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-Phillip Borg Businessman

July 2019

 

Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.

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-Phillip Borg Businessman

  

-Phillip Borg Businessman
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-Phillip Borg Businessman

Special Edition 2019/2020 Federal Budget Update

 

Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.

 
 

-Phillip Borg Businessman

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-Phillip Borg Businessman

Single Touch Payroll Update

March 2019

 

Understanding STP obligations

Single Touch Payroll (STP) is a Government initiative aimed at cutting red tape for employers and improving visibility of compliance with business obligations such as:

q salary and wages and similar payments;

q Pay As You Go (PAYG) withholding; and

q certain superannuation related information;

by requiring ‘real time’ reporting of payroll information directly to the ATO.

Importantly, STP is designed to extract information that already exists in an employer’s payroll system.

As such, it is not intended to impose any additional burden on employers, other than requiring them to report the information to the ATO sooner.

From a practical perspective, businesses must use STP compliant software to comply with the new obligations.  This will necessitate updating or changing their current payroll software.

Generally, most payroll software providers will have already adapted their software to ensure the required reporting capability has been incorporated.

Once a business has adopted the appropriate software, ongoing reporting obligations should be dealt with as part of an automated software function.

Effectively, employers will send their employees' relevant payroll information required under STP to the ATO each time they run their payroll and pay their employees.

Crucially, in complying with their STP obligations employers will not change their payroll cycle.

When a business reports to the ATO via STP, the relevant employees will be able to view their year-to-date tax and super information through myGov.

As a result of STP reporting, a number of ongoing compliance obligations for employers will be streamlined, and/or removed.  Some benefits for employers under STP include the following:

q The removal of the need to issue an annual 'Payment Summary' toemployees  for payments reported to the ATO via STP, provided an employer lodges a 'finalisation declaration' (i.e., generally by 14 July, although extensions are in place for the first year of STP implementation).

q The removal of the need to lodge a 'Payment Summary Annual Report' for payments reported through STP.

q From 1 July 2019, STP will enable the pre-filling of BAS Labels W1 (gross salary and wages and other payments) and W2 (amounts withheld from salary, wages and other payments) for employers that are small or medium withholders.

q The streamlining of employee documentation such as the lodgment of  ' TFN Declarations' and 'Withholding Declarations' via enabled software.

Editor: It is important to understand that STP does not impact or change when employers must actually remit PAYG withholding amounts to the ATO or make super contributions.  The new STP obligations simply affect when employers must report these payments to the ATO.


 

Original commencement date

STP commenced from 1 July 2018, for employers with 20 or more employees (i.e., substantial employers).

When determining whether or not the 1 July 2018 start date applied, an employer was required to do a headcount of the number of employees they had on 1 April 2018.

Broadly included in the headcount were all full-time and part-time employees, casual employees who worked at any time during March 2018, overseas employees, any employees absent or on leave (paid or unpaid) and seasonal employees.

 

Pending STP commencement date for small employers now law

Small employers (being those with less than 20 employees) are now technically required to commence their STP reporting obligations from  1 July 2019.

The intended STP obligations on small employers has only recently become law, with the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 finally being passed by both houses of Parliament on 12 February 2019.

This means that from 1 July 2019 all employers, no matter their size, will generally be required to comply with the STP reporting obligations.

The ATO says it will be writing to small employers who have 19 or less employees and already use payroll software to tell them about STP, and remind them that if their payroll software offers STP, they can update their software and start reporting now.

 

Solutions for micro employers

For micro employers (generally defined as businesses with one to four employees) who do not currently have payroll software, a range of simple, low-cost solutions are expected to be available from early 2019.

These solutions may include mobile apps, simple reporting solutions and portals.

An alphabetical list of the companies intending to offer these solutions has been published on the ATO website (and reproduced for your reference below).

The ATO does not (and nor does our firm) specifically endorse any of the suppliers listed below:

q AccXite Pty Ltd

q BAS Off Pty Ltd

q Catsoft

q Easy Pay Slip Pty Ltd

q Employment Hero Pty Ltd

q e-PayDay Pty Ltd

q ePayroll

q Etax Accountants Pty Ltd

q Free Accounting Software

q Globe BD

q GovReports

q Intuit Australia Pty Ltd

q LodgeiT Pty Ltd

q Ironbark Software

q Myaccountant Technology Pty Ltd

q MYOB Australia Pty Ltd

q OB Secure Messaging

q Sodapay

q PwC Australia

q Reckon Australia Pty Ltd

q Single Touch Pty Ltd

q SRI Enterprise Software Pty Ltd

q Xero Australia Pty Ltd

 

Flexible ATO implementation

The Commissioner of Taxation, Chris Jordan,  recently made a personal guarantee that the ATO’s approach to STP will be “flexible, reasonable and pragmatic”.

In particular, despite the 1 July 2019 start date for small employers, the Commissioner has stated that they can start STP reporting any time from 1 July 2019 to 30 September 2019.

This effectively provides a three-month implementation reprieve for small employers.

The ATO has also indicated that there will be no penalties for mistakes, missed or late reports for the first year and exemptions will be provided from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

 

-Phillip Borg Businessman

P r a c t i c e U p d a t e

January/February 2019

 

Division 293 assessments

The ATO has been issuing ‘Additional tax on concessional contributions (Division 293) assessments’ with respect to liabilities relating to the 2018 income year.

Division 293 imposes an additional 15% tax on certain concessional (i.e., taxable) superannuation contributions.

It applies to individuals with income and concessional superannuation contributions exceeding the relevant annual threshold.

This means that impacted individuals may ultimately pay 30% tax (when the Division 293 tax is combined with the existing 15% contributions tax) with respect to:

q superannuation contributions made on their behalf as a result of employer super guarantee obligations or effective salary packaging arrangements; or

q personal deductible contributions.

The ATO reportedly expects to issue about 90,000 assessments during the first two months of 2019.

Payment needs to be made by the due date to avoid any additional interest charges, although alternative payment methods are available (including the ability to release money from any existing super balances).

Editor: More individuals will receive Division 293 assessments (and be required to pay the additional 15% tax) for the 2018 financial year due to a drop in the applicable threshold from $300,000 to $250,000.

Additionally, one of the key ALP tax policies for the upcoming Federal Election includes a further reduction of this Division 293 threshold from $250,000 to $200,000.

 

Claims for home office expenses increased

The ATO has updated the hourly rate taxpayers can use to determine deductions for home office expenses from 45 cents to 52 cents per hour for individual taxpayers, effective 1 July 2018 (i.e., from the 2019 income year).

According to the ATO’s recently updated PS LA 2001/6, individual taxpayers who claim deductions for either work or business-related home office running expenses may either:

q claim a deduction for the actual expenses incurred; or

q calculate the running expenses at the rate of 52 cents per hour.

Taxpayers who use the rate per hour method to claim a deduction for home office running expenses only need to keep a record to show how many hours they work from home.

This reduced substantiation requirement can be recorded either:

q during the course of the income year; or alternatively

q they can keep a representative four-week diary (where their work from home hours are regular and constant).


MYEFO report

The Mid-Year Economic and Fiscal Outlook (‘MYEFO’) report was recently released.

It indicates that the underlying Budget deficit is expected to be $5.2 billion in 2019 (down from the $14.5 billion deficit estimated in the 2018/19 Federal Budget).

The substantial deficit reduction is reportedly a result of increased tax collections, with individual tax collections up $4.1 billion and company tax collections up $3.4 billion.

Additionally, the MYEFO report also provides a useful snap shot of what the Government is thinking when it comes to tax policy – particularly where previously announced reforms are still pending.

A few tax-related policy updates confirmed in the MYEFO worth mentioning include the following:

q GST compliance program – The Government is looking to provide $467 million of ATO funding from 2020 to 2024 to fund additional GST-related audits and the development of analytical tools to combat emerging risks to the GST system.

q $10,000 cash payment limit – The Government will delay the introduction of an economy-wide cash payment limit of $10,000 from the originally proposed 1 July 2019 start date, until 1 July 2020.

q Abandonment of the proposed changes to intangible asset depreciation – The Government has announced it will not be proceeding with the current proposal to allow taxpayers to self-assess the effective lives of certain intangible depreciating assets.

q Super access for victims of crimes – The Government proposes to introduce legislation to allow victims of certain crimes (i.e., serious violent crimes) access to their perpetrator’s superannuation to pay any outstanding compensation.

q Increasing the integrity of limited recourse borrowing arrangements (‘LRBAs’) – The Government is making an adjustment to the previously announced reforms requiring outstanding balances of LRBAs to be included in a member's total superannuation balance by extending the start date and limiting impacted taxpayers.

q Superannuation guarantee (‘SG’) penalty increase – Where employers fail to come forward during the 12-month SG amnesty, the Government is proposing to increase the minimum penalty from 50% to 100% of the Superannuation Guarantee Charge.

Editor: Note the required legislative amendments needed to implement the tax concessions promoted by the ATO under the SG amnesty (at the time of writing) is yet to be passed by Parliament.

This is despite the fact that the Government's proposed SG Amnesty is meant to run from24 May 2018 to 23 May 2019.

 

Taxation of income for an individual’s fame or image

The Government has released a consultation paper with respect to the implementation of the 2018/19 Federal Budget announcement relating to the direct taxation of an individual’s fame or image at their marginal tax rates.

The proposed reform aims to ensure that all remuneration (including both cash and non-cash benefits) provided for the commercial exploitation of a person’s fame or image will be included in their assessable income.

Editor: These reforms reflect the Government’s concern that high-profile individuals (including sportspersons, actors and other celebrities) have been ‘taking advantage’ of lower tax rates by licencing their fame or image to another (generally related) entity for the purpose of tax-effective income splitting.

Following the Federal Budget announcement, the ATO withdrew its draft Practical Compliance Guideline PCG 2017/D11 (the ‘draft PCG’).

The draft PCG had set out a 10% safe harbour for apportioning lump sum payments for the provision of a professional sportsperson’s services and the use and exploitation of their ‘public fame’ or ‘image’ under licence.

In withdrawing the draft PCG, the ATO advised that for the period up to 1 July 2019, it will not seek to apply compliance resources to review an arrangement complying with the terms of the draft PCG if it was entered into prior to 24 August 2018 (i.e., being the date the draft PCG was withdrawn).

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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