SG and small business CGT measures pass

Improving the integrity of SG contributions

From 1 January 2020, employers will be required to pay superannuation guarantee (SG) contributions on an individual’s ordinary time earnings (OTE) plus any salary sacrifice contributions to super. This ensures that an individual’s salary sacrifice contributions cannot be used to reduce an employer’s minimum SG contribution obligations.

Currently, amounts that an employee salary sacrifices to super may reduce their SG entitlements, because the employer is only required to pay SG on the employee’s OTE.

This also means that an employee’s salary sacrificed amounts will not satisfy an employer’s SG contribution obligations for that employee or any amount towards late SG payments. Salary sacrifice amounts are also included in the definition of salary and wages when determining an employer’s SG shortfall payment.

This measure applies for quarters beginning on or after 1 January 2020.

Small business CGT concessions and partnerships

A new requirement relating to CGT events involving rights or interests in a partnership must be satisfied as part of the basic conditions in order to qualify for the small business CGT exemptions.

Previously, partners in a partnership could assign their income and/or capital entitlement to an assignee (such as an associated person or entity) without the assignee becoming a member of the partnership, and would allow partners to reduce their income tax liability.

Effectively, the partner continued to hold the partnership interest on trust for the assignee, and the assignment resulted in a CGT event in the hands of the partner. The partner could, however, access the CGT small business concessions to reduce or eliminate the capital gain.

The new requirement means that the small business CGT concessions can only be accessed for CGT events involving such assignments if it also resulted in the assignee becoming a partner in the partnership.

Eligible CGT events may include:

• transferring all or part of a partner’s share in a partnership to another assignee or entity
• making that other assignee or entity a partner, or
• increasing an existing share in a partnership.

This measure applies to CGT events occurring after 7.30 pm on 8 May 2018, which was the original date of the Budget announcement.

The Bill awaits Royal Assent.

Source: MLC