SMSFs to be spared from new STP reporting obligations
An industry law firm has assured SMSF professionals that the new Single Touch Payroll obligations will not apply to SMSFs, despite the way certain superannuation benefits have been treated for reporting in the past.
From 1 July 2019, all employers, including small employers with 19 or less employees, will need to report payroll information to the ATO in real time under the Single Touch Payroll (STP) regime.
Kimberley Noah from DBA Lawyers explained that the STP regime was introduced to provide the ATO with real-time information on employer PAYG and superannuation obligations. It also provides employees with greater transparency of their salary and reportable superannuation and fringe benefit entitlements.
Large employers with 20 or more employees as of 1 April 2018 have been required to comply with the new STP obligations since 1 July last year.
Under the STP provisions, the ATO must be notified of salary or wages, ordinary time earnings and pay as you go (PAYG) withholdings on the day the amount is withheld or paid, Ms Noah explained.
In the context of pension payments, SMSF trustees have PAYG withholding obligations in certain circumstances, she said.
“When an SMSF pays the required minimum pension amount each financial year, SMSF trustees should give consideration to whether any PAYG amount should be withheld,” she explained.
Ms Noah said these obligations arise in the context of benefit payments if the relevant member is:
- Under 60 and the benefit is a pension or a lump sum with a taxable component;
- A non-dependant who is paid a superannuation lump sum death benefit with a taxable component;
- A dependant who is paid a superannuation pension, via a reversionary or fresh pension, with a taxable component, following the death of a member where both the deceased member and the dependant are both under 60;
- Under 60 and the death benefit is a reversionary capped defined benefit income stream (CDBIS) where the deceased was 60 or over when they died; or
- 60 or over and the benefit payment is pension that is a CDBIS.
Under the withholding obligations, the SMSF trustee, she said, must register for PAYG withholding, obtain a TFN declaration from the member, issue a PAYG payment summary to the member by 14 July and lodge a PAYG withholding payment summary statement annual report with the ATO by 14 August.
She noted that employers subject to the STP regime are relieved of several of these PAYG reporting obligations, provided they satisfy their STP reporting obligations on a timely basis.
Under previous legislative provisions, Ms Noah said that certain superannuation benefits, especially pensions, have been treated in a similar manner to salary and wages for PAYG and reporting purposes.
Given this background history, especially from a PAYG context, some SMSF advisers and their clients, she said, have raised concerns about whether the STP reporting obligations also extend to SMSFs.
A detailed review of the Taxation Administration Act 1953 (Cth), however, indicates the STP reporting is not directly imposed on SMSF trustees, she reassured.
“Further, we have not seen any express comment from the ATO on this point,” she said.
“The STP reporting framework operates as an employer obligation. Accordingly, SMSF trustees should not have STP reporting obligations unless they have employees. An SMSF that has employees would, however, be subject to STP. This would be rare but not impossible.”
While it is important that advisers and employers are aware of their STP and PAYG obligations under the new streamlined reporting regime, SMSF trustees and advisers, she said, “can breathe a sigh of relief as STP obligations should not extend to them”.