Posts Categorized: Employment matters

Employer reporting obligations for June 2015

For those of you who are employers, Tuesday 28th July is the end date for satisfying your SGC super obligation for the June 2015 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 Tuesday 21st July.

For those who lodge a quarterly BAS or IAS, your June quarter activity statement is due to be lodged by Tuesday 28th July (but 25th 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 $170 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.

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.

WorkCover finally saw sense a few years ago and now issue staggered lodgement dates for the annual Certificate of Rateable Remuneration.  This Certificate advises WorkCover of the exact remuneration for the prior year which triggers a reconciliation process against premiums paid during the 2014/15 year.  The Certificate also serves to advise the expected remuneration for the forthcoming 2015/16 year.  Non-lodgement may result in an excess assessment as their default assessment may increase remuneration by some 20%.  Employers with a March 2016 lodgement date who expect to have lower remuneration in 2015/16 will need to lodge their 2015 Certificate before the end of August to ensure that are not levied an excessive premium in 2015/16.  Please contact us should you have any queries or require assistance.

The government had previously scheduled the introduction of the Single Touch Payroll (STP) reporting for all employers on an progressive basis from July 2016 (with all employers required to adhere to electronic notification by July 2018).  They have deferred the first introduction date of July 2016 as they now (finally) understand that businesses are largely unprepared for such a system and the associated costs.  Under this system, each payment to each employee will be reported to the ATO at the time of payment (including super thereon).  We had been developing  package to our clients who would have been unable or not willing to attend to this real time reporting but will now defer any further action until we have a concrete start date.

Choice of super fund

Offering employees choice of super fund has been compulsory for most employers since July 2005.  It was introduced for two major reasons:-

  • To enable employees to dictate where their super savings where invested, and
  • Overcome the problem of departing employees not being able to continue their existing life insurance – not ideal for one over 45 years of age.

An employer not excluded from the choice system must provide an employee with a Standard Choice Form within 28 days:-

  • To a new employee.
  • To an existing employee who requests to make another nomination.
  • Where you change the default fund.
  • You are unable to contribute to the nominated employee’s fund.
  • The employee’s fund becomes a non-complying fund.

The form must offer a default fund into which contributions will be made if the employee doesn’t nominate a different complying super fund (which can be the employee’s own self managed super fund).  If the employee exercises choice, they must complete the form and return it with certain information as set out on the form.  You can obtain a copy of the form by clicking on the following link:-

http://tinyurl.com/pcnj3oc

Once an employee exercises choice by nominating a fund, an employer has 2 months to arrange for contributions to be made into the nominated fund.

Which funds can an employer use a default fund?  It must:-

  • Be a complying fund,
  • Be registered by APRA to offer a MySuper product,
  • Provide a minimum level of life insurance as set out in the regulations.

If you would like to know more, please call us or ask for a copy of the last edition of our Tips and Traps newsletter which explored this area in more detail.

Salary packaging a car

It never ceases to amaze how many new business clients have their cars owned the wrong way.  Not that they should know – but their former accountant should have, but for some unknown reason, never bothered to advise their client!

So what is the best way to salary package a car?  There is no single answer that applies to all.  It is simply a matter of analysing a client’s situation to work out what is best for them.

If one is provided with a passenger car by one’s own business run through a company or trust, then Fringe Benefits Tax (FBT) tax rules apply.  There are two stages in determining the outcome – and two chances to maximise the outcome.

The first step is to choose which of the two methods to use to determine the value of the car fringe benefit.  The benefit can be valued under either the log book method or the statutory formula method.  I view the log book method as it is what it is.  The only advantage of having a car provided by one’s own business rather than in one’s name is that is that GST can be claimed back.  For many though, the statutory formula can be most generous.  All that matters is how many kilometres are travelled annually; the actual split between business and private doesn’t matter as an implied business use is assumed.  For those with a low percentage of work travel, they can effectively claim a much higher work percentage – and it is audit proof (provided the right declarations are completed).

The second step is to determine the best way to extinguish the fringe benefit value.  Paying FBT tax is rarely the best option as it equates to the highest marginal tax rate.

That said, we recently advised a client on how to salary package their next car.  They were looking at an expensive car and were in the top marginal tax rate.  By structuring the package in the most optimal way, we estimate the client will be $1,800 to $2,800 better off in each of the next 4 years.  So after 4 years, they will have had an average of $9,200 more in their pocket.  Quite a good result indeed.

We would welcome your call to see how we can make you better off.

The most misunderstood tax (and some opportunities)

In my experience, Fringe Benefits Tax (FBT) is the most misunderstood tax.

I say this as the ATO makes corrections in every second FBT audit.  Employers just don’t calculate the correct benefit amount and tax thereon.  It is also amazing how many clients who are employees of large employers are sacrificing salary for fringe benefits and then simply paying the FBT tax thereon without exploring alternate ways to reduce the taxable value.  How does this happen?  It happens as the employer calculates the taxable value of the fringe benefit but does not go on to see how the employee can reduce or extinguish the taxable value of the fringe benefit by making after what are called employee contributions (which they do so at their marginal tax rate).

What is FBT you may ask?  It is a tax on an employer for fringe benefits provide to an employee.  It’s basically anything other than salary or superannuation.

Some employees are lucky – their employer does not have to pay FBT so there is no corresponding adjustment to the employee’s remuneration package.  Exempt employer include public hospitals and charities.

There are also employers that pay a reduced rate of FBT; private schools being the most common example.  Otherwise, the FBT tax rate payable is a flat 49% where one is employed by a “normal” employer.  As I noted earlier, where many employees lose out is that nothing is done to reduce the amount that the FBT tax rate is applied to.

For those employed by FBT exempt employers, you will almost certainly want to salary package as many fringe benefits as possible.

So what are the benefits that those employed by their own business or “normal” employer can package:-

  • Cars.
  • Exempt fringe benefits such as lap-tops.
  • Those benefits subject to the minor, infrequent and irregular exemption.

So can you make yourself better off by sacrificing salary for fringe benefits?  We have a calculator which can show how you may benefit.  Ring us to schedule a meeting so we can show you how we can increase your after tax income.

 

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