Category: News

Single Touch Payroll – Imminent Headcount 1 April 2018

Larger employers need to urgently prepare for the imminent introduction of Single Touch Payroll!
 
Employers with more than 20 employees as at 1 April 2018 must be STP-compliant by 1 July 2018. ‘Employee’ for STP headcount purposes is the common law definition of employee (which is narrower than the definition for Superannuation Guarantee purposes). Thus, workers for whom an employer does not withhold PAYG from will generally not count towards the 20 employee threshold. Also not included in the count are staff provided by third-party labour-hire, office-holders and directors of companies, casual employees who did not work in March 2018, independent contractors, or religious practitioners.
 
On the other hand, employees based overseas, employees absent on leave, and seasonal employees are included. Although in most cases it will be clear-cut as to whether a worker is an employee, if you are uncertain, you should seek advice from your Accountant. Note that it appears that connected or related businesses are not required to include employees from those other businesses in their head count. Only wholly-owned groups are required to do so. Where a company owns 100% of any other company they would generally form a wholly-owned group and if the employee headcount across all entities of the wholly owned group was 20 or more, then all entities in the wholly owned group would be larger employers and thus required to be STP-compliant by 1 July 2018.
 
The ATO urges employers to start preparing now to be STP-ready. The next steps are:
 

  • Download the “Get ready checklist” from the ATO website www.ato.gov.au/business/single-touch-payroll/get-ready-for-single-touch-payroll/
  • Determine how many employees you have on 1 April 2018
  • Talk to your software provider on how and when their product will be STP ready
  • Employers who don’t have existing software should choose a product that offers STP. Your Accountant or Bookkeeper may be able to suggest a suitable product.
  • Update your payroll software when it’s ready and start reporting to the ATO through STP.
 
A number of STP resources including factsheets, checklists, information packs and advice on how to manage the headcount are available on the ATO Webpage at www.ato.gov.au/stp.
 
Note that although the ATO is currently working closely with software providers, some providers may not be ready by the 1 July start date. Where this is the case, the ATO will grant a deferral for affected employers. The ATO may also grant exemptions for employers in rural areas with no reliable internet connection, and also employers who only have 20 or more employees for a short period of the income year (e.g. due to harvesting activities).

Farm Management Deposits

Introduced in 1999, Farm Management Deposits are seen to be an important part of risk management for primary producers. What are they and do they work? This article takes a close look at the Farm Management Deposits Scheme, some of the commonly asked questions and works through a case study to determine the answers.

BASICS

In simple terms, the Farm Management Deposit (FMD) scheme is intended to allow Primary Producers the opportunity to shift “before-tax’ income to a later year where they may offset losses due to unfavourable climatic or market conditions. FMDs are considered an important risk management tool for the Primary Producer to ‘even out’ what could otherwise be extremely uneven income years.
The scheme works by allowing Primary Producers to claim an income tax deduction for an actual cash deposit into an FMD scheme in the year the deposit is made. As a result, this reduces the Primary Producer’s taxable income in the deposit year and hence any income tax payable on the deposit amount. In a later income year, when the Primary Producer’s income may be low due to a downturn in market or climatic conditions, the Primary Producer can apply to the FMD scheme for a withdrawal. The amount is then included in the Primary producer’s assessable income for that year and taxed accordingly.

The scheme is cash-flow driven; in a bountiful year, the surplus cash is deposited in a FMD held with a financial institution. In a lean year the cash is withdrawn from the FMD to assist the Primary Producer to pay for business expenses.

 ELIGIBILITY

THE OWNER

The owner of an FMD is a person on whose behalf the deposit is made. The owner must be a Primary Producer at the time the deposit is made. The owner cannot be a joint ownership or a Company but, rather, the scheme is restricted to ownership by individuals (including Partners in a Partnership). The only exception of this rule is where a Trustee is acting on behalf of a beneficiary who is presently entitled to a share of the income of a Trust estate, but is under legal disability (for example, a minor under the age of 18 years)

DEPOSIT-TAKING INSTITUTION

You must make your deposits with an FMD Provider that is an authorised deposit-taking institution or an entity that has a Commonwealth, State, Territory guarantee for deposits. This includes any bank, building society or credit union. You can make deposits with more than one of these institutions.

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Buying or Selling Property? Beware of the Capital Gains Tax Withholding Rules

If you are buying or selling real estate situated in Australia for $750,000 or more, it is important to be aware of the the Capital Gains Tax Withholding rules.


With effect from 1 July 2017, for any real estate transactions of $750,000 or above, the vendor must provide to the purchaser, prior to settlement, a  “clearance certificate” obtained from the ATO. Without this, the purchaser is required to withhold 12.5% of the price and pass this on to the ATO. The vendor would then need to wait until lodgement of their income tax return before they could recover the withheld amount.

The laws were introduced to tackle the problem of foreign residents selling real estate and avoiding their capital gains tax liabilities. In practice, however, it means that the vast majority of real estate transactions not involving foreign residents are also impacted. The ATO recommend applying for a clearance certificate at least 14 days before you require it.

The following tax changes commence 1 July 2017 and may impact you or your clients:

Happy New Financial Year!

Income Tax

Deficit Levy to be abolished – thus resulting in a 2% tax cut for individuals with taxable income in excess of $180 000.

Minimum Wage

On 6 June 2017, the Fair Work Commission handed down its annual wage review. The decision varied the following:

  • Minimum wage rates in Modern Awards – increased by 3.3% from first full pay period commencing on or after 1 July 2017 (rounded to the nearest 10 cents)
  • National minimum wage – increased by 3.3% to $694.90 per week, or $18.29 per hour
  • Wages for juniors, apprentices – most rates are expressed as a percentage of nominated adult rate so they receive a proportionate increase to the adult rate
  • Wages for trainees and piece workers – most trainees are covered by the National Training Wage system that is included as a schedule in most awards. National Training Wages will also be increased by 3.3% from the first pay period on or after 1 July 2017. Piece rates will increase in accordance with the relevant provisions in the modern award, pay scale or transitional award.
  • Supported wage system – employees with a disability: these employees are paid a percentage of the relevant adult wage, based on their assessed capacity. The 3.3% increase will also flow through to these employees.

GST

Rental Property Deduction Crackdown

First Home Saver Scheme to Commence

Voluntary super contributions made from 1 July 2017, will be able to be withdrawn as a deposit for a first home. More information.

Superannuation

Single Touch Payroll

Available for some employers

Payment Summaries Due 14 July 2017

With the end of financial year fast approaching, be mindful that Payment Summaries must be provided to employees by 14 July for 2016/2017. This date is not just a guideline but is actually stipulated by law (Section 16- 155 of the Tax Administration Act). Two of the most common errors made in preparing the Individual Non-Business Payment Summary for employees are:

 

  • Misstating reportable employer superannuation contributions – ensure that you exclude Superannuation Guarantee amounts from this label. Salary sacrificed superannuation amounts must however be included.

 

 

This year there are special rules for Working Holiday Makers. A reduced tax rate applies for employers who registered with the ATO from 1 January 2017 — 15% up to $37,000 and 32.5% from $37,001. For registered Working Holiday Makers who worked both before and after 1 January 2017, two Payment Summaries must be issued, with the two different tax rates applying to the gross payments, depending upon the time of payment.

 

On the other hand, employers who did not register with the ATO for the reduced tax rate and continued to withhold at the foreign resident rate of 32.5% are required to issue the standard single Payment Summary per employee.

 

The Payment Summary for 2016/2017 includes a new section for overseas workers. In the Gross Payments Type box you must now indicate a type – this will be either S (salary), or H (registered Working Holiday Makers).

 

 

 

Engaging a Tax Agent

If like many taxpayers you intend on using the services of a Tax Agent to prepare your upcoming 2016/2017 Income Tax Return, you should ensure you are on their lodgement list by 31 October 2017. If you are not on a Tax Agent’s Lodgement List, your tax return will be due on this date, and you will not enjoy the extended due date that you usually would when you lodge with a Tax Agent. Other points to be mindful of when using a Tax Agent include:

 

  • Ensure they are registered with the Tax Practitioners Board (go to https://www.tpb.gov.au/search-register)
  • Ensure that you provide the Tax Agent with all of your relevant tax records for 2016/2017 (receipts etc.). Failure to do may result in delays in lodging your return, and you possibly paying more tax than you are liable for. Ask your Tax Agent for a checklist of the records that you need to provide.
  • Tax return preparation fees are tax deductible, so ensure that you retain evidence of payment.

 

 

 

RIDE-SOURCING IS TAXI TRAVEL

The Federal Court last month dismissed and appeal from Uber, and confirmed the ATO view that ride-sourcing (ride-sharing) does constitute ‘tax travel’ for GST purposes. Consequently, the ATO has advised that unless Uber appeals this decision, it will continue to administer the law in accordance with its published guidance. We now detail what this treatment is from a driver’s and passenger’s perspective.

DRIVER

Ride-sourcing drivers have a range of tax obligations as follows:
  • As ride-sourcing constitutes taxi travel, they must register for GST from when they sign up as a driver. The normal $75,000 GST registration threshold does not apply.
  • They must keep records of their expenses and income.
  • They must have an ABN.
  • They must pay GST to the ATO on the full fare (including any commission they pay to the facilitator e.g. Uber) for each trip they provide.
  • They must lodge Business Activity Statements
  • They or the facilitator must provide passengers with a tax invoice when they request it and where the fare exceeds $82.50 (GST-inclusive).
  • They must include the fares as income on their tax returns.

On the plus side, drivers are able to claim the GST and income tax deductions on expenses that they incur in driving such as insurance, petrol, registration, the facilitator’s commission, and also depreciation of the motor vehicle. However, these claims must be apportioned to take account of any private use of the vehicle.

PASSENGER

From a GST perspective if the fare is work-related, GST registered taxpayers can claim this component of the fare back on their Business Activity Statement. If the amount of the fare is under $82.50 (GST-inclusive) you will not need a tax invoice to do so. If the fare is over this amount, you should request a tax invoice in order to claim the GST.

From an income tax perspective, passengers can claim a tax deduction if the fare is work-related and would be deductible if you were driving that route yourself.

WHATS HOT?

This article examines some topical issues that taxpayers and employers should be aware of at this time. Areas covered include ATO compliance, the instant asset write-off, Airbnb tax consequences, and more.

NEW ATO RULES

The ATO is currently on the look-out for and taking action against employers who are not complying with two new regimes:

BACKPACKER TAX
Employers who employ workers in Australia on a 417 or 462 visa must now be withholding 15% tax from every dollar that they earn up to $37,000 (from the first dollar that they earn). These workers can no longer claim the tax-free threshold. Beyond $37,000, the normal tax rates apply.

Employers who currently have these workers on their books, must have registered online with the ATO by 31 January 2017 at www.ato.gov.au/twhm/ to be able to withhold at this new rate. Employers who won’t have this class of workers on their books until later in the year can register their business at that time. When you register with the ATO, you will typically not receive an acknowledgement, however the ATO advise that they will eventually include your registration information in your business’s ATO profile. To confirm that your registration has been successful, at this stage you will need to phone the ATO. Employers who cannot register online, can register with the ATO by phoning their business info line on 13 28 66. Employers with this type of worker on their books who do not register with the ATO will be required to withhold at the 32.5% rate and may be subject to ATO penalties.

SUPERSTREAM
Despite the deadline having passed months ago, SuperStream non-compliance among employers is still relatively high. By way of background, SuperStream is a Government initiative that aims to improve the efficiency of administering Australia’s superannuation system. The system requires employers to remit employee contributions (including Superannuation Guarantee) and other relevant data in an electronic, standardised format. The data is linked to the payment by a unique payment reference number. All employers are now required to be SuperStream compliant except for:
  • Contributions to your own SMSF (i.e. if you’re a related-party employer) – for example , if you’re an employee of your family business and your Superannuation Guarantee contributions go to your SMSF.
  • Personal Contributions – for example, if you’re a sole trader and you contribute to a superannuation fund for yourself.
Fines of up to $8,500 can now be imposed by the ATO on employers who are not SuperStream compliant. For more information on the SuperStream regime including compliance solutions, see the September/October edition of our publication which is available in the subscriber section of our website http://www.taxrtaxreporter.com.aueporter.com.au

INSTANT ASSET WRITE-OFF

If you are a small business (aggregated turnover of less that $2 million) contemplating buying machinery or equipment, be aware that these are the final months of the $20,000 instant asset write-off.

With a sunset date of 30 June 2017, small businesses may wish to start considering bringing forward any planned asset investments to the next few months – particularly in this current low interest-rate environment. You can read more about the cashflow benefits of the instant asset write-off in the previous edition of our publication (January/February 2017 ). Note that legislation is currently before the Parliament to increase the turnover eligibility threshold from $2 million to $10 million (to be back dated to 1 July 2016) however at the time of writing this has not yes been passed into law. We will immediately notify subscribers via email if and when this increase becomes law.

RENTING OUT YOUR HOME

With the advent of Airbnb many more residential home owners are now landlords – renting out their entire house, or one or two rooms. The ATO is at the moment,is particularly targeting those that rent out part of their property via Airbnb.

Whether you are renting out your entire home or part of your home through Airbnb or just traditionally by advertising it or through a real estate agent…. the tax consequences are broadly the same as follows:
INCOME
Any rental income will be assessable. You should keep records of your rental income, even when it is paid by the tenant in cash.
RENTAL EXPENSES
Where your rental income is assessable, you are generally entitled to tax deductions for expenses incurred in deriving that income.For landlords these generally fall in 3 categories:

To read the complete article please see the ATR Bi Monthly update for Mar/Apr 2017 – this can be accessed via our exclusive ATR Members Area http://www.taxreporter.com.au/login

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How a good Bookkeeper can help your business!

Making the Most of the Bookkeeper Relationship  

The use of bookkeepers has grown substantially over recent years. This article examines the merits of using a bookkeeper in your business, and how to get the most out of the relationship.

SERVICES
When many people think of bookkeeping, thoughts turn to looking after petty cash, entering invoices into a software system, and keeping receipts together. The reality though is that the modern-day bookkeeping professional offers a range of services that can be utilised by your business including:
  • Management reporting on business performance
  • Data entry into accounting software
  • Cash flow projections
  • Payroll tax returns and compliance
  • Preparation of year-end financial records for your Accountant
  • Payroll and superannuation processing including dealing with the ATO and superannuation funds
  • Activity Statement preparation and lodgement
  • Record keeping
  • Software training.
Given the breadth of services, Bookkeepers can become trusted partners and advisors to your business.

 REGISTERED
If you do decide to engage a contract Bookkeeper, then unless they are an employee of your business or unless they are only undertaking basic services (such as bank reconciliation, basic date entry such as entering invoices onto a computer program) then they must be registered with the Tax Practitioners Board as a BAS Agent. If they are not registered, then they may be breaking the law. You can check their registration on the Tax Practitioner Board website http://www.tpb.gov.au. They will also have their own BAS Agent number which along with the Tax Practitioner Board logo they may or may not display in their email signature.

WHAT TO LOOK FOR
Aside from being registered with the Tax Practitioners Board, what should you look for in a contract bookkeeper? Consider the following:

Personal traits that fit with your team
  • Do they understand your business and your industry?
  • Do they have a natural affinity with you and the personnel they will be dealing with in your business?
  • Are they knowledgeable and add value to your business?
  • Are they reliable and punctual, with strong attention to detail?
Track Record
Your bookkeeper should be able to demonstrate that they have experience relevant to the assignment you are offering. Many will likely have testimonials to evidence this.

Back-Up and Support
A good bookkeeper will have back-up and support that they can use to quickly settle issues that may be outside their skillset or experience. Back-up and support can take the form of educational materials, explanatory resources and access to other qualified practitioners from whom the bookkeeper can seek feedback and support should any technical issues arise. This support may be in the form of membership of a bookkeeping industry organisation such as Australian Bookkeepers Network https://www.austbook.net/ .

To read the complete article please see the ATR Bi Monthly update for Jan/Feb 2017 – this can be accessed via your exclusive ATR Members Area http://www.taxreporter.com.au/login

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Burning Issues for Employers

SUPERSTREAM – COMPULSORY FOR ALL! 

All employers are now required to be SuperStream compliant. The 31 October compliance extension granted by the ATO to smaller employers has now passed. Note that there are no general exemptions from SuperStream – all employers must comply except for:
  • Contributions to your own SMSF (i.e.if you’re a related-party employer) – for example, if you’re an employee of your family business and your Superannuation Guarantee contributions go to your SMSF.
  • Personal contributions – for example, if you’re a sole trader and you contribute to a superannuation fund for yourself
Fines of up to $8,500 can now be imposed by the ATO on employers who are not SuperStream compliant. For more information on the SuperStream regime including compliance solutions, see the September/October 2016 edition of your ATR Bimonthly newsletter which is available in the Members Area if you are a subscriber.

SUPERANNUATION GUARANTEE

Still on superannuation… although the ATO allows an extra month for businesses to lodge their December quarterly BAS (the due date is February 28 regardless of whether you are lodging online via the Business Portal, by paper or via a Tax Agent/BAS Agent) there is no equivalent extension for the payment of Superannuation Guarantee.

Superannuation Guarantee for the October-December quarter is still due 28 days following the end of the quarter i.e. 28 January 2017. Failure to pay on time (even if you are just one day late) will result in your business being liable for the Superannuation Guarantee Charge. For this reason, if you are closed throughout January, you may wish to consider making the October-December contribution in December.

FINANCE

Following yet another recent reduction by the Reserve Bank, interest rates in Australia are now at record lows (the cash rate is currently at just 1.50%). With talk that rates will remain relatively low into the future, it’s an opportune time to review if you are making the most of them. Have you considered the following?

Fixed rate options. While rates are at an all-time low there may be opportunities to fix your loans or 3 or 5 years at under 5% per annum. Explore your options. Some borrowers may wish to fix just a portion of their loan.

Review your position. Low interest rates offer an opportunity to refinance or revise your payment schedule to pay your loan off sooner. Talk to your broker to see if there’s a home or business loan that better suits your needs.

Debt reduction. With lower rates, your monthly/fortnightly repayments will be less. Rather than pocketing the difference, if you put the difference into extra  repayments, you can shave years off your loan and, in doing so save thousands in interest. For example, a $500,000 home loan at an interest rate of 7% requires repayments of $3,078 per month over 30 years. At 4.5%, the repayments are $2,533, a difference of $545 a month. If you put that $545 into extra repayments, you can potentially take more than 9 years off the home loan term and save almost $140,000 in interest.

Create an offset account. This is effectively a money source sitting beside your mortgage. Any savings inside this account are effectively offset against your loan which in turn reduces the amount of interest you pay.

Of course, low rates will not be around forever. As a borrower it’s important not to become complacent and to make sure that you still have the capacity to meet your repayment obligation in the event that rates increase.

To continue to read this article (other headings Equipment Purchases & Annual Leave Issues), see the November/December 2016 edition of your ATR Bimonthly newsletter which is available in the Members Area if you are a subscriber, simply log in with your username & password.

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