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Budget time….again?

Last night the Treasurer handed down his second budget in 7 months and whilst this is generally my favorite day of the year I must admit, it felt a little more like groundhog day than the usual excitement it brings. (Just me? Ok then.)

I’m calling this budget a great budget. There was alot in there but I’ll narrow it down to my personal top 5. If you would like a more in depth read, download our IQ budget explainer.

My highlight was the “Digital Economy Strategy” which was announced earlier this month which plans to invest $2b to lift our competitiveness and productivity with the aim to increase jobs and wages. This includes a review of myGov and expanding the Digital Solutions – Australian Small Business Advisory Service to help businesses improve their digital processes and take up new things like e-invoicing.

There were some prior announcements that received extensions such as the fully expensed assets, temporary loss carry back and low and middle income tax offsets. All good news.

But back to the top #5

  1. Modernising the individual tax residency rules – this is a good one and the proposal is much simpler than the current legislation. It will be interesting to see the start date and what changes are made (if any) through the legislative process.
  2. Change to self education expenses – previously the first $250 spent was non deductible. This is being removed.
  3. Removal of the taxing point for ESS (Employee Share Schemes.) Whilst this doesn’t effect all individuals, it has been a “nasty surprise” for many when they have left a company that issues employee shares. I’m pleased to see this change but await the start date.
  4. Changes to debt recovery action by the ATO when a taxpayer is in dispute and has filed a claim with the Administrative Appeals Tribunal. Currently, whilst the dispute is being reviewed – the ATO can still continue with debt recovery action including interest, penalties and issuing garnishee notices. This one just practically makes more sense.
  5. The removal of the $450 per month threshold for superannuation guarantee. I have this here more from an interest viewpoint as I was surprised by this one as for me personally, the reasoning behind this change doesn’t make a heap of sense. This one will be a sting for some employers and we don’t know the start date as it’s “the first year after the it receives royal assent” so watch and wait.

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How to Make Sure You Get Paid – Rise Legal

This year we want to share some of the awesome work our clients do. We will do this in a variety of ways – video, Q & A, written form and information sharing. Today, the topic is something close to all of our hearts – “How to Make Sure You Get Paid.” Helen Kay, Director of Rise Legal has put together a fantastic PDF document which can be downloaded below covering her top 4 tips. This includes some important information about terms and conditions which I know many of our clients have wondered about.

If you have any questions about this, please contact Helen. She can be found here.

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I would be completely lying if I said that this years budget didn’t sneak up on me. It’s OCTOBER! I was happily assessing clients for JobKeeper 2.0 eligibility – (and when I say happily I mean frantically) and suddenly it’s BUDGET NIGHT. Traditionally, this is one of my favourite nights of the year and with this years big spending budget together lots of early drops about what was going to be announced – the stakes were high………..and it didn’t disappoint.

We’ve put together a budget overview which we will share with those who receive our newsletter covering the budget. It’s too lengthy for this blog as there was so much content in this years budget. If you’d like a copy of our budget overview, please email admin@iqaccountants.com.au and put “NEWSLETTER” in the subject line and we will add you to the list. This document will be sent this afternoon.

For now though, I’ll share my top 3 announcements:

TAX CUTS

Backdated to July 1, this means that for everyone who has a taxable income of $90k or less – you will now paying less tax. This has happened by moving the thresholds of income up and by increasing the low and middle income tax offset. It’s expected that the tax tables will be updated once legislated.

CAPITAL ASSET IMMEDIATE DEDUCTIONS

I’ll admit, this almost didn’t make my top 3 but based on the emails I’ve received – it’s a popular one. Obviously the Government is really keen for businesses to invest but on the flipside, those that have been really hurt by COVID aren’t in a position so this one isn’t that helpful for them.

The difference between this announcement and the current $150k immediate write off is that there is no cap on the amount of the asset and now any business with a turnover of less than $5b can claim the asset as an immediate deduction. It is expected that this will apply to assets first used or installed ready for use until 30 June 2022.

VICTORIAN BUSINESS SUPPORT GRANTS TO BE TAX FREE

An odd top three but this one is in here for precedence. State-based grants such as the Business Support Grants are generally considered taxable income unless legislation enables them to be treated as non-assessable, non-exempt income.

The Government will make the Victorian Government’s business support grants for small and medium business tax-free for tax purposes.

This program will be extended to all States and Territories on an application basis and is restricted to future grants programs. While no one hopes that Victoria or any other state or territory has a repeat of recent events, I am pleased with this tax response but will watch with interest for future announcements where support grants are provided.

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COVID-19 >< $$$$

So I know we aren’t supposed to be in panic mode but the announcements from the governments stimulus package yesterday sent me into a mild panic attack. I’ve been fairly level headed about the whole situation, even attending a large event in Sydney last week but after the announcement yesterday I couldn’t help but think “if they are announcing this now – what will happen at the Budget in May?” I’m really hoping they’ve saved something good for one of my favourite days of the year.

There were some tax free payments for individuals in the form of $750 for those on social security, veteran, concession and other income support payments.

For businesses:

  • The instant asset write off has been increased from $30,000 to $150,000 for businesses with a turnover of less than $500m (where the ‘m’ stands for MILLION!) until June 30, 2020.
  • There’s some additional depreciation deductions for the next 15 months for new assets.
  • The ATO won’t be giving a standardised administrative relief for the Coronavirus outbreak but they are saying that they will consider assistance for tax obligations on a ‘case by case’ basis.
  • Employers of apprentices and trainess who employ 20 full time employees (or less) may be entitled to a subsidy of up to 50% of the wage for 9 months with a maximum of $21k.
  • And last but not least, possibly my favourite of all – tax free payments of up to $25,000 for businesses with turnover of less than $50m that pay PAYGW.

Let’s unpack what some of these really mean:

The instant asset write off has steadily been rising over the past 2 years and while the jump from $30k to $150k certainly isn’t small – the businesses that this is being made available to has increased literally overnight. Before Thursday March 12th only businesses with a turnover of $50m or less could utilise the $30k asset write off and after Thursday the 12th it is businesses with $500m and $150k. Depending on the industry you are in, the economic impact of the corona virus is going to vary however from speaking with various clients over the past month or so – I know that many are concerned about the domino effect on the market in general and in this way, cashflow is king. I question how many businesses will be inclined to make large capital purchases that were not already on their budget or projected expenditure plan? It will however be a wonderful tax benefit for those who do take advantage of this opportunity – it’s going to make tax planning very fun for me this year.

The refund of PAYGW (wages tax) for employers is one of the most exciting things that I’ve seen in a long time. Big statement but it’s true. This will actually do what it is intended to do – help employers keep their staff in jobs. The way this is expected to mechanically play out is that the BAS and IAS (if you lodge wages monthly with the ATO) are done in March, April, May and June and the ATO will refund 50% of the PAYGW (wages tax) amount in each of those months within 14 days – to your bank account. You will receive the funds from the ATO until you reach the maxiumum threshold of $25k. If you are an employer who has chosen to cease paying yourself wages to assist with cashflow during these uncertain times, now is the time to re-consider. The 50% payment is tax free however your employees will still gain the benefit of the full PAYGW credit and you will still receive the full tax deduction for their gross wages. All business owners should pick up the phone and speak to their accountant about this government announcement – it is a great opportunity.

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SUPER Good News

This week the governments superannuation amnesty bill was waved through the Senate. It took almost two years but it finally happened and for clients with outstanding superannuation – this is definately good news.

In basic terms, the bill allows an “amnesty” for employers to pay superannuation that hasn’t been paid before and make up for prior non-compliance. When superannuation is paid late, there are generally 3 components:

  • The actual super owed
  • Nominal interest
  • Administrative penalty

The calculation of late paid superannuation under the amnesty will not include an administrative penalty. Additionally (and this is my favourite part) the actual super owed and the nominal interest paid will be tax deductible.

This is how I expect business owners with outstanding superannuation to react.

An opportunity exists for current businesses to claim large tax deductions in the current year on these additional superannuation payments. In particular, small businesses that have been operating for a long period of time may have unmet SG obligations for business owners, company directors and working family members.

To qualify for the amnesty:

  • you must disclose to the ATO that there is a shortfall in super guarantee for a particular quarter for an employee
  • the quarter in which there is a shortfall must have ended at least 28 days before the start of the amnesty period (including quarters ending up to 31 March 2018), and
  • the ATO must not have declared an investigation into SG compliance for that particular quarter.

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The busyness of being in business

Being in business is a never ending cycle of lists and checkboxes, making sure we stay up to date on the various deadlines that we need to adhere to and those that we self impose. It’s easy to become overwhelmed in the busyness of business.

As we near the end of another financial quarter, there’s a few things that I’m ticking off the list of accomplishments for our clients and within the office:

  • Single Touch Payroll implementation
  • Taxable Payment Summary Reports
  • Payroll Tax Returns
  • Workcover Declaration Notices
  • the list goes on….

Today I’m sharing my 5 favourite things that help me in my every day work life to give me more time for other things I enjoy doing:

  1. TIME BLOCKING – In basic terms, this is when you set time aside to do specific tasks without trying to multitask – so basically, you don’t let anything interupt you. I find this works best for me when I time block things like “emails” and “phonecalls” and “meetings.” Basically, I don’t let the flow on from those things distract me from getting through the rest of the group of tasks. I am definately more efficient when I timeblock.
  2. COMMUNICATION – The IQ team is made up of awesome humans who all have awesome lives that don’t neccessarily allow us or require us all to be in the Burleigh office Monday – Friday, 9-5. Being an e-office (paperless environment), working remotely is seamless, but we needed something that allowed us to keep our office culture and communication at the same level as if we were sitting right next to each other. We have been using Slack for over 3 years and use this as our communication hub and have banned internal emails. This helps us to get things done in the most time efficient manner as well as letting us share photos, do video calls and search prior chats for
  3. TASK MANAGEMENT – This has been a game changer for me and our IQ team. We use kyber which integrates with Slack and allows us to set ourselves and each other tasks with timeframes, deadlines complete with follow up and the ability to delegate and make notes as required. I love that I can see at a glance what I need to do as well as what any other team member has on their tasks list for today, tomorrow and the future as well as what they have completed.
  4. LEARNING – I am commited to being a lifelong learner (that’s a term I picked up at my kids school and I am running with it because I really like the alliteration.) I have a host of podcasts that I subscribe to but the ones I am loving right now are Next Generation Innovators Podcast Future Women and The Startup Grind Podcast . I have had a client recommend the Jordan B Peterson Podcast to me but I am yet to check this out.
  5. PEOPLE – I can’t really make a list of the things that help me do what I do best without listing people! I choose to surround myself with people who are on the same page and who are going in the same direction. We have pretty specific goals and ideas and we make sure we all know what they are and how we are going to get there. I also try really hard to give those people as much of my time as they need so that they can be the very best versions of themselves. I also make sure I both contribute to and seek the counsel of an outstanding support network of business mentors that I can turn to when I need advice – this is invaluable to my general day to day activity and sanity.
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Single Touch Payroll – Act Now

Single Touch Payroll (STP) is a change to the way employers report their employees tax and superannuation information to the ATO and is done electronically through your accounting or payroll software.  The information is sent directly from the software to the ATO.  All employers need to ensure that they are compliant by July 1st.

Employers with 20 or more staff should already be reporting to the ATO as this was implemented from July 1st, 2018.

Employers with less than 20 employees have until July 1st, 2019 to begin reporting but I recommend getting the process started now to ensure that there is not a last minute rush and stressful implementation at the end of the financial year.

The process is relatively simple and once you are setup, it really runs in the background with very little for you to do – most of our existing clients who are already on the STP process report that they mostly forget that it exists.  There are some distinct advantages – employers who report using STP for the full financial year will not be required to provide employees with payment summaries.  Instead this information will be provided electronically to employees by the ATO through an employment income statement and be available on their mygov account.  Where employees do not have a mygov account, their tax agent can access this for them or they can contact the ATO for this information.

Long term the ATO is looking to use the STP information to prefill activity statements and reduce the burdon on the taxpayer for monthly IAS statements that report PAYG withholding amounts.  This is the same information that is being reported through the STP data so it makes sense that the ATO would use information that you are giving them to pre-fill the reports.

We have successfully assisted clients with the implementation of Single Touch Payroll.  Please consider getting on board prior to July 1st and contact the office on 07 5576 0011 if you would like to make an appointment to get setup.

 

Fringe Benefits Tax 2021

The fringe benefits tax year for 2021 ended on March 31st and we’ve put together some general information to assist you in understanding what this is about and how this may effect your business.

Important FBT issues

COVID-19 assistance and benefits

Many businesses are likely to have provided different types of benefits and assistance to their employees because of COVID-19. For many of these benefits, it can be challenging to work out whether FBT should apply. 

In general, minor benefits should be FBT exempt where their individual cost is under $300 and it is reasonable to treat the benefit as minor (for example, it is provided infrequently).

Outside of this and in many cases, there are specific FBT concessions that could be available, but it is important to work through these concessions carefully.

Working from home

COVID-19 related office and site closures have meant that many employees worked from home for most of the FBT year. To assist with the transition, employers often provided work-related items such as computer monitors, printers and other equipment to assist with transition.

Where common work related items such as laptops and mobile phones have been provided to team members, it’s unlikely an FBT liability will be triggered as long as the equipment is primarily used for work purposes. The situation gets more complex however if multiple similar items have been provided during the FBT year.

Emergency assistance

If your business provided emergency assistance to employees because of COVID-19, then FBT is unlikely to apply. While we doubt anyone would be thinking about FBT during a crisis, it’s good to know that the tax system does not disadvantage your generosity.

Examples of the kinds of benefits that are exempt from FBT include immediate relief your business provides to an employee:

First aid or other emergency health care provided to an employee is also exempt if the treatment is provided by another employee (or a related company employee), or is provided at your premises (or those of a related company), or at or near an employee’s worksite.

Protective equipment

Many businesses increased their workplace health and safety processes and infrastructure in response to COVID-19.

If your business provided protective equipment to allow your employees to safely continue to work, this benefit may be exempt from FBT.  Unfortunately, this does not seem to be available for all employers. 

Typically, an FBT exemption would be available if your employees are involved in cleaning premises or required to be in close proximity with customers or clients. For example, the ATO suggests that this should include hairdressers, cleaners and medical practitioners and hospitality workers.

Motor Vehicle problem areas

Private use of work vehicles

Just because your business buys a motor vehicle and it is used almost exclusively for work, that alone does not mean that the car is exempt from FBT. If you use the car for private purposes – pick the kids up from school, do the shopping, use it freely on weekends, garage it at home, your spouse uses it – FBT is likely to apply. The private use of work vehicles is firmly in the sights of the ATO and has been for some time.

Private use is when you use a car provided by your employer (this includes directors) outside of simply travelling for work related purposes.

While there are two methods to calculate the FBT liability on the private use of a car, the choice of method can result in very different FBT liabilities. For example, using the logbook method may provide a better result especially this year if the work vehicle has not been used at all and garaged at or near the employee’s home. This is because if your business keeps a valid logbook/odometer records and is eligible to use the logbook method, the ATO will accept that a FBT liability won’t arise if the car:

  • Has not been driven at all during the period even if it has been garaged at home; or
  • Has only been driven briefly to maintain the car.

In comparison, if the statutory method is used, the FBT liability could be much higher. This is because the FBT calculation under this method will include the days that the car has been garaged at home and is taken to be available for private use of the employee (regardless of whether or not the employee has permission to use the car privately).  Similarly, where the place of employment and residence are the same, the car is taken to be available for the private use of the employee.

ATO ‘red flags’

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

Where deductions claimed don’t match what is reported for FBT purposes

When it comes to entertainment, employers are often keen to claim a deduction but often this is not then recognised as a fringe benefit provided to employees.

Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Let’s say you have taken a client out to lunch and the amount per head is less than $300. If your business uses the ‘actual’ method for FBT purposes, then there should not be any FBT implications. This is because benefits provided to client are not subject to FBT and minor benefits (i.e., value of less than $300) provided to employees on an infrequent and irregular basis are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either.

If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to FBT (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the company would be able to claim 50% of the GST credits.

Mismatched FBT and income tax amounts

Another area where the ATO is picking up errors is when the amount reported as an employee contribution on an FBT return does not match the income amounts on the employer’s tax return. In particular, what concerns the ATO is where an employer overstates employee contributions received on their FBT return to reduce the taxable value of the fringe benefits provided (and thereby, the employer’s FBT liability).

The ATO’s approach is very evidence-based; there needs to be documentation to back-up what the business is claiming.

When business assets are used personally by owners and staff

Private use of business assets is an area that crosses across a whole series of tax areas; FBT, GST, Division 7A, and income tax.  

Take the ATO’s example of the property company that claimed deductions for a boat on the basis that it was used for marketing the company. Large deductions were claimed for the upkeep and running of the boat.  On review, the ATO discovered the boat was used by the director and other employees for private trips and to host parties for people who had paid to attend the company’s property seminars.

When looking at the activities of the business overall, the ATO determined that the director had purchased the boat primarily for their own private use. As a result, they disallowed the deductions and the private use of the boat was a fringe benefit for the employees of the company. The company had to lodge an FBT return and pay the resulting FBT liability, as well as the income tax shortfall, interest and penalties.

Not lodging FBT returns

The ATO is concerned that some employers are not lodging FBT returns or lodging them late to avoid paying tax. While we hope the ATO understands that this was a difficult year for many businesses, it’s likely the ATO will still pay close attention to any employer that:

  • Is registered for FBT but lodges late – If your business is likely to face delays lodging the FBT return, it’s a good idea to contact us as early as possible and we will get in touch with the ATO to request an extension.
  • Is not registered for FBT but employs staff (even closely held staff such as family members), and is not registered for FBT – it’s essential you have reviewed your position and are certain that you do not have an FBT liability. If your business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then it’s likely you are providing a fringe benefit. Make sure you have reviewed the FBT client questionnaire we sent you!

Salary sacrifice problem areas

Calculating superannuation guarantee on salary sacrifice

From 1 July 2020, new rules came into effect to ensure that an employee’s salary sacrifice contributions cannot be used to reduce the amount of superannuation guarantee (SG) paid by the employer.

Previously, some employers were paying SG on the salary less any salary sacrificed contributions of the employee. Employers could choose whether or not to include the salary sacrificed amounts in ordinary time earnings (OTE). That is, some employers were reducing the amount of SG payable by excluding the salary sacrificed amounts from the ordinary time earnings calculation.

Now, the SG contribution is 9.5% of the employee’s ‘ordinary time earnings (OTE) base’. The OTE base is an employee’s OTE and any amounts sacrificed into superannuation that would have been OTE, but for the salary sacrifice arrangement.

Employee contributions for FBT purposes and salary sacrifice

An issue that frequently causes confusion is the difference between the employee salary sacrificing in order to receive a fringe benefit and making an employee contribution towards the value of that fringe benefit.

To be an effective salary sacrifice arrangement (SSA), the agreement must be entered into before the employee becomes entitled to the income (i.e., before the period in which they start to perform the services that will result in the payment of salary etc.).

Where an employee has salary sacrificed on a pre-tax basis towards the fringe benefit provided – laptop, car, etc., they have agreed to give-up a portion of their gross salary on a pre-tax basis and receive the relevant fringe benefit instead.

As a starting point, the taxable value of the fringe benefit is the full value of the expense paid by the employer. The salary sacrifice arrangement doesn’t reduce the FBT liability for the employer.

The employer recognises a lower cost of salary and wages provided to the employee as their ‘cost saving’, which results in lower PAYG withholding and superannuation contribution obligations, but they still recognise the full value of the fringe benefit as part of their taxable fringe benefit which is subject to FBT.

The employee recognises that they have a reduced amount of salary and wages, and a non-cash benefit in the form of the fringe benefit.

Car parking under scrutiny

Important impending changes

A controversial draft ruling from the ATO could expand the scope of the FBT rules dealing with car parking benefits. This is because the draft ruling changes the ATO’s view on what constitutes a commercial parking station. Where an employer provides:

  • Car parking facilities for employees within 1km of a commercial parking station, and
  • That commercial car park charges more than the car parking threshold ($9.15 for the year ended 31 March 2021)

a taxable car parking fringe benefit will arise unless the employer is a small business and able to access the car parking exemption.

The draft ruling is not finalised as yet but the ATO has stated it intends to apply the new definitions from 1 April 2021. If you provide car parking facilities to team members, it is important that you either:

  • Are certain you are able to access the small business exemption (which has a more generous turnover threshold of less than $50m from 1 April 2021 onwards); or
  • understand the implications of the ruling to the car park facilities you provide.

Housekeeping

It can be difficult to ensure  records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

COVID Cashflow beyond JobKeeper

This morning the JobKeeper extension bill was introduced to parliament – which basically outlines the changes to the JobKeeper scheme that were announced by the Government extending the reimbursement subsidy to March 28th, 2021. I will provide some more detailed information once it is available however, we do know that JobKeeper is likely to come to an end for some current JobKeeper employers at the end of September (final payment in October.)

Since the Government introduced JobKeeper, many small – medium business owners have relied on this stimulus measure and despite it being a “reimbursement” scheme, it has really assisted with keeping employees in a job and helping with cashflow from month to month. When the extension was announced, “new eligibility criteria” were flagged meaning that to continue to be eligible from September 28th (or to become eligible) the employer needed to meet the 30% decline test in July – September 2020 quarter and then retest in October – December 2020.

The current JobKeeper system does not require retesting for eligibility and many business owners have been in receipt of the JobKeeper payments for the entirety of the scheme (up to 6 months.) Some business owners will have found themselves financially better off under this system as they may have recovered from the initial decline in income and these owners will need to ensure that have not absorbed or become used to the additional JobKeeper funding. Other business owners may find that they are still suffering from COVID related sales decline and as they don’t meet the 30% decline test, the JobKeeper payment will cease. Other business owners may be somewhere in between, there are many stories and I am aware of several clients who are concerned by the new eligibility criteria. With this in mind, we know that the end of JobKeeper could cause a real change to the business cashflow so it’s important to start preparing for how this will effect your business.

Review your current cashflow situation and test it to see what things will look like without JobKeeper

Practically speaking, your software should have a cashflow report showing inflows and outflows on a monthly basis. Review this for the last 3 months and ask yourself the following questions:

  • What does my cashflow look like without the JobKeeper supplement?
  • Do I expect my income to be more or less than these months I am looking at?
  • What will the business cash at the end of each month look like with these things in mind?

While it’s sometimes hard, it’s important to consider a “worst case scenario” approach and then determine some action points if this were to occur. Now is the opportunity to be proactive.

Consider whether you may need to speak to your financial lender to obtain a loan or line of credit to help cover your expenses.

If you have been using the JobKeeper funds to begin a new project or you are waiting on a payment from a customer who is COVID effected, make sure that you think ahead and speak to your lender in advance as applications can take time. Sometimes banks will require updated accountant prepared financial statements or tax returns so it’s important to know in advance what is required to avoid any delays.

If in doubt, seek help

If you are uncertain about your cashflow position then seek help. It is crucial to speak to a trusted advisor like an accountant or a financial planner to get advice in a timely fashion. Often, poor cashflow can create other problems within an otherwise successful business and it’s generally cashflow that keeps us awake at night.

Here at IQ, we are ready and willing to help with a wide range of services for clients who need assistance. We have been:

  • preparing cashflow reports for clients and then having 15 minute phonecalls to explain what these mean and creating action points to deal with the issues raised
  • having 30 minute monthly meetings to review trading and profit trends and discuss growth and profitability strategies
  • doing financial modelling with clients to assist them in determining what the cashflow will do if “we make this choice” vs “making this choice”
  • holding “understand your business better” meetings – explaining what the bookkeeping reports mean and teaching clients how to get more data and information out of their own bookkeeping information and then how to use that data
  • providing affirmation, being that trusted person to run a new idea past and providing yes/no “does this make sense” feedback
  • reviewing processes and offering a set of “fresh eyes” for new opportunities, increased efficiencies and increased revenue
  • providing other guidance tailored to specific clients needs.

If you would like to find out more about these services or more, please email info@iqaccountants.com.au or phone 07 5576 0011.

Going, going……almost gone

The Superannuation Guarantee (SG) Amnesty is one of the best opportunities given to employers in a long time but unfortunately it has come at a very bad time. The SG Amnesty has given employers the opportunity to “fix up” any non payment or short fall payments of superannuation for their employees. However, time is almost up as we move quickly towards the 7th of September deadline.

The ATO is allowing employers to disclose and pay superannuation that is owed to employees without penalty of interest or Part 7 for the periods between July 1992 – March 2018.

I wrote about the SG Amnesty here but to quickly summarise the difference between paying super before September 7th and after September 7th:

  • If paid before September 7th under the SG amnesty, there will be no administrative penalty. ($20/employee/quarter)
  • If paid before September 7th under the SG amnesty, the super owed will be tax deductible.
  • If paid before September 7th under the SG amnesty, the nominal interest paid will be tax deductible.
  • If paid before September 7th under the SG amnesty, Part 7 won’t apply which is a penalty of up to 200% of the superannuation guarantee owed.

The ATO have recently announced that they will accept payment plans for employers who wish to participate in the amnesty however only payments made by September 7th will be tax deductible.

For further information, please contact our office without delay.

JOBKEEPER 2.0

For weeks we’ve been told the JobKeeper announcement would be on the 23rd and the PM and Treasurer decided to bring the news early and make the announcement yesterday. On the whole, it’s a good news story with the scheme being extended and I will outline the general details below. We must remember though, there is no legislation yet and if we’ve learned anything from the COVID stimulus announcements to date – the devil is in the detail. So while I am absolutely celebrating the important and wonderful assistance this announcement will bring for many of my clients, I am also conscious that we need to wait and see what the details are as none of this takes effect until very late in September.


General details

  • Most important, there is no change to the current JobKeeper and it will continue to run “as is” until September 27th.
  • The “new” JobKeeper which has been called JobKeeper 2.0 will be run from 28/09 through until March 28th, 2021.
  • The turnover tests will need to be re-applied for JobKeeper 2.0. The tests need to be re-applied twice during the 2.0 period. This is where I am expecting some of the nitty gritty detail to come into play and where there are already a wide range of questions being thrown around.
  • New JobKeeper applications will be available – so if you become eligible during the period, you can still apply (this is the same as now.

How much will the new JobKeeper be?

From September 28th

  • Currently $1,500 per fortnight for all employees and business participants, from September 28th there will be a 2 tiered payment system.
  • If you work 20 hours or more then you will receive $1,200/fortnight.
  • If you work 20 hours or less then you will receive $750/fortnight.

From January 4th, 2021

  • This will reduce from the $1,200 or $750 per fortnight for all employees and business participants, from September 28th but the 2 tiered payment system continues.
  • If you work 20 hours or more then you will receive $1,000/fortnight.
  • If you work 20 hours or less then you will receive $650/fortnight.

How does the 20 hours test work?

  • The 20 hours period is based on the 4 weeks of pay periods before 1 March 2020, so you look back to February 2020. You must have worked more than 20 hours a week.
  • The 20 hours test will also apply for sole traders and eligible business participants and the 20 hours will apply to time spent “actively engaged in the business.”

JobKeeper 2.0 is due to CEASE on MARCH 28th, 2021.

I have a lot of questions and am keen to see the actual legislation and some further interpretation on this. The changes are expected to be legislated through ammendments to the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020.

Here is the link to the Government info sheet about the JobKeeper changes. Again, we’ve learned over the COVID-19 period that this document changes regularly (even by the hour at times) so I recommend downloading this document if there is something on there that you specifically want to rely on.

JobSeeker

I never profess to be an expert in matters concerning Department of Human Services or Centrelink or Services Australia (so many names for one organisation!) There was an announcement regarding JobSeeker though which is as follows:

  • The JobSeeker coronavirus supplement will be $250 a fortnight, currently $550 taking effect from the end of September.
  • Those in receipt of JobSeeker will be able to earn $300 before any reduction in payment.

I understand that those receiving the full JobSeeker payment including supplement are receiving $1,100/fortnight and this will drop to $800.

Year End Process: STP Finalisation

Happy New Financial Year everyone! Now we turn our minds to finalising the payroll for the 2020 financial year and for most small businesses, this will be due at the end of July or if you have more than 19 employees – on July 14th.

Here are the steps that I recommend taking in order to finalise the payroll year and complete the STP finalisation:

  1. Check your bank feeds. Best practice is that the bank account that you pay payroll from is reconciled.
  2. If you use an electronic clearing account for payroll – make sure that the balance of this account is NIL.
  3. Check that your employee details are up to date……I’m talking names, dates of birth and tax file numbers.
  4. Make sure that all of your payroll items have been allocated to the respective ATO reporting categories correctly. For MYOB users, click here for AccountRight and here for Essentials.
  5. If you have paid any termination payments for employees during the year, now is the time to go back and review these for correctness.
  6. Obtain any Reportable Fringe Benefit Amounts from your accountant if you lodged a Fringe Benefits Tax Return in March – June this year.
  7. Confirm that the last pay run lodged via STP was accepted. Make sure the payroll year is set to 2019/20 as it will default to the current pay year.
  8. “Print” the payroll summary report for the period 1st July – 30th June and compare this to the YTD verification report. Specifically check that the total income (wages) and total PAYGW Withholding matches on both reports. If yes, proceed to the next step. If no, see below:
  9. Select all employees and then press the “Set as Final” button.
  10. You are done!!

What to do if the reports don’t match

I recommend running a NIL pay run for all employees to see if this updates the balances. If this doesn’t work, you will need to go through each employee and determine which employee is out of balance and then check each payroll category has been allocated to the STP per Step #4.

General Recommendations

Ensure that when you complete the June BAS, the total PAYGW on the verification statement and the payroll summary report matches the PAYGW you have declared on the BAS for the entire year.

If you use MYOB Accountright, consider updating to 2020.2.2 as you will not have to complete the STP Finalisation before running the first payroll in the 2021 financial year – this is a gamechanger and totally takes the pressure off. Hooray!

Don’t feel pressured by your staff. Getting the year end process right is better than rushing and getting it done incorrectly. If there is an error, it will likely result in your staff having to amend their income tax returns.

Single Touch Payroll and Employees at Year End

As the end of financial year draws near, employees begin to get excited about lodging their tax returns and getting their refunds which in turn, puts pressure on their employers to provide their payments summaries – or group certificates (depending on your age!) This year, most employers and businesses will be on the Single Touch Payroll (STP) system and this means that employees will not receive any documentation regarding their annual earnings.

FACT: When registered for STP – employers are not required to provide employees with a final end of year payment summary.

FACT: Some employers will have until July 31st to complete the “STP Finalisation” process. This means employees may not have access to their year end information and be unable to lodge their tax returns. The ATO have recommended that employees “hold off” lodging their tax returns until employers have completed the process.

FACT: The STP Finalisation process replaces the old payment summaries. Upon completing the process, employers are:

  • letting the ATO know that all pays for the 2020 year have been done
  • the status of the employees income statement in myGov changes to “Tax Ready” and this means they can now lodge their tax return

FACT: Every time an employer who is STP registered processes a pay, this information goes to the ATO.

FACT: Employees can access their Employment Income Statements through any of the following ways:

  • Access myGov and download from there
  • Via a registered tax agent who can assist in lodging the tax return
  • By phoning the ATO who will provide this over the phone – 13 28 61

Here is a great fact sheet to provide your employees if they ask for their payment summary/group certificate.

All IQ clients who are employers should have received an email advising the due date for the STP Finalisation. If you have not, please contact the office as a matter of urgency.



Why we are choosing to keep the Burleigh office temporarily closed

It’s been 62 days since we closed the IQ office – we miss each other terribly but in all reality, we are working really well and things are going fine. Some of our clients haven’t even realised we have closed the office given that they ask me “Are you at home or at work?”

The IQ office is in Burleigh Heads, Queensland. I know, that seems like an odd statement but because we are a digital firm, we have clients nationwide and some people have never been to the office – so it’s an important piece of information given the topic at hand. Qld has a “Roadmap to recovery” that was announced last Friday and there is a federal one as well. There is also an overwhelming amount of information here about what needs to be implemented before and when we return to the office. Workcover Qld also has some information.

Day to day, we only take about 25% of our meetings face to face. Otherwise it’s via other methods using various technologies, much like we’ve been doing over the past 62 (still can’t get over that number) days. But I also know that if clients ever decide to make that one face to face visit to the office, its generally at tax planning time – which is now. So our decision, to delay re-opening the office has been a really tough one.

We are all very keen to see each other but the bottom line is that we are accounting and taxation experts and not workplace health and safety experts. This is our busiest time of the year and we need to stay focused on the outcome which is completing the 2019 for the late lodgers and proactive tax planning for all other clients.

Speaking of tax planning, we recently installed a very fancy new whiteboard which I was really looking forward to using in tax planning this year! It is currently hanging sadly on the wall.

And to end – some exciting news. This week we learned that I have been named as a finalist in the Australian Accounting Awards. The awards night is being held in a few weeks via live stream! What a wonderful world we live in.

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