Australia Regulatory Updates – August 2021

Australia Regulatory Updates – August 2021

Several regulatory updates have been made in Australia throughout the last few months. It is imperative that employers stay up to date with these policy changes, in order to avoid compliance regulations. Key changes are outlined below.

Employer pension contribution rate increase?

Effective July 1st, 2021, the rate at which employers contribute to employees’ superannuation has risen to 10%. This 0.5% increase will continue to be applied to the contribution rate annually until it has reached 12%. It is expected to reach the 12% rate by 2025, after which the annual increase will conclude.

Employer Considerations:

Employers will need to re-visit employment contracts and review them against this contribution rate increase to determine whether payroll costs will be affected. Payroll calculations will need to be adjusted accordingly.

Deadline extended for exemption to Permanent Establishment tax

The Taxation Ruling (TR 2002/5) has been revised once again by the Australian Tax Office. This ruling provides a playbook around Permanent Establishment (PE) taxes in Australia.

Ordinarily, only foreign entities with business operations in accordance with an Australian Permanent Establishment would be subject to Australian income taxation. To officially be considered a Permanent Establishment in Australia, a business must have local employees conducting business activities of geographic and temporal permanence. Entities with operations at the same location for at least six months are considered temporarily permanent.

The recent revision of the Taxation Ruling (TR 2002/5) has provided an extension in response to the COVID-19 pandemic, clarifying that employees working in Australia for over six months may still be deemed “temporary” to enable firms to meet the Australian PE temporal permanence requirement. This clarification was previously valid until June 30th, 2021, but the amendment has extended its validity until the end of the year, December 31st, 2021.

Employer Considerations:

With this new COVID-19 prompted amendment, foreign entities in Australia will be able to avoid additional tax liabilities that would have previously been incurred.

National minimum wage rate increased

As of July 1st, 2021, the minimum wage rate in Australia has risen per the below:

  • Effective Up to June 30th, 2021:
    • Hourly Rate (pre-tax): AUD 19.84
    • Weekly Rate (pre-tax): AUD 753.80
  • Effective Beginning July 1st, 2021:
    • Hourly Rate (pre-tax): AUD 20.33
    • Weekly Rate (pre-tax): AUD 772.60

Employer Considerations:

Employers will need to adjust pay rates for all employees accordingly. Employees whose current pay rates already exceed the new minimum wage amount will not be impacted by this increase.

Reportable Tax Position schedule requirement for large companies

Companies in Australia are required to provide Reportable Tax Position (RTP) schedule forms along with their income tax return. The schedule discloses information regarding transactions and arrangements that are considered high risk.

As of July 1st, 2021, large private entities must adhere to a mandatory self-assessment of their RTP lodgment. Companies meeting the below criteria will need to lodge an RTP schedule for their total income for the 2021-22 years:

  • They have a total business income of at least AUD 250 million, or
  • They have a total business income of at least AUD 25 million, and the business is in an economic group with over AUD 250 million in turnover

Employer Considerations:

Companies must assess their eligibility, determine whether the RTP schedule requirement applies to them, and make the necessary disclosures.

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