Posts Categorized: BAS and super obligations

SG super

Friday 27th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2017 quarter.

SG super is payable on all forms of remuneration including:-

  • Commissions.
  • Bonuses (but see below).
  • Directors’ fees and all other forms of remuneration to directors.
  • Allowances (except where fully expended).
  • Contractors paid mainly for their labour.

But excluding the following remuneration:-

  • Overtime.
  • Reimbursements.
  • Unused annual leave on termination.
  • Remuneration of less than $450 in a month.
  • Bonuses that are only in respect of overtime.
  • Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
  • In respect of employees younger than 18.
  • Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
  • On quarterly remuneration greater than $51,620.
  • Non-residents performing work for an Australian business outside Australia.

SGC super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

The SGC rate remains at 9.50%.

Please ensure that you make your payment with sufficient time through your Super Stream gateway.  A SG commitment is only satisfied when the money is received by the fund; not when paid to the gateway.  Whilst some gateways pay into the respective super funds the next working days (such as the ATO’s free gateway), other gateways take up to 5 working days.

We welcome any question you might have.

At MRS, we will spend today planning for your success tomorrow.

PAYG Instalments options

PAYG Instalments are income tax payments paid during the year by companies, super funds and individuals.  In respect of individuals, it is levied on income not taxed upon receipt with common examples being interest, dividends and trust distributions.  It is not assessed on wages or capital gains.  With the September BAS being the first one for the year, one can choose how to calculate your PAYG Instalments.

We usually prefer that clients use the instalment amount method.  In the majority of cases, it will not result in an over-payment that can so often arise under the instalment rate method.

In some cases though, the % rate method may enable one to pay a lesser amount.  If the instalment income is nil or negligible in the first couple of quarters or much less than the year before, then no or little tax will be paid.  A significant payment will only be required at such time as income is received.

It is critical with PAYG Instalments (and indeed GST Instalments) that any downwards or indeed upwards variation be made cautiously.  If a variation results in the instalments paid being 15% less than the actual liability then the ATO will issue a fine.

Please do not hesitate to call us should you wish to discuss your own situation.

At MRS, we will spend today planning for your success tomorrow.

GST options

With the Sep 2017 BAS  comes options as to how you can calculate GST.  So what are these GST options?

Even with the introduction of the “Simpler BAS” there remain three ways to calculate and report GST.

We recommend most business clients select Option 3 (GST Instalments).  Option 3 (which is only offered to small businesses who lodge quarterly BAS’s and who have turnover of less than $10,000,000) is the best for most clients as:-

  • It reduces our fees by our not having to prepare BAS’s or amend those prepared by clients (at the risk of being misunderstood, there are matters that only come to light when preparing annual financial statements and which require past BAS’s to be amended).
  • One doesn’t have to amend BAS’s for where a tax invoice is not held by the time a BAS is lodged.
  • If profits are increasing, then one’s GST net liability will also be increasing.  The instalment will represent an under payment as the ATO advised instalment is based off the prior year’s lodged activity statements.  In most cases, the shortfall is not payable until May of the following year so one receives an interest free loan from the ATO to pay any GST shortfall.
  • If the instalment is too high, then they can be varied downwards (but best left until at least the second and preferably the third or fourth quarter when the year’s position becomes clearer).

 

Please contact us if the ATO have marked on your BAS that Option 3 is not available.  This is often simply an ATO error and one that we can easily have rectified.

If you adopt Option 3 , then the ATO will issue you with an Annual GST Return after the end of the financial year.  This form is completed by netting off the actual liability against the instalments paid.  The form is required to be lodged by the time the Tax Return is lodged and by which time a shortfall is to be paid or a refund will be generated.

At MRS, we will spend today planning for your success tomorrow.

June quarter deadlines

There are a number of upcoming June quarter deadlines.

For those of you who are employers, Friday 28th July is the end date for satisfying your SG super obligation for the June 2017 quarter.  Late payments will attract substantial interest and penalties which effectively doubles or triples the cost.  Even if your cash flow is tight, this commitment should be paid before anything else.

The final day for payments and reporting of Victorian Pay-roll Tax is Friday 21st July.

For those who lodge a quarterly BAS or IAS, your June quarter activity statement is due to be lodged by Friday 28th July (but 11th August for activity statements if you have registered your business as a user of the Taxpayer Portal and are not paying only fixed $ instalments).   

Please note that lodgement of an activity statement (even if it is nil statement) and payment are two separate requirements.  Late lodgement attracts a minimum non-deductible fine of $180 for every 28 days that a form is lodged late whereas as late payment results in an interest levy (which is often remitted).  A fine is not tax deductible, interest is.  Not that we encourage it, but should you not be able to pay an activity statement in full, do not defer lodgement as the possible fines are significant.  The ATO will of course in time identify that an activity statement liability has not been paid and follow it up; but by this time though the liability should be paid in full anyway and at worst, incur a deductible interest charge far less than any non-lodgement penalty.

Please be mindful that the ATO now reports unpaid business tax liabilities of more than $10,000 not subject to a payment arrangement directly to credit reporting agencies. Please refer to our blog from 12th June 2017 for further information.

I remind you that under the Director Penalty Regime which came into effect in July 2012, PAYG Withholding (WH) and SGC super which remains unreported and unpaid after 3 months now results in the unpaid amounts becoming a personal liability of any directors.  Placing a company into liquidation doesn’t avoid or extinguish this liability.  For further information, please refer to our September 2012 Tips and Traps newsletter.

Please contact us should you have any queries or require assistance.

For other key dates, please click on the Key Dates button on our firm app. If you haven’t done so already, you can download it from either Google Play or the Apple App stores.  Simply type in Maggs Reid Stewart at either site and we should come up first with our logo prominent.  You will also find a heap of useful tools and calculators in our app.

At MRS, we will spend today planning for your success tomorrow.

 

ATO tax debts and credit reporting agencies

From 1st July, the ATO will be reporting taxpayers with unpaid tax debts to credit reporting agencies.

Such reporting will mean that a black mark will added to one’s credit rating where it will remain for 5 years. This of course will have a detrimental impact on one’s ability to obtain finance and to re-finance.

Come 1st July, the ATO will report taxpayers who:-

  • Have an ABN.
  • Have a debt of more than $10,000 which has remained unpaid for more than 90 days.
  • The debt is not in dispute.
  • No payment plan has been established or an existing plan has defaulted.

The key outtakes are:-

  1. Do not let existing payment arrangements default.
  2. If your business tax debt is more than $10,000 and 90 days old, then you need to enter a payment arrangement NOW. We can help you with this application.
  3. It is now more important than ever to not commit to a payment plan than you can’t meet. Don’t commit to the first payment plan that comes into your head.
  4. Consider making extra payments – these can be offset against future instalments should you find that difficulty meeting them.
  5. Speak to us if you have are now having cash flow issues. We have a forecasting tool which can predict what your future cash positions will be like. Not only will we be able to show you what payment plan you can commit to but we look at your overall cash flow issues. Moreover, we can share our wealth of experience and knowledge of ways to improve your cash flow.

 At MRS, we will spend today planning for your success tomorrow.

Did they really think they could get away with it?

Did they really think they could get away with it? I was gob-smacked when I heard about the $165 million tax fraud.

On one level, I was surprised how many people were allegedly involved.

On another level, I was surprised to hear that one of the main players was the son of a senior ATO official. How did it come to pass that not only a ATO official, but being one heading a major corruption and fraud section, saw his son leading what is reported to be an extravagant lifestyle?

What surprises me the most is how they thought that they would get away with it. The scam involved underpaying both employees and contractors.  Surely at some stage someone was going to complain about being underpaid. 

The really dangerous game though was in respect of the alleged underpaid PAYG WH (wages tax) and SG super. Since 2012, PAYG WH and SG super that goes unreported and unpaid for more than three months becomes a personal liability of a director (it doesn’t matter if the business can’t pay).  All the ATO has to do is issue what is called a Directors Penalty Notice (DPN). 

And if that all wasn’t bad enough, the other 40 tonne truck was the fact that the amount of late paid SG super is increased by the addition of lodgement fees and lost earnings. And if all of that wasn’t bad enough, the total amount payable is non-deductible – meaning that any late payment will cost anywhere from 2 to 3 times as much if it had been paid on time.

If all was as reported, then it was just a matter of time.

 

 

What was in the 2017 Federal Budget for you?

 

So what was in the 2017 Federal Budget for you?

There weren’t the nasty changes so often seen in a budget delivered in the first year of a new electoral term.  There were even some welcome announcements – particularly in respect of the extension of the $20,000 instant asset write-off.

That all said, much of what appeared on TV and the press is simplistic and narrow further confused by useless political clap-trap from both parties. 

We have published a briefing paper which sets out the important changes and includes tips thereon.  You can make a request by e-mailing admin@mrsaccountants.com.au

We will be modifying our 2017 pre-year end checklist for businesses to take advantage of any opportunities and avoid any of the pitfalls where possible.

But whilst there may be only be minor adverse outcomes from this year’s budget, we remind you of the superannuation changes announced in last year’s budget which include:-

  • From July 2017, the concessional contribution limit everyone will reduce to $25,000.
  • From July 2017, the non-concessional contribution limit everyone will reduce to $180,000 and the three-year bring forward limit will reduce from $540,000 (for which there are tricky transitional rules).
  • From July 2017, one will not be able make any further non-concessional contributions if their superannuation balance exceeds $1,600,000. 
  • From July 2017, one will be fined and forced to withdraw any pension balance in excess of $1,600,000.  Those affected by these rules and who take action before July also have the option of nominating Capital Gains Tax relief on an asset by asset bases.
  • From July 2017, income on transition to retirement pensions will be taxed.

These and other changes require many to take action both well before and after June and do so based on their individual circumstances.  Many will also need to revisit their estate planning.

At MRS, we will spend today planning for your success tomorrow.

 

 

Lessons from a Master Chef

George Calombaris from Master Chef was in the news during the week for his restaurants under-paying staff.

He apologised for this and said it was a book-keeping oversight caused by the business growing too quickly. This often happens.  And it can happen all too easily as whilst there are support channels and complaint procedures for employees (as there should be), there is no such similar support for businesses.  It is a pity there is such a lack of support for employers as there are so many matters to comply with.  It is particularly difficult for most employers to correctly identifying what award (or awards) employees apply. 

Sometimes, breaches are quiet avoidable – like not issuing pay slips or not issuing employees with the national 10 employment standards.

The costs of getting it wrong can be considerable – both financial (as in fines) and reputation (due to negative press stories).

We ran a seminar on employment obligations two years ago and will look to re-run it again. In the meantime, we can refer you on to a qualified employment expert who can ensure that you comply with all obligations – including PAYG WH, WorkCover, Pay-roll Tax, employment law, awards, FWA provisions.  We can also set you up on a complying payroll program (and guide you away from deficient ones).

At MRS, we will spend today planning for your success tomorrow.

Debts, snails & the ATO

One has two obligations to the ATO – lodge any required return and pay any associated tax. Those in financial trouble or difficulty often fail to do both.  This is a pity as the ATO is quite reasonable in dealing with paying off taxes owed. 

If you are in financial difficulty, you should ensure that the activity statement or return is lodged on time. If they are lodged late, then late lodgement penalties will be levied and the ATO will be far more reluctant to agree to any deferred payment arrangement.

Non-lodgement is particularly an issue for employers as unreported and unpaid PAYG withholding (tax from wages) and SG super become a personal liability if they remain unreported and unpaid for three months. The ATO routinely issue what are called Director Penalty Notices (DPN) and actively chase amounts owing.

A word of caution though. Entering into a payment arrangement with the ATO could be a breach of your loan terms or possibly even your franchise agreement.

The ATO may reverse fines for late lodgement of a Tax Return(s) where there are extenuating circumstances. In an article in The Age on 13th February 2017, a list was provided of reasons that the ATO rejected as not constituting extenuating circumstances and which included:-

  • Snails eat our mail, so your lodgement demand letter must have been eaten.
  • I had a fight with my wife and she works my tax agent so I couldn’t meet with him.
  • My client can’t lodge because she is currently of the North Pole.
  • I could lodge my 2003 Tax Return because suffering from trauma from a serious car accident I had in 2007.

At MRS, we will spend today planning for your success tomorrow.

Simpler BAS reporting

Simpler BAS reporting? Sounds too good to be true doesn’t it?  

The ATO has been in consultation with tax bodies, industry associations, small businesses and accounting software providers. The end result is that one will soon be able to choose to only report:-

  • G1 – Total sales
  • 1A – GST on sales
  • 1B – GST on purchases

But does this really save time and cost?

It depends.

If your accounting processes are basic then it probably will.

But for most people, it won’t constitute any real saving.  With modern accounting software and by implementing automated bank feeds and perhaps even integrated point of sale systems and other modules, it has become much easier to run an up to date and accurate accounting system.  From such a system, completing a BAS is no harder than running a couple of reports after undertaking some checks.  Preparing an accurate BAS should be no more than a by-product of a reliable and up to date accounting system.  So reporting less on a BAS doesn’t mean much.

If running an up to date accounting system is a challenge or impractical, then I suggest that the simpler BAS option may not be the best option. If you struggle to run accurate accounting records, then having fewer labels to won’t actually amount to much.  Perhaps the better solution is to utilise GST Option 3 where one pays a fixed amount as advised by the ATO.  Then, when the year end financial statements and Tax Return have been finalised, an annual BAS / GST Return can be prepared (within which credit is given for the quarterly GST instalments paid).

I suggest that for most, a Simpler BAS is only simpler in name.

At MRS, we will spend today planning for your success tomorrow.