Posts Categorized: BAS and super obligations

Which PAYG instalment method to use

Which PAYG instalment method to use is a question that comes up at the start of every financial year – or rather with the September activity statement.

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.

One can pay PAYG instalments under one of two methods – by paying a fixed dollar amount as advised by the ATO or applying a percentage advised by the ATO against the income of that quarter. So what are the relative advantages and disadvantages of each method?

Under the fixed dollar method:-

You know what you are up for.
If the current year (in this case 2016/17) is much better than 2015/16, then any shortfall will not be payable until the Tax Return for 2017 is lodged – this could be as late as May 2018.
It’s a simple method as it doesn’t require any calculations.
If the amount is too high then it can be very downwards – but I would not do so on the September activity statement when the year is far from known.
Should it be that the PAYG Instalments already paid are too high then a variation can be made and any overpayment refunded.
This is a better method to use if you wish to avoid complex and costly calculations of your gross income years (which is required under the percentage method).
As it is a simple method, no extension to lodge is granted where there is only a PAYG instalment payable; the extensions to lodge through the Taxpayer or Tax Agent Portal are not available.

Under the percentage method:-

The ATO determines the percentage by dividing the prior year’s tax bill into the prior year’s tax liability. It is a rough method but one which usually approximates the appropriate tax.
One will pay more if the income in 2016/17 is greater than 2015/16. People who prefer to pay the appropriate (or should I say approximate) amount of tax each quarter as they go prefer this method.
It is a good method to use if one’s income is likely to be less than the year before as one will pay less tax. Under the fixed dollar method, one would be forced to vary the amount which could be problematical (see below).
As the percentage method requires a calculation of gross income, an extension to lodge is available to those who lodged through the Taxpayer or Tax Agent Portal

Two other important points to note are:-

You are entitled to vary an amount or instalment downwards – but do so carefully as the ATO has the right to issue a fine for gross underestimations.
It may be that your September activity statement offers only the fixed dollar or percentage method. If you do wish to change method, a request to the ATO can be made to reissue the activity statement with both methods being offered.

We would welcome the opportunity discuss which is the best method for you.

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

SG super obligations

Friday 28^th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 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 Withholding Rate tables

For those of you who need to access PAYG Withholding Rate tables, we now have an easier option for you in that our new firm app links directly to the ATO’s very useful PAYG WH (wages tax) calculator.

I take this opportunity to remind you that PAYG Payment Summaries were due to be issued to employees by 14^th July and that copies of those Payment Summaries as well as the PAYG Summary Statement are to be sent to the Tax Office by 14^th August. Please ensure you keep a copy of those documents. However, employers that employ only family members have until the date of lodging their 2016 Tax Return to lodge their payment summary stationery (provided they have a good lodgement record).

I also take this opportunity to remind you that the Superannuation Guarantee rate remains at 9.5%.

Even if you have tax tables within your software, we remind you download our firm app which has many useful tools and calculators. It is designed to be on your front screen from where you can undertake any number of business activities and to attend to your tax affairs. Tell your family, friends and business colleagues about it as there the app has many uses for everyone.

Please do not hesitate to call us if you have any queries in relation to the above or require any assistance in loading a new tax table into your software.

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

Year end processing tips

We are accountants because we like being accountants. But I can assure you that we gain no joy from fixing fundamental book-keeping tasks, particularly when the result is our fees being higher than what they should otherwise be. We therefore provide you with the following year end processing tips.

You can make our life more enjoyable and reduce your accounting fees by attending to the following accounting tasks before inviting us to work on your file:-

Reconcile all bank accounts, loans and credit cards.
Investigate any reconciling items.
Reconcile payroll before issuing any payment summaries.
Count and value stock.
Review last year’s depreciation schedule and advise us what has been sold or scrapped.
And the most time consuming one – do not change a period’s figures if we have lodged a Tax Return or BAS for that period. If you need to change an old debtor or creditor balance or make some other change then please call us and we will happily either (1) advise you how to correct the item, (2) use Logmein to make the adjustment and/or show you how to make the adjustment without affecting the prior period, or (3) easier yet, we will log into your cloud accounting system and make the change the correct way.

You can also find how to guides for MYOB, Reckon, QuickBooks Online and Xero at:-

MYOB

http://help.myob.com/wiki/display/ar/Closing+a+financial+year

RECKON

http://kb.reckon.com.au/issue_view.asp?ID=4155

QUICKBOOKS ONLINE

http://www.intuit.com.au/r/product-updates/end-financial-year-using-quickbooks-online/

XERO

https://help.xero.com/au/Q_YearEnd

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

Super Stream tips

Some employers may think it is another compliance burden. What it is though is a streamlined system – and many experienced book-keepers that I have spoken to have been glowing in their stories about the great time savings even in these early stages. Thankfully, gone are the days where an employer with 18 employees can be paying separately into 8, 10 or even 18 different funds – now they have just one reporting and payment process. As some are still to register, here are some Super Stream tips.

You can use either your payroll software, a clearing house or one of the large super funds.
I would avoid using the large super funds and anything but the ATO’s clearing house as their processing times can be as long as 10 business days – which means to meet the deadline of the 28^th day after quarter end, some will have to report and contribute two weeks beforehand.
The ATO provides a free clearing house for those employers with less than 20 employees. Not only is it a free service but contributions made to this clearing house are treated as being made on the day they are made to the clearing house (as it is an approved clearing house).
It is called the Small Business Super Clearing House (SBSCH). You can register for it at – https://www.ato.gov.au/business/super-for-employers/paying-super-contributions/small-business-superannuation-clearing-house/#
To register, you will a number of items at your fingertips.
Apparently the registration works best when done in Chrome.
Employers have since 2005 been required to provide their employees with choice of super fund (and which nominates a default super fund if the employee does not exercise their choice). An old form though will not have some information that you will need to complete the registration and make payment.
You will need the USI (Unique Superannuation Identifier) and ABN of each super fund.
You need every employee’s TFN and their super fund member number.
You can get the USI from your employee’s last member’s statement, by ringing the fund or checking a USI register which you can find at http://superfundlookup.gov.au/DownloadUsiList.aspx
If an employee nominates their complying self managed super fund, then they will need to provide you with its electronic service address.
Please be very careful when selecting the fund when setting up your clearing account as payment to the wrong fund will mean you still have to pay the correct fund. The registration will bring up the name of the selected fund but as many names are very similar, please ensure you select the right one.
You will be asked for your banking account details in case there is a refund to be paid back.
You will still need to make payment by EFT or BPay; payment will not be automatically deducted from your nominated bank account.
Please note that you will be issued with a different account number to pay into for each entity. To avoid paying into the wrong account and having the payment returned, you will need to give each SBCH bank account a different name within internet banking.
It is a legal requirement that you send the payment and message on the same day – so don’t do it at 5 minutes to 6pm and then miss the banking cut-off.

Please don’t hesitate to ask us any questions you may have.

You may also like to watch the ATO’s video (but don’t panic s it was published before the October extension was announced).

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

Are you Super Stream ready?

Are you Super Stream ready? You need to be as it is the only way that employers can both report and pay employer super contributions after 30th June 2016.

It won’t apply to personal contributions nor to employer contributions to a related party’s self managed super fund. Every other employer contribution by every employer in the country must be made through Super Stream.

You can learn more by watching the following video from the Australian Taxation Office.

Or better yet ask us to help you personally.

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

The Budget

The following public domain You Tube clip from BT Financial Group is a great summary of The Budget as it affects most people.

It is an interesting one with some bad news, a few sweeteners but also some changes that will benefit many

There are however a range of other tax changes which we will address in upcoming blogs that will benefit businesses and individuals alike.

https://www.youtube.com/watch?v=qDMhN6zSoZU

Running out of cash – and what to do about it

Summer is a great time of year isn’t it?

Most people think so – but not all business owners.

Rent, wages and other fixed expenses all must be paid whilst most businesses see their sales fall over the holiday period. Just because everyone is back at work, doesn’t mean the ship rights straight away. And then there is the December BAS quarterly payment due by month end! Running out of cash is stressful and can break even successful businesses.

There a few things that can be done now to get through these times. But the real lesson here is not to let it happen again.

We have a great tool that can generate a workable cash flow from a cloud accounting system within 15 minutes. Our client’s that use this tool have a clear idea of what their future looks like – which allows an analysis of how they can control it. And if it is projected to get tough, they can go the bank and ask for help in advance of the problem (and not when the house is burning down).

For those larger business, we also have a program that generates four way budgets – in addition to cash flow, it generates at the click of a button a Profit and Loss, Balance Sheet, and Funds Flow Statement all of which are backed up by supporting schedules. These reports blow away most bank managers. In fact, during the week I received glowing feedback from a franchisor as to the detail and reliability of the budgets I prepared for a prospective franchisee.

We would welcome the opportunity to help you take control of your cash flow and business. Why not call me and arrange a free initial meeting.

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

Which PAYG Instalment method is best for you?

With respect to 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.

Why you should use the GST instalment method

Being the start of another activity statement year, one can exercise the choice as to the method to be used to calculate GST and pay GST for the 2015/16 year.

We recommend that Option 3 GST Instalments be selected in most cases for those that lodge a quarterly BAS.

Option 3 (which is only offered to small businesses with turnover of less than $2,000,000) is far and away the best option in the majority of cases 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 it 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 Option 3 is adopted, then the ATO will issue an Annual GST Return at the end of the financial year. This form is used to net 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.