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Closely held payees exemption to be extended

Employers with 19 or fewer employees are temporarily exempt from reporting ‘closely held (related) payees’ through Single Touch Payroll enabled software. The exemption deadline has been extended from 1 July 2020 to 1 July 2021 as part of the ATO’s response to the COVID-19 situation.

A closely held payee is an individual directly related to the business, company or trust that pays them. Commonly, these are:

The closely held payees exemption is automatically applied, and employers do not need to report them to the ATO.

Employers still have the option to report their closely held payees’ payroll information through Single Touch Payroll if they wish to. This can be done each time a payment is made, following the same process that applies for regular employees.

Employers will need to provide payment summaries to their closely held employees and a payment summary annual report to the ATO at the end of the financial year unless they:

Posted on 2 June '20 by , under Tax.

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Tax on super death benefits for dependants vs non-dependants

A super death benefit is the super paid after a person's death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

  • A child of the deceased who is under 18 years of age,
  • A spouse or former spouse of the deceased,
  • A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship),
  • A financial dependant of the deceased.

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

  • Withdraw it as a lump sum, or
  • Receive an account based income stream.

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

  • The deceased was at least 60 years of age at the time of death
  • The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap.

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

  • The payment is made as a result of the SMSF member passing away,
  • The payment is provided to a non-dependent for tax purposes,
  • The payment has a taxable component.

Non-dependants must calculate how much money in the super account is a:

  • Tax-free component,
  • Taxable component the super provider has paid tax on (taxed element),
  • Taxable component the super provider has not paid tax on (untaxed element).

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).

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