Touch Payroll (STP)

Extensive STP resources can be found in a related article in last month's edition below.

There are some minor benefits to an employer, from reporting to the Australian Taxation Office (ATO) employee details with every pay.

An employer that has met its STP reporting obligations for an income year will not need to comply with the following obligations:-

Notification of withholding amounts
Annual payment summaries
Payment summaries for payments for termination of employment
Annual reports to the Commissioner
Part-year payment summaries

The ATO will be able to make the information currently recorded on an annual payment summary progressively available throughout the income year to employees on ATO Online.

The ATO will use the information collected through STP reporting to pre-fill employees’ income tax returns.

AcctWeb

‘Calm before the storm’: Government proposes 12-month SG amnesty

Kelly O'Dwyer

BUT foreshadowing tougher penalties once the Single Touch Payroll regime kicks in fully next year.

A one-off, 12-month amnesty period for historical underpayment of the superannuation guarantee has been announced by the government, foreshadowing tougher penalties once the Single Touch Payroll regime kicks in fully next year.

In an announcement by Minister for Revenue and Financial Services, Kelly O’Dwyer, the amnesty will set aside employer penalties for late payment that are normally paid to the government, with employers needing to pay all super that is owed to their employees, including the rate of nominal interest.

The new bill will complement the existing SG integrity package, and subject to the passage of legislation, the amnesty will run from 24 May 2018 to 23 May 2019.

Speaking to Accountants Daily, CPA Australia head of policy, Paul Drum said that while the announcement might seem like a welcome opportunity for employers to come clean, he believes the measure was strategically announced one year out from the full implementation of STP across all business sizes, before the ATO enforces a tougher penalty regime for SG non-compliance.

STP will roll out for employers with 20 or more employees on 1 July 2018, while employers with 19 or less employees will have to start reporting on 1 July 2019.

“It's good and well to say, ‘oh it's a great opportunity to tidy up’ but the sting in the tail,” said Mr Drum.

“When STP kicks in, the ATO are going to have real-time data and know who is behind in payments and the penalty is enormous for not paying on time so it's really an olive branch and the calm before the potential storm if people don't do something about it and get their SG payments in order.”

Likewise, HLB Mann Judd tax manager Alexander King believes the amnesty will help give employers time to sort their affairs before the ATO clamps down on further non-compliance.

“The benefit for employers is that they have an opportunity to catch up on their outstanding SG obligations before new and tougher penalties are introduced for non-compliance, which include possible jail terms,” said Mr King.

“[However], under the amnesty, employers are still required to calculate the SG charge on salary and wages, not ordinary time earnings, and must pay the nominal interest component calculated at 10 per cent per annum.”

According to Ms O’Dwyer, the ATO will continue its enforcement activity against employers who do not own up voluntarily to their historical obligations during the 12-month amnesty period.

By: Jotham Lian
24 MAY 2018
www.accountantsdaily.com.au

4 components of our 2018 Federal Budget

Click on the following links for more detail on the main components of the 2018 Federal budget.

Australian Federal Government

Your Budget

How the 2018 budget applies to you can be found via the following links.

Australian Federal Government

Federal Budget 2018 – Overview

The Australian economy in its 27th year of consecutive growth.

Business conditions are at the highest level since the global financial crisis.

1,000 jobs a day on average over the past year.

Global growth at fastest pace in six years.

The budget focuses on 5 main areas:

Tax relief to encourage and reward working Australians
Keep backing business to invest and create more jobs
Guaranteeing the essential services that Australians rely on
Keeping Australians Safe
Ensuring that the Government lives within its means

Working holidaymakers and tax returns

If your business employs working holidaymakers – or you’ve been one yourself this year! – you need to satisfy the “backpacker tax” s that came into effect from 1 January 2017.

Employers needed to issue two payment summaries to each working holidaymaker with the income apportioned before and after 1 January 2017. Only one summary is issued for 2018.

If the right visa is held (471 or 462 are most common) the tax rate is:-

0 – $37,000 15% each dollar

$37,000 – $87,000 32.5% over $37,000

etc

Employers must register their intention to hire working holiday makers.

It is advisable not to attempt to comply with these rules without help.

AcctWeb

Beware residency rules if moving overseas

SMSF trustees are often unaware that if they move overseas for an extended period of time, their SMSF may fall foul of the ATO’s residency rules and they may face a heavy tax bill.

In order to satisfy the residency rules, SMSFs must meet three conditions:

It was established in Australia, or at least one of its assets is located in Australia.
The central management and control of the fund is ordinarily in Australia.
It either has no active members or it has active members who are Australian residents and who hold at least 50 per cent of:

the total market value of the fund’s assets attributable to super assets, or
the amounts that would be payable to active members if they leave the fund.

Generally speaking, the first condition is readily satisfied, but the other two can cause problems if members move overseas for a period of time, usually defined as over two years.

If these conditions aren’t met, then the fund can lose its complying status, which has significant tax implications. They include:

taxing assessable income of the SMSF at 47 per cent (or 45 per cent for income years before 2014/15), and
a one-off additional tax bill in the year that it becomes non-complying that would result in the fund losing almost half its assets.

So what are the options for SMSF trustees and members who are considering moving overseas temporarily or taking an extended trip?

If trustees know they will be away for more than two years, or even if they are planning a shorter trip but it may end up being permanent, they should take steps to protect their superannuation before heading off.

This could involve transferring their benefits to a public offer fund and winding up their SMSF.

Alternatively, if they want to keep their SMSF running, but do not currently have at least 50 per cent of trustees living in Australia to manage and control the fund, they should appoint additional resident trustees/members to the SMSF, for instance adult children.

They could also appoint a resident enduring power of attorney to act as SMSF trustee on their behalf while they are away. Or, if they have a corporate trustee, they could appoint an alternate director to act as trustee director in their absence.

The main difference between an alternate director and an enduring power of attorney is that the power of attorney can continue acting on behalf of the member in the event of their incapacity. However, the role of alternate director will cease if the trustee is incapacitated, that is, the role of director ceases.

They should also take steps to ensure the ‘active member’ condition is satisfied. Active members are those who are making contributions or rollovers to the SMSF. Therefore, even if the central management and control test is met, if an overseas SMSF member contributes to the fund, then the SMSF will become non-complying if the overseas members combined hold more than 50 per cent of the SMSF’s assets.

Contributions or rollovers for these overseas members can instead be made to a local public offer, retail or industry fund while overseas and then they can choose to transfer these benefits into their SMSF when they return to Australia.

In most cases, the best approach is for all members, local and overseas, to avoid making contributions or benefit rollovers to the fund while a fund member is overseas for an extended period.

While these steps are relatively straightforward, they need to be put in place before moving overseas. Therefore, SMSF trustees and members should ensure they talk with their advisers before undertaking any overseas moves.

Andrew Yee is director of superannuation and SMSF specialist at HLB Mann Judd Sydney.

By Andrew Yee
12 Apr 2018
www.smsmagazine.com.au

Meaningful tax reform in high demand

Comprehensive tax reform continues to dominate wish lists for the upcoming federal budget, with support for change to state-based taxes particularly high, according to a new survey.

Mid-tier firm BDO’s annual tax reform survey of over 250 clients found that 94 per cent agreed that the government should recommence a broad reform process, with more than three-quarters supporting the establishment of a tax reform commission.

The top tax measures respondents believes were in most need of tax reform included states taxes (59 per cent), GST (37 per cent), and personal tax (29 per cent).

“The message for the government is that taxpayers are still waiting for meaningful tax reform,” said BDO national tax director, Lance Cunningham.

“This can only begin with a renewed commitment to a holistic review of the tax system that examines the whole system and not the introduction of a number of piecemeal changes.”

The survey also revealed that 90 per cent of respondents believed that state payroll taxes should be abolished or reduced as they discouraged employment and were a disincentive to growing business, a position challenged by Treasury’s research earlier this month.

Likewise, 70 per cent support an increase in the GST rate and broadening of the GST base to allow for reform to state taxes, although Mr Cunningham concedes that it is typically thrown in the “too hard basket” of tax reform.

Fringe benefits tax continue to make the case for reform, with 75 per cent of those surveyed calling for it to be abolished or replaced with a simplified system of taxing the employees but only on truly remuneration benefits and not on benefits that are incidental or ancillary to their employment duties.

BDO has been actively throwing its support behind reform, with Mr Cunningham noting how the process has “floundered” in recent years.

“BDO fully supports Ken Henry’s call for a return to the Tax Reform process that has floundered in recent years,” Mr Cunningham told Accountants Daily last month.

“The so called ‘root and branch’ tax reform process, that was ignited by Ken Henry’s 2010 Australia’s future tax system report, gave a detailed framework for such a holistic tax reform. However, the tax reform process has turned into a smouldering heap with all sides of politics just picking on single issues instead of looking the bigger picture.

“While the current concentration on company tax rate reductions is justifiable to ensure Australia’s competitiveness in international capital markets, it should not be seen as tax reform.”

By: Jotham Lian and Lance Cunningham, BDO Australia
27 APRIL 2018
www.accountantsdaily.com.au

Tools to help you manage your financial position are available on our site.

Three ingredients to attaining your retirement goals: give yourself enough time, utilise professional assistance and increased financial literacy.

On a beach, in a desert, atop a mountain, at a restaurant, overseas, under a tree, or by a river there’s always time to work at improving the understanding you have of your financial position and of how better to manage your money.

Being able to develop and manage a Budget has always been important to gaining better control of our affairs. Unfortunately, undertaking this task on a regular basis has always been hard, time consuming and, at best, ad-hoc. While there are many tools and resources available to you those that better connect you to your financial planner can provide the best long-term outcomes. Plus such tools are secure and available 24/7 so you can use your time rather than ‘fitting’ in with someone else.

The value of completing and managing a budget on an ongoing basis cannot be overstated. So to help we take great pleasure in providing you with access to a comprehensive range of integrated budgeting, superannuation and cash flow tools via our website.

To start using them simply click on the Calculators or Financial Tools button in the menu bar and login in again or register.

The real beauty of these tools is that you can use them, leave, and when you come back to keep developing your budget or test some Super strategies the information you entered previously is still there waiting for you. Of course, you need to Register so the system knows which information is yours, just like, say, Internet Banking.

While these tools are great for those getting closer to retirement they are also of value to the young who need to look at both their short-term needs as well as thinking of the long-term as well. It is never too early to start managing money and setting course for some life time financial objectives.

Your Financial Planner

‘A simple mistake can attract our attention’: ATO reminder about FBT slips-ups

The tax office has issued a reminder to tax professionals about some simple, but common, errors which often attract its attention with fringe benefits tax (FBT).

As tax agents prepare to lodge for the 2018 FBT year, the tax office has highlighted that “a simple mistake or omission” can attract their attention, including common errors such as failing to report an employee’s private use of a company car.

Other common errors include claiming exempt food and accommodation in living-away-from-home allowance (LAFHA) benefits; undervaluing employee car park benefit; and incorrectly claiming employer exemptions and rebates.

The ATO has been vocal in its focus on employer-provided motor vehicles and private use associated with it, having noted the failure of some employers to identify or report these fringe benefits or incorrectly apply exemption provisions.

Draft guidance, PCG 2017/D14, provided by the ATO clarifying “minor, infrequent and irregular” private travel for work vehicles has been welcomed by practitioners as it helps provide certainty to a previously “grey-area” exemption.

LAFHA benefits have also routinely attracted the ATO’s attention, with common errors including claiming reductions for ineligible employees; failing to obtain required declarations from employees; claiming a reduction in the taxable value of the LAFHA benefit for exempt accommodation and food components in invalid circumstances; and failing to substantiate expenses relating to accommodation and, where required, food or drink.

The tax office will also continue to pay close attention to the validity of valuation provided in relation to car parking fringe benefits, noting errors that include market valuations that are significantly less than the fees charged for parking within a one-kilometre radius of the premises on which the car is parked.

Other common errors with car parking valuations include the use of rates paid where the parking facility is not readily identifiable as a commercial parking station; rates charged for monthly parking on properties purchased for future development that do not have any car park infrastructure; and insufficient evidence to support the rates used as the lowest fee charged for all-day parking by a commercial parking station.

By: Jotham Lian
10 APRIL 2018
www.accountantsdaily.com.au