Home – New Forums Money matters Desperately need advice on super

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  • #979099
    appg2
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    Hi All,

    I registered a PTY Ltd in December when I started doing contracting in IT. The income is of PSI nature and I am the only director who earns the income through contracting.
    Thanks to my first accountant, I did not have a proper structure in place until end of January. So I changed accountant. The next accountant said there is no necessity to pay Super if we do drawings. So we decided to do drawings for the first quarter and then have super paid correct from the next one onwards

    For the latest BAS, I decided to do BAS myself and if I become confident, planned to do the tax return as well.

    So I spent a lot of time reading ATO website in the last month and I get the impression, even for drawings, Super guarantee must be paid.
    If its not paid, there is section about super guarantee charge statement and penalty.

    Was my accountant right and my understand is wrong ? Or was he wrong?

    If he was wrong, what should I do? Questions are spinning in my head. I would really appreciate your suggestions in this situation.

    #1111915
    Anonymous
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    Hi appg2,

    Welcome to Flying Solo, and apologies that your initial post was held up in our moderation queue for a while there.

    It’s here now though, and I have my fingers crossed that one of our resident bean counters will be along to advise you shortly.

    Thank you for joining the forum :)
    Jayne

    #1111916
    ntgd
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    Hi appg2,

    Can you clarify what you mean by drawing.
    Drawing in a Pty Ltd company can be a problem. If you just take money from the company and record it as drawing and not report it as any form of income (like wage) to you personally, then you will have a loan account with the company, usually called Director’s Loan account.
    If this is your situation then you might have problem with Division 7A under the tax law and it could get ugly, particular if the business have financial difficulities and needed insolvency action. I see this far too often as I have work with business in trouble for a long time to help them through the bad time and help them to get re-establish in business again.
    Taking drawing and think it won’t attract PAYG and super is not a good practise.

    #1111917
    James Millar
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    Sounds like you’re not completing the attribution process correctly and it’s beyond the scope of comments here to provide an exact solution. Either your new accountant doesn’t know how to do it correctly (to your best advantage) or you aren’t prepared to pay him to do it correctly. Unfortunately do it yourself doesn’t work for everything.

    There are a few accountants / firms on this forum that could complete this for you (including our firm). Obviously it’s not free but it will be correct and it probably save you money in other areas.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1111918
    appg2
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    ntgd, post: 124792 wrote:
    Hi appg2,

    Can you clarify what you mean by drawing.
    Drawing in a Pty Ltd company can be a problem. If you just take money from the company and record it as drawing and not report it as any form of income (like wage) to you personally, then you will have a loan account with the company, usually called Director’s Loan account.

    Hi Wan,
    Thanks for replying to my post. Unfortunately, I don’t know the what my accountant meant by drawing. But he calculated PAYG on the amount and reported in the activity statement.

    #1111919
    appg2
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    Bookkeeper Easts Subs , post: 0 wrote:
    A wonder where some accountants get their qualifications sometimes! You should try to fix this ASAP.

    I have four days to submit activity statement, pay due to ATO and pay super…:confused:

    #1111920
    James Millar
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    FS Community service for the day…

    ATO ID 2002/774
    Superannuation Guarantee Scheme: attributed personal services income

    Issue

    Does attributed personal services income attract superannuation guarantee obligations on the part of the relevant personal services entity?

    Decision

    No, except for salary or wages that are part of the earnings base in the year of income but which are reported as attributed personal services income because they were paid more than 14 days after the end of the Pay-As-You-Go (PAYG) period in which the relevant amount was derived as income of the personal services entity.

    Conclusion ATO ID extract

    Attributed personal services income will not generally give rise to an SG obligation. This is because the amounts of attributed personal services income are generally not paid to the personal services provider and the obligation to provide superannuation under the SGAA hinges upon the notion of receipt of payment for work.

    The exception to this rule is for salary or wages that have been paid too late for the purposes of subsection 86-15(4) of the ITAA 1997 and therefore treated as attributed personal services income. These amounts will give rise to an SG obligation to the extent that the payment falls within the definition of the relevant earnings base. The types of payments that fall within the meaning of ‘ordinary time earnings’ is described in Superannuation Guarantee Ruling SGR 94/4.

    http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~SGC~basic~exact&target=JA&style=html&sdocid=AID/AID2002774/00001&recStart=1&PiT=99991231235958&recnum=5&tot=91&pn=ALL:::ALL

    I still think it would be wise for you to find an accountant and work through the mechanics of the reporting process for this. PSI attribution has a host of related issues involving tax reconciliation adjustments and retained earnings adjustments.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1111921
    ntgd
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    appg2,

    Without knowing your situation it will be hard for people to comment.
    Your original post mentioned your accoutant suggests you to take drawing so no super apply, then your later post mentioned your accountant calculate PAYG on the drawings, which make it like wage and super will then apply. So there are conflicting information given.

    James above have shown you good info from the ATO regarding super on PSI income.

    You better sort things out with your accoutant NOW.

    Also please note the due date for superannuation for the June quarter is the 28th July, and it mean the amount are paid and cleared to the superfund by the 28 July. If you made payment or issue a cheque on the 28 July it will likely be consider late. So if there is any superannuation payment due you really need to pay it today or tomorrow especially if you pay by cheque.

    As for BAS, if you lodge through an accountant or tax agent you probably got extra 2 weeks.

    You might need to consider should you find an accountant that you are comfortable with the advise and can help you manage your business affairs.

    #1111922
    appg2
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    Thanks James. Given the timeline, I have to do this one myself.
    I will find an accountant (maybe your firm or other gentlemen who answered as well) for the tax return and then wind up the company. For a purely PSI company, I do not see any benefit in having own PTY Ltd.

    At the time of filing tax return, I am hoping if any adjustments required can be made.

    Thanks again for spending your valuable time to help me.

    #1111923
    James Millar
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    No problem. Feel free to reach out if you require our assistance at some point.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1111924
    ntgd
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    Hope you get the BAS done in time.

    Happy to help if you need any further assistance.

    #1111925
    saffron70
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    James was reading your post from 2012. Just wondering if the person has a trust and distributed PSI attriubted to PSI earner of the trustee of the trust then does this eliminate Superannuation?

    #1111926
    James Millar
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    Attributed net PSI is not Ordinary Times Earnings (OTE) for the purposes of Compulsory Employer Superannuation Guarantee Contributions.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
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