 

Improve profitability by understanding how your business compares – strengths and weaknesses – with industry benchmarks, enabling you to adjust pricing, renegotiate with suppliers and or reduce unnecessary expenses.
 

Stay competitive within your industry by setting Key Performance Indicators (KPIs) based on industry growth rates and or customer retention rates. You might need to improve your marketing strategy and or customer service offering.
 

Ensure employee productivity by comparing your wage and salary expenses within your industry and subsequently reviewing your employee remuneration.
 

Demonstrate strong business performance relative to others in your industry by evaluating your business and making changes to meet the ATO’s small business benchmarks.

Next Steps

The ATO encourages voluntary tax obligation compliance by making its small business benchmarks and associated data publicly available for ease of comparison by small businesses. Access small business benchmarks on the ATO website Benchmarks A–Z | Australian Taxation Office.

Small businesses may self-correct any reporting issues found when making regular comparisons. Self-correction may reduce the likelihood of a business being audited by the ATO.

Review your record-keeping practices and how your income is reported. If you find your business is outside a benchmark, seek professional advice from YML Chartered Accountants for guidance.

How can YML help?

Talk to our YML Chartered Accountants today to see how YML Group can assist you with your small business. For more information, view our website and contact us on (02) 8383 4400 or by using our Contact Us page on our website.