This decision is reflected in 5 separate applications by 5 horse racing clubs (Armidale Jockey Club, Australian Turf Club Ltd, Clarence River Jockey Club, Grenfell Jockey Club Ltd, and Illawarra Turf Club) on assessments issued by the ATO about superannuation guarantee charges (SGC) from 30 September 2009 to 30 June 2014.

The AAT accepted the ATO’s argument that the horse racing clubs were liable for SGC regarding the payments made to jockeys as the payments fall under section 12(8) of the SGAA. This section applies to individuals who are paid to participate in the performance or presentation of sport, music or other artistic activities.

Other racing clubs across the country may face similar superannuation liabilities for jockeys if they are legally liable to make the payment to the jockeys for similar activities. Additionally, it could have broader implications for other sports and industries with similar payment structures.

Facts of the cases

In 2020, the ATO issued notices of assessment for SGC to all 5 clubs on the basis that jockeys who participated in horse races conducted by the clubs between 2009 and 2014 were employees of the clubs.

The central issue was whether the jockeys were “employees” of the racing clubs under the SGAA. The clubs argued that the jockeys were either independent contractors or employees of the horse owners or trainers, asserting that the clubs should not be responsible for their superannuation.

Section 12(3) and 12(8) of the SGAA

The AAT examined sections 12(3) and 12(8) of the SGAA to determine the employment status of the jockeys. Section 12(3) defines an employee as someone who works under a contract that is wholly or principally for their labour. The tribunal rejected the clubs’ argument that this section applied, pointing out the absence of formal contracts between the jockeys and owners or trainers that would establish a labour-based relationship.

However, the AAT found that section 12(8) did apply. This section states that a person paid to perform or participate in a sport is deemed an employee of the entity liable to make that payment. Since the racing clubs were responsible for paying the jockeys’ riding fees, they were deemed to be the employers for superannuation purposes.

Role of NSW Local Racing Rule LR72

A critical factor in the tribunal’s decision was the interpretation of NSW Local Racing Rule LR72. This rule obligates racing clubs to pay jockeys’ riding fees directly, with the fee amounts set by Racing NSW. The AAT confirmed that LR72 created a direct payment obligation for the clubs, leading to the application of section 12(8) of the SGAA. The clubs’ argument that they were merely intermediaries paying on behalf of owners or trainers was rejected, as the rule placed the liability for payment on the clubs themselves.

Decision

The AAT considered that the racing clubs failed to sufficiently evidence the existence and contents of any contracts between the jockeys and the owners/trainers. Instead, the evidence suggested that jockeys are engaged on a race-by-race ad hoc basis.

It was determined in each of the matters that section 12(8) of the SGAA was the most appropriate provision to apply between the clubs and the jockeys as it was not possible to determine the common law employer of the jockeys based on the evidence.

The AAT further found that the SGAA does not contemplate multiple employers for one activity and the use of the term “the person” as opposed to “a person” in section 12(8) means that only one person can be liable at a time for payment of the same performance.

Implications for the racing industry

Beyond the immediate financial impact on the five clubs involved, many other racing clubs across the country may face similar superannuation liabilities for jockeys if they are legally liable to make the payment to the jockeys for similar activities. The decision reinforces the obligation of racing clubs to treat jockeys as employees under the SGAA, potentially leading to substantial superannuation contributions and increased administrative burdens for these clubs.

While this ruling specifically addresses the racing industry, it may have broader implications for other sports and industries with similar payment structures. The definition of “employee” in Section 12(8) includes individuals engaged in various types of activities, such as performers, presenters, service providers, and media production workers, who are paid for their participation or services. This ensures that these individuals are considered employees for superannuation purposes in certain circumstances, obligating the paying entities to make the necessary contributions.

Thus, any organisation compensating individuals to perform or participate in sports, entertainment, or media production could be scrutinised under section 12(8) to determine if they have similar superannuation obligations. This could set a precedent for interpreting deemed employment relationships where traditional notions of employment are unclear, potentially leading to broader implications across multiple industries.

How SW can help

This decision highlights the expansive nature of the provisions of the SGAA, emphasising the importance of having clear contractual terms that set out who is liable for any payments made for sporting, entertainment or artistic performances.

SW can help you implement appropriate measures and make necessary disclosures about SGC and other employment tax obligations—contact your SW advisor to discuss how this decision affects you and your business.

Contributors

Rahul Sanghani

The post Super Guarantee | Jockeys held to be employees of racing clubs appeared first on SW Accountants & Advisors.

As part of the 2023-24 Budget, the Federal Government announced that from 1 July 2026, super must be paid on payday, a change that will contribute towards a ‘dignified retirement for all Australians’. 

Treasury has released the Securing Australians’ Superannuation consultation paper (the Paper), which will remain open until November 3, 2023. The Paper provides a number of areas for consultation, including in relation to: 

• defining payday super 
• updating the superannuation guarantee (SG) charge 
• compliance mechanisms 
• choice of fund and employee onboarding 

It is intended that stakeholder answers will help inform the design of payday super implementation and compliance frameworks. 

SW fully supports the intended purpose of the payday super to address the drivers of unpaid SG. Material change is required to systems and processes in employers, clearing houses, superannuation funds and the ATO to deal with increased frequency of contributions (up to 13 times) and tighter deadlines. 

Treasury’s openness to considering a broad spectrum of issues is commendable, with few topics being excluded. If not designed well, there are also numerous aspects of the proposed design which may unduly increase the administrative and regulatory burden on employers. 

SW is preparing a submission to Treasury addressing practical issues for Australian businesses in designing and implementing the payday super frameworks. While there are many matters that deserve consideration, we highlight several key consultation topics below and welcome your insights and feedback: 

• the transition from self-assessment system for SG obligations to ATO-driven recalculations and assessments. 

Employers who have conducted recalculations of pay and super will know that recalculations are rife with false discrepancies. It is proposed that under Payday Super, the ATO will recalculate superannuation obligations based on STP and superannuation fund reporting data. The ATO calculated superannuation shortfalls will result in “nudges” for employers to comply followed by assessments, moving away from the self-assessment system we currently have. 

Is it possible for the ATO to eliminate assessments resulting from false discrepancies, and if so, how might this be done? 

• due date for the making of superannuation contributions or receipt by the superannuation fund. 

Treasury has suggested either deadline based on when payment is made, or one based on receipt by the superannuation fund. 

Superannuation is often a subsequent process to finalisation of a pay run, and can involve significant manual intervention (e.g. in successfully producing and submitting the SAFF file). 

Is a same day due date for payment or a three day deadline for payment into the superannuation fund realistic? If not, how long would employers need to complete processing and comply with deadlines? 

• grace periods for employers to deal with payroll/Payday Super issues that will occur on a more frequent basis (from quarterly to payroll cycle). 

There are many circumstances that arise which can cause superannuation shortfalls, some of which outside the employers control. For example, incorrect superannuation fund details, or paid amounts being reclassified (e.g. an employee incorrectly claims overtime that is re-classified to ordinary pay).  

While proposed improvements in onboarding and superannuation stapling may reduce these instances, the increased frequency and tighter deadlines may result in more SG shortfalls. 

Currently, employers have the quarter and 28 days to correct issues that arise. 

Should there be a grace period which allows employers to correct shortfalls of superannuation? If so, what should be included as a concession in the grace period (interest, admin fees, income tax deductibility, SG calculations)? 

In addition, should the SGC calculation be made easier to assist with the administrative burden of compliance?  

How SW can help

While this has not been made law as of yet, we see a trend of increased transparency and compliance activity from the ATO in respect of superannuation compliance. In anticipation of these trends, or the proposed Payday Super changes, all employers should review the configuration of STP phase two reporting to the ATO as well as end -to -end superannuation processing to reduce the risk of superannuation shortfalls and review activity from the ATO or FWO.  

SW has designed an end to end offering which includes a review of time and attendance / payroll system configuration, and the use of advanced data analytics to test superannuation compliance and reporting to superannuation funds and the ATO.  

If you have any concerns with the proposed reforms or are interested to contribute to SW’s submission, please contact Paul Hum. 

Contributors

Eric Lay

Zainab Ayub

The post Payday Super – Consultation crucial to avoid an administrative and penalty minefield appeared first on SW Accountants & Advisors.

Notably, the draft legislation allows negative earnings to be carried forward and offset against future years. Otherwise the Treasury’s proposal is largely unchanged from the Government’s original announcement with the proposed amendments inserted into the Income Tax Assessment Act 1997 as Division 296 (Better targeted superannuation concessions).

How to prepare

This is an ideal time to undertake a detailed review of your superannuation, particularly if you are over or approaching the $3m threshold. Everybody’s circumstances are different and it is important to take action as soon as you can to ensure that there is sufficient time to action any planning opportunities. Although this is a significant increase in tax, superannuation is still a good investment vehicle.

A brief summary of the proposed tax

• An additional 15% tax is levied on the portion of earnings and growth (both realised and unrealised) of your individual super balance above $3m
• Losses are carried forward to future income years, but are not refunded
• Losses are lost on death
• The $3m threshold is not indexed
• The tax is levied to the individual and can be paid personally or request a release from the super fund
• Structured settlements (e.g. compensation proceeds, but not disability insurance).

For more details on the draft legislation click here.

Actions required

• Obtain copies of your member statements issued by your superannuation fund and/or financial statements for your SMSF
• Ascertain your current member balance(s)
• Confirm latest contributions made to your super fund
• If you have a spouse or partner, ascertain their super balances.

Contact your SW advisor for your tailored strategy or assist you with a comprehensive review of your superannuation to ensure you are maximising it to its fullest potential.

The post Update on $3m super balance tax appeared first on SW Accountants & Advisors.

Employers need to start planning now for the change in the superannuation contributions.

Total remuneration package

Where employees are structured on a total remuneration model, employers will need to communicate to staff before 1 July 2021 that their cash salary will decrease to give them time to plan for the change.

For example, if an employee is currently on a total remuneration package of $150,000 (excluding any allowances and non-cash benefits), the current split is:

• Cash gross wages – $136,987
• Super – $13,013

Where the remuneration package is unaltered from 1 July 2021, the split will be amended as follows:

• Cash gross wages – $136,364
• Super – $13,633

Based on the example, the employee will have a reduction in cash gross salary of $623 per annum or $52 per month.

To avoid negative impact to employees, it may be an opportune time to complete salary reviews before 30 June 2021 to ensure the pay increments at least cover the hit to the employee’s cash salary component, provided the business can support the cost and cashflow.

Gross salary plus super

Employees who are packaged on a gross salary plus super arrangement will have no impact on their cash salary, although employers need to factor in the additional wages cost for the superannuation increment of 0.5%. This will mean the total wages costs will increase for other on-costs such as payroll tax, WorkCover.

Maximum Contribution Base (MCB)

The minimum SG superannuation contribution of 10% from 1 July 2021 is also capped to the MCB. The MCB will increase to $58,920 per quarter (FY 2021 $57,090 per quarter). This means the maximum superannuation contribution for an employee earnings more than $235,680 will be $23,568, ($58,920 x 4 = $235,680 x 10%). An employee’s contribution will be limited to the MCB of $23,568 unless the employer chooses to override the MCB cap.

The concessional superannuation cap will also increase from $25,000 to $27,500 for contributions received in FY 2022. This is the first increase in the concessional cap since FY 2017. The concessional superannuation cap covers both employer contributions (including salary sacrificed contributions) and personal contributions claimed as a tax deduction by the member.

How SW can assist

Contact one of our experts below to discuss how the changes to the SG rate may affect your business’ superannuation contributions.

Get in touch

Sharon Burke

E sburke@sw-au.com

Janelle McPhee

E jmcphee@sw-au.com

The post SG minimum to increase 10% from 1 July 2021 – are you ready? appeared first on SW Accountants & Advisors.