Why Company Directors need to ensure that tax lodgements and payments are made on time. Obligations in relation to being a Company Director can sometimes be onerous, but in the current ATO environment with regard to debt collection, one responsibility may even outweigh all of the others. Company Directors are legally responsible for ensuring that a company’s tax and superannuation obligations are reported and paid on time. And the ATO can currently utilise legislative provisions to force the Director(s) of a company to personally pay outstanding: Pay As You Go Withholding ( PAYGW ) Goods and Services Tax ( GST ) Superannuation Guarantee Charge ( SGC ). A Director becomes liable to a penalty at the end of the day on which the company is due to meet its obligation. At this time, the penalty is created automatically. The ATO does not need to issue any notices or take any action to create the penalty. However, the Commissioner of Taxation (or the appropriate Delegate of the Commissioner), must not commence proceedings to recover a director penalty until 21 days after a Director Penalty Notice (“ DPN ”) is issued to a Director. Even if you resign as a Director of the Company, you can be liable for director penalties for liabilities of the Company. Similarly, if you are appointed as a new company Director, you can become personally liable for any unpaid amounts. There are two types of DPN’s: non-lockdown DPN and lockdown DPN. Non-lockdown DPN A non-lockdown DPN can be issued to a Director of a company that has lodged its business activity statements ( BAS ), instalment activity statements ( IAS ) and/or superannuation guarantee charge statements within three (3) months of the due date for lodgement, however the PAYG withholding, GST and/or SGC debts remain unpaid. The notice gives the Director 21 days to take one of the following actions: pay the debt in full; or appoint a Voluntary Administrator ( VA ) over the Company; or appoint a Small Business Restructuring ( SBR ) Practitioner over the Company; or appoint a Liquidator over the Company. There is a misconception that Directors can avoid personal liability by entering into a payment plan with the ATO within 21 days, however this is not correct. The payment plan simply allows the Director to repay the liability by way of instalments, however the Director becomes personally liable for the whole debt after the end of the 21-day period. In the event the Company (or the Director) defaults on the payment plan, the ATO can commence proceedings against the Director personally, seeking recovery of the relevant tax debt(s). Lockdown DPN A lockdown DPN can be issued to a Company's Director where the Company has failed to lodge its BAS, IAS and/or SGC statements within three (3) months of their due date for lodgement. In this case, the penalty permanently locks down on the Director and there is no ability to remit the penalty (i.e. avoid personal liability), except by paying the debt in full. It has been reported that the ATO intends to utilise the DPN regime more often as the ATO ramps up its actions to recover $30 billion in overdue small business tax. We have recently become aware that the ATO can (and will) issue lockdown DPN’s on company Directors even after the Director has: placed the Company into Liquidation ; or appointed a Voluntary Administrator over the Company; or appointed a Small Business Restructuring Practitioner over the Company.  It is important to understand your obligations as a company Director and, in particular, how you may not be able to avoid personal liability of certain company debts, including tax debts, even if you appoint an insolvency practitioner over the Company. Our takeaway from this is we want you to understand is that, before it gets to this point, even if you cannot pay, you will much better off by lodging all tax forms ie BAS/IAS/SGC on time (or within 3 months of the due date) as by lodging late will expose Directors to hard lockdown DPN’s. These need to be avoided as Directors are still liable even if the company goes into liquidation. The moral of the story is to have your lodgements up to date and seek specialist advice sooner rather than later! Want more information or discuss your personal circumstances? Call us on 02 6024 1655 or email advisory@st-m.com.au and we'll contact you.

The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies? The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made. Complaints to the Australian Financial Complaints Authority (AFCA) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within 3 months, for others it can take well over a year. The super laws do not specify a time period only that super needs to be paid to beneficiaries “as soon as practicable” after the death of the member. How to make sure your super goes to the right place Death benefits are a complex area. The superannuation fund trustee has discretion over who gets your super benefits unless you have made a valid death nomination. If you don’t make a decision, or let your nomination lapse, then the fund has the discretion to pay your super to any of your dependants or your estate. There are four types of death nominations: 1. Binding death benefit nomination Directs your super to your nominated eligible beneficiary, the trustee is bound by law to pay your super 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. 2. Non-lapsing binding death benefit nomination If permitted by your trust deed, a non-lapsing binding death benefit nomination will remain in place unless you cancel or replace it. When you die, your super is directed to the person you nominate. 3. Non-binding death nomination A guide for trustees as to who should receive your super 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 your super to someone else or to your estate. 4. 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. Who is eligible to receive your super? Your super can be paid to a dependant, your legal representative (for example, the executor of your will), or someone who has an interdependency relationship with you. A dependant for superannuation purposes is “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. What happens if I don’t make a nomination? 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 be a superannuation dependant or the legal representative of your estate to then be distributed according to your Will. Where it can go wrong There have been a number of court cases over the years that have successfully contested the validity of death nominations. 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. If your super is to be directed to your estate, ensure the wording uses the correct legal terminology. One of the reasons for delays in paying death benefit nominations cited by the funds is where there is no nomination (or it is expired or invalid), there are multiple potential claimants, and the trustee needs to work through sometimes complex family scenarios. The bottom line is, young or old, check your nominations with your superannuation fund and make sure you have the right type of nomination in place, and it is valid and correct. While there still might be a delay in getting your super where it needs to go if you die, the process will be a lot quicker and less onerous for your loved ones. Contact us today to discuss your individual circumstances. Email stm@st-m.com.au or call us on 02 6024 1655

If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point. In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But, is the issue as simple as it seems? The push for change The Reserve Bank of Australia (RBA) launched a review in October 2024 of Merchant Card Payment Costs and Surcharging . The review explores whether existing regulatory frameworks are still fit for purpose given the rate of technological change and complexity, and if there is a need for greater transparency – surcharges, transaction fees, and the way in which payments are regulated, are all up for review. Ultimately, the review is about reducing costs to merchants and consumers. In general, customers dislike surcharges and would be happy to see them go – they represent a personal loss of value in much the same way a discount is seen as a personal gain. And, they have support for a ban from the large credit card providers and financial institutions with the Australian Banking Association’s (ABA) submission to the RBA review saying, “The current surcharging framework is clearly not working and requires targeted reform. Consumers should never be surcharged for bundled costs like POS systems, business software products or other business incentives.” The reference to “business incentives” is where a higher fee is charged by the payment service provider to provide the merchant with reward points and other incentives. The push for a ban accelerated when the government announced that it would ban debit card surcharges from 1 January 2026, subject to the outcome of the RBA review later this year. If surcharges are banned for some or all payment methods, businesses currently charging surcharges will need to either absorb the cost of merchant fees or increase prices. The issue for many businesses is not whether to charge a fee, but the costs of accepting what is now the most common payment method – cash is free to transact, cards are a facility to transact legal tender, not legal tender in and of themselves. Small business pays 3 times more While the average card payment fee in Australia is lower than the United States (which is close to double Australia’s rates), we pay a higher rate than in some other jurisdictions such as Europe. The RBA have flagged there might be room to improve this by capping interchange fees and/or introducing competition into how debit card payments are routed (allowing systems to default to the ‘least cost’ option available). In Australia, it is not a level playing field when it comes to card transaction fees with a large disparity between fees paid by small and large merchants – small merchants pay around three times the average per transaction fee than larger merchants (large merchants are able to secure wholesale fees or utilise ‘strategic’ interchange rates). But even within the small business sector, fees vary dramatically with the cost of accepting card payments ranging from less than 1% to well over 2% of the transaction value. How we use cards and digital transactions The RBA are generally in favour of allowing surcharges, pointing out that they signal to consumers which payment methods offer better value and enable market forces to determine the dominant payment providers. And, this might be true for large purchases, but do we really notice when we’re tapping our phones or watches to grab that morning coffee? Cards (including debit, prepaid, credit and charge cards) are the most frequently used payment method in Australia, accounting for three-quarters of all consumer payments in 2022. According to the Australian Banking Association: Contactless payments now account for 95% of in-person card transactions, compared to less than 8% in 2010. Online payments, as a share of retail payments, have grown from 7% in 2010 to 18% in 2022. Mobile wallet (Apple Pay, Google Pay, etc.,) usage has grown from 1% of point-of-sale payments in 2016 to 44% in October 2024. Buy Now, Pay Later (BNPL) services, virtually unknown 8 years ago, are now used by nearly a third of Australians. When are surcharges allowed In the days before the RBA’s surcharge standard , it was not uncommon for businesses to apply a flat 3% surcharge. The surcharge rules enable merchants to surcharge consumers for the “reasonable cost of accepting card payments”. This means: A business can only charge a surcharge for paying by card/digital wallet, but the surcharge must not be more than what it costs the business to use that payment type . These costs, measured over a 12 month period, can include gateway costs, terminal costs paid to a provider, and fraud prevention etc., if they relate directly to the card type being surcharged. Payment suppliers must provide merchants with a statement at least every 12 months that includes the business’s average percentage cost of accepting each payment type. If a business charges a payment surcharge, it must be able to justify how the surcharge fee was calculated. If the surcharge applies to all payment types regardless of type, it must not be more than the lowest surcharge set for a single payment type. If there is no way for a customer to pay without incurring a surcharge, the business must include the surcharge in the displayed price. That is, if your customer cannot use cash or another payment method that does not incur a surcharge, then the price displayed must include the surcharge. The RBA estimates that, on average, card fees cost: Card type Fee Eftpos less than 0.5% Visa and Mastercard debit between 0.5% and 1% Visa and Mastercard credit between 1% and 1.5%. Source: RBA Excessive surcharging is banned on eftpos, Debit Mastercard, Mastercard Credit, Visa Debit and Visa Credit. The Australian Competition and Consumer Commission (ACCC) reportedly stated that excessive surcharge complaints increased to close to 2,500 in the 18 months from the start of 2023. Tax on surcharges If your business charges goods and services tax (GST) on goods or services, then GST should also apply to any surcharge payments made Contact us today to discuss your individual circumstances. Email stm@st-m.com.au or call us on 02 6024 1655

“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke The Australian Taxation Office (ATO) thinks that wealthy babyboomer Australians, particularly those with successful family-controlled businesses, are planning and structuring to dispose of assets in a way in which the tax outcomes might not be in accord with the ATO’s expectations. If you are within the ATO’s Top 500 (Australia's largest and wealthiest private groups) or Next 5,000 (Australian residents who, together with their associates, control a net wealth of over $50 million) programs, expect the ATO to be paying close attention to how money flows through the entities you control. A critical issue for many business owners is how to effectively (and compliantly) benefit from a successful business. In many cases, the owners have spent years building the business and the business has become not only a substantial asset, but a lucrative source of income either through salary and wages, dividends, or through the sale of shares or assets. Generally, under tax law, you can legitimately structure assets if there is a good reason to do so - like for asset protection, but if you tip across the line and the only viable reason for a structure is to reduce tax, then you risk the ATO taking a very close look at your operations or worse, denying any tax benefits under the general anti-avoidance rules in Part IVA of the tax rules, designed to combat “blatant, artificial or contrived” tax avoidance activities. “We’re seeing that succession planning behaviour is primarily done by group heads who are approaching retirement. They typically own groups that family members are a part of, and wealth is transferred to the next generation to keep it within the family (via trusts and other means),” ATO Private Wealth Deputy Commissioner Louise Clarke said in a recent update. Key areas of concern include: Division 7A loans being settled. That is, a company has been paying money to a shareholder or an associate under a loan account. The ‘loan’ is quickly settled, often via a distribution, to remove it from the accounts. Assets moving around the group (often the true value of an asset is not recognised raising the question, why the change if not to avoid capital gains tax on disposal or for some other benefit). Family member interests being restructured . Trust deeds being amended. A restructure is cited as a reason for late lodgment. Use of trusts Trusts are also a key area of concern in 2025. Where a trust which has made a family trust election (FTE) or interposed entity election (IEE) makes a distribution outside of the family group, a 47% Family Trust Distribution Tax applies (tax at the top marginal tax rate plus Medicare). In addition, the ATO has recently tightened its approach to trust tax returns for closely held trusts to ensure that trustee beneficiary (TB) statements are being completed. These are required when a trust makes a distribution of income or assets to the trustee of another trust, unless an exclusion applies. For example, a trust which has made an FTE or IEE doesn’t need to make a TB statement. The TB statement will then be used to cross reference against what the beneficiary has declared in its tax return. Where a valid TB statement is not made on time this can trigger a hefty 47% Trustee Beneficiary Non-Disclosure Tax. Reducing risk Where you or your family have control over multiple entities, particularly where the value of these entities is significant, it is important that the connections between these - be it in Australia or overseas - are looked at closely to avoid any nasty surprises or lost opportunities. Transferring control of your business may involve restructuring your business operations – changes to share structures, changes to the trustee and appointor of a trust, changes to partnership structures – or transferring assets to family members via the creation of trusts or other entities. All these events have legal and tax implications that need to be carefully considered. Contact us today to discuss your individual circumstances. Email stm@st-m.com.au or call us on 02 6024 1655

Recent changes to the requirement for clearance certificates for Australian property sales may impact your SMSF, if you sell property owned within that entity. Like all other property owners in Australia, SMSF trustees must obtain a Clearance Certificate when selling or disposing (including in specie transfers) Australian real property and give it to the purchaser at, or before settlement. Without a clearance certificate, the purchaser must withhold up to15% of the sale price (or market value if not sold at arm’s length). The purpose is to prevent foreign residents from avoiding the capital gains withholding rules and assumes that all property owners are foreign residents unless proven (by way of certification) otherwise. Prior to 1 January it was only a requirement for $750k plus properties (and the rate was 12.5%) but now includes all direct property, irrespective of value, such as: vacant land, buildings, residential and commercial property mining, quarrying or prospecting rights where the material is situated in Australia Indirect Australian real property interests (IARPI), where the holder has a right to occupy land or buildings on land. The certification process is free and rather straight forward but must be attended to. A clearance certificate can be applied for well in advance of selling a property as they are valid for a year (can be longer for delayed settlement contracts) – unless there is a change of residency status. They can take up to 28 days (can be longer if there are complications) to issue so early action is advisable as they must be provided to the purchaser before settlement date to avoid the 15% deduction. Processing may take longer if: the vendor hasn’t lodged income tax returns recently there’s a change in residency status the names on the ATO’s records don’t match the names on the Certificate of Title the property is owned by complex entity structures and determining the residency takes longer. The deducted amount is remitted to the ATO. If the vendor is not a foreign resident, but just failed to provide the certificate in time, they will not be able to access the withheld amount until they have lodged their tax return for the year in which the contract was signed. This cash flow delay can have significant commercial consequences. Where the vendor involves multiple parties, each must provide certification, or the withholding will be applied to their share. In addition to the vendor (who can apply on MyGov), clearance certificate applications can be made by, legal practitioners, tax agents, conveyancers, real estate agents and solicitors and registered tax agents representing the vendor on their behalf. The entity that has legal title to the property applies for the clearance certificate. For an SMSF this should be the trustee of the fund but there may be some instances where another entity is holding the property title in trust for the SMSF. The name on the Certificate of Title and clearance certificate must match. Early applications are advisable. If you require assistance with this, or need more information, please contact our team via email advisory@st-m.com.au or call us on 02 6024 1655

Clearance certificates required for all Australian property sales From 1 January 2025, all Australian residents (for tax purposes) selling or disposing of Australian real property (land and buildings) must have a clearance certificate and give it to the purchaser at, or before settlement. If a clearance certificate is not provided, 15% of the sales price (or market value if not at arm’s length) will need to be withheld (up from 12.5%). Previously, clearance certificates were only required where the value of the property is $750,000 or more. For foreign resident vendors, the withholding is made available as a credit against any tax liability. The vendor only receives any refund due after their next income tax return is processed at tax time. For a more detailed overview specific to SMSF, read our blog post here Superannuation rate increases to 12% The Superannuation Guarantee (SG) rate will rise from 11.5% to 12% on 1 July 2025 - the final legislated increase. Super on Paid Parental Leave From 1 July 2025, superannuation will be paid on Paid Parental Leave payments. Eligible parents will receive an additional payment based on the superannuation guarantee (i.e. 12% of their PPL payments), as a contribution to their superannuation fund.

As of 1 January 2025, the intentional underpayment of workers will be criminalised. Employers will commit an offence if: they’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) under the Fair Work Act, or an industrial instrument; and they intentionally engage in conduct that results in their failure to pay those amounts to or for the employee on or before the day they’re due to be paid. Employers convicted of wage theft face fines of up to 3 times the amount of the underpayment and $7.825 million.  See the Fair Work Ombudsman for further details.

The Future Made in Australia is the Government’s plan for a net zero economy. The Hydrogen Production Tax Incentive and the Critical Minerals Tax Incentive form part of that plan. The Senate Economics Legislation Committee is due to report on the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024 enacting the incentives on 30 Jan 2025. These incentives seem a long way off with a start date of 1 July 2027. The hydrogen production tax offset is a new offset that provides a refundable tax offset available at a rate of $2 for a kilogram of eligible hydrogen for companies satisfy the eligibility requirements. It is intended to be available for income years commencing on or after 1 July 2027 and ending before 1 July 2040. The Critical Minerals Production Tax Incentive is another new tax offset focussed on minerals that are, “essential to modern technologies, economies and national security.” There are currently 31 of these minerals on the government’s list. The amount of the offset for an eligible company is equal to 10% of the eligible expenditure of the company and is intended to be available for income years that start on or after 1 July 2027, and end on or before 30 June 2040.

Lost Legislation Parliament has resumed for 2025 and whilst the Senate pushed through 32 Bills on the last sitting days of 2024 , there are a few anticipated…dreaded, Bills yet to pass. Zombie tax: Division 296 $3m super tax Division 296, which imposes a 30% tax rate on future earnings for superannuation balances above $3 million, is proposed to commence from 1 July 2025. The Bill implementing the measure, Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 , was divided into two by the Senate to remove the less controversial measures. Unless there is a concerted effort to negotiate the Bill’s passage through the Senate in February, pundits have their money on this tax disappearing as a bad idea. However, the MYEFO continued to recognise the revenue from the new tax in the budget and the Government, at least at this stage, is not formally backing away from it. Peter Dutton has vowed to abolish the tax. No certainty on the $20k instant asset write off threshold In the 2024-25 Federal Budget, the government announced the extension of the $20,000 instant asset write-off threshold for small business for a further year to 2024-25. The concession enables businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. Without this measure, the threshold returns to $1,000 for 2024-25…yes, current year. This concession was removed by amendment from the enabling legislation at the last minute in the final sitting of Parliament of 2024. The intent is to pick it up in 2025 in a new Bill. The removal of this measure is unfortunate, as once again, SMEs now have no confidence about the tax treatment of investments in assets that they might be looking to make, or have made, in the current financial year. Luxury car tax and fuel-efficient cars Amends the Luxury Car Tax (LCT) rules to: Tighten the definition of a fuel-efficient vehicle - reducing the maximum fuel consumption for a car to be considered fuel-efficient for the LCT to 3.5 litres per 100 kilometres from the current 7 litres per 100 kilometres. For car enthusiasts, that gets you a Toyota Yaris (the Lexus UX for example is 4.2 litres per 100 kilometres). Align the indexation rates for LCT thresholds. Under this revision, the LCT threshold for the 2024-25 is $80,567 and will be indexed annually using the index number for the motor vehicle purchase sub-group of the CPI. Currently, the LCT uses the threshold from 30 June 2012 and is indexed using the ‘All Groups’ CPI. Of late, motor vehicles have grown at a faster rate than CPI generally. Deductions denied for interest charges This measure would prevent deductions being claimed on the general interest charge (GIC) and shortfall interest charge (SIC), incurred in income years starting on or after 1 July 2025. Extending ATO notification period for retaining BAS refunds After the ‘TikTok' GST refund scam that saw $1.7 billion paid out in fraudulent refunds and another $2.7bn in fraudulent claims stopped, the time period for the ATO to notify that they are retaining a refund will be extended from 14 days to 30 days.