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.
- Including non-reportable allowances – only certain types of allowances are required to be reported on the Payment Summary.
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).