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Newsletter February 2011

Effective 1 January 2011, the Federal Government has introduced the Paid Parental Leave Scheme (PPLS). All of the Australian workforce are eligible for the scheme, except state government employees, although state government employees have had paid maternity for some time.

The PPLS will be fully funded by the Australian Government, and will provide eligible working parents with a maximum of 18 weeks pay at the weekly rate of the national minimum wage (which is currently $570.00 per week less tax). However, whilst the funding is provided by the Government, the payment will be made through the employer's payroll system.

To be eligible, an employee must;

• Be the primary carer of a child born or adopted after 1 January 2011.
• Be an Australian resident.
• Have been engaged in paid work for at least 10 of the 13 months before the child is born or adopted.
• Have worked at least 330 hours during that 10 month period; and
• Have earned less than $150,000 per annum over that 10 month period.
• Be on leave or not working from the time they become the child's primary carer.

An employee is not required to have been working on a full time basis to be eligible. An employee may still be eligible if they are a part time, casual, a contractor or self employed.

Whilst the PPLS starts on 1 January 2011, an employer's role in the scheme is voluntary until 1 July 2011. This means that between 1 January and 30 June 2011, an employer does not need to be involved in the PPLS, and the employee can deal directly with Centrelink. However from 1 July 2011, employers play a role in the process.

Employers do not have to apply for PPLS for their employees, the employee is responsible for lodging the application with the Family Assistance Office.

In most cases, the Family Assistance Office, will pay the money for the Paid Parental Leave to the employer's nominated bank account before the employee's pay cycle. The idea is that this will then enable the employer to have the money to pay the employee through the existing payroll cycle.

The 9% superannuation is not only payable on employees wages but may also apply to contractor payments.

A contractor payment would be subject to the 9% superannuation if the contract is wholly or principally for labour. The ATO guidelines include;

• the individual is remunerated (either wholly or principally) for his/her personal labour and skills,
• the individual must perform the contractual work personally (ie there is no right of delegation), and
• the individual is not paid to achieve a result.

The attached link is a tool supplied by the ATO (on their web site) to determine if you are paying a contractor or an employee for superannuation purposes.

http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=GEC.xr4&go=ok

The government has announced that self managed superannuation funds (SMSFs) will continue to be allowed to invest in collectibles and personal use assets like artwork or stamps, provided they are held in accordance with tightened legislative standards.

The new rules (which are yet to be announced) are intended to ensure that these investments do not give rise to a personal benefit for SMSF trustees or members, but rather are held for the purpose of providing retirement benefits.

Such assets regarded as in-house assets must have a market value less than 5% of the total fund’s assets.

The government has announced that the ATO has approved ‘bucket donations’ for the 2011 Queensland and Northern New South Wales floods as it did for the large number of donations made after the Victorian bushfires in 2009. The ATO will allow deductions for donations up to $10 made to 'bucket appeals' for the floods without needing to keep a receipt.

People are also reminded that in order to be deductible the donation must be made to a 'deductible gift recipient' and if their donation is over $10 then they will need to keep a receipt for tax purposes.

Most major charities are registered as 'deductible gift recipients' but if you are not sure whether an organisation is registered or not you can check on www.abr.business.gov.au

Children’s Savings Accounts

Savings accounts of dependent children under the age of 16 have special income taxation rules.

If the child’s tax file number is not supplied, the investment body must withhold tax at the top marginal tax rate on interest earnings.

Interest income earned on the account must be declared by whoever controls the account, not whose name it is in, or whose name it is held in trust for.

Children do not need to lodge a tax return if their only source of income is interest totalling less than $420. However, if the investment body has withheld tax, the child must lodge a return to get a refund.

Children’s Share Accounts

Special rules also apply to children’s share investments. If the child’s tax file number is not supplied, the company paying the dividend must withhold tax at the top marginal tax rate on unfranked dividends. However, unlike children’s savings interest, there is no threshold before tax is payable, so all unfranked dividends will be taxed at the top marginal tax rate.

Dividends and capital gains or losses on the sale of shares must be declared by whoever rightfully owns and controls the shares, not whose name they are in.

A child who owns shares and who earns more than $3,333 must lodge a tax return.