Posts Categorized: Employment matters

Important SG super changes

As you will have read in our Budget analysis and no doubt been notified by your software provider, please ensure that you are calculating SG super as from July at 10%. 

It is opportune to remind you that SG is payable on what is called Ordinary Times Earnings (OTE).  OTE is not calculated on a number of items including overtime and some bonuses.  You can read more here.

And in closing just a reminder that the removal of the $450 monthly; threshold is due not to be removed until 1st July 2022.

Payroll processing is complicated.  Moreover errors can prove costly.  We are therefore pleased that Xero now interacts with KeyPay (QuickBooks Online has used a limited version for 5+ years).  Please ask us if you would like a review of your payroll system.

Best to pay your employee super now?

Most businesses pay tax on an accruals basis.  That means that income is recognised when an invoice is raised; likewise expenses when the bill is received.  Those assessed on a cash basis pay tax based on when income is received and expenses paid.

Accrual taxpayers can deduct bills received by 30th June and other liabilities incurred.

However this doesn’t apply to employee super. 

An employer can only deduct the super it has actually paid during the year.

TIP

Whilst employers have to 28th July to pay the June quarter super, it may be best to pay it now.  Paying it now will allow a tax deduction to be claimed within the 2021 Tax Return.  You will pay less tax.  You will also pay less PAYG Instalments next year.

It’s common sense – might as well pay it now for what is due before the end of next month anyway.

But if covid business life is tough and you are in a loss situation, there is no point in accelerating the cash flow.  Mind you, if cash is not the problem, corporate taxpayers may still wish to do so as they can claim back more 2019 and/or 2020 tax under the new loss carry back rules.

As with all years, proper tax planning takes all these considerations and matters into account to deliver you the best result.

We have a great process and one that delivers a plain English report.  That report sets out what you need to do and what the tax and cash flow benefits will be.  Call us now – it’s best not left to the final days of June.

What’s in the Budget for you?

What’s in the Budget for you? 

Probably significantly more than you think.

As what is now unfortunately the norm, there were plenty of pre-announcements before Budget night.  But there is much more to the Budget that was announced on Budget night or leading up to it.

In addition to some key business announcements (extension of loss carry back company rules and instant asset write-off) there were very welcome announcements to being able to getting more money into super.  Welcome I say as how can one provide for retirement with a contribution cap – which currently sists at $25,000 before being eroded by 15% tax, life insurance premiums and for some an extra 15% tax).

Also of note were the proposed changes to personal and self managed super fund residency rules.  I say welcome as the existing rules are quiet archaic in context of how people today live, work and travel – mind you we still aren’t going anywhere for a while with covid.

We will explore some of the key measures in our next survive and thrive webinar.  It will beheld at 5.30pm on Wednesday 2nd June and you can book here – https://tinyurl.com/reg0206

We will also flesh out some opportunities in upcoming blogs.

But having said all that, please keep in mind that:-

  • A Budget is only ever a series of announcements,

  • They still have to be legislated,

  • They may be changed slightly and

  • Many have start dates form July 2021 – and we may have a change of government before then.

Please though don’t hesitate to call us if you any questions.

Important action if you employ casual employees

Do you employ any casual employees?

If so, recent changes to the Fair Work Act require your attention.

In late March the Fair Work Act was amended to require an employer to convert the employment basis to either full or part time where:-

  • Employee has been employed for more than 12 months and

  • During previous 6 months, there has been a regular and systematic pattern of working hours.

Employers are required to make the offer of either full or part time employment the later of either:-

  • Before 27th September 2021 or

  • Within 21 days after an employee’s 12 month anniversary

There is however a provision to not make such an offer where there a “reasonable business grounds” not do so.  Unfortunately, this is a test that will be analysed in hindsight, so documentation of this decision will be imperative.

It should also be noted that many modern awards already stipulate a conversion from casual employment.

It must be said that casual employment is often misunderstood.  If someone works regular days then they are not a casual employee.  A casual is one who may be called upon the work on a Friday and Saturday night at a function, not the next week and then the following Saturday.  That said, there are many shades of grey.

You can read more at The Fair Work website here including the definition of an casual employee.

You can download the casual employment information sheet here.

Employment law is truly a specialist area.  Please let us know if you would like a referral.

 

Entertainment can be taxing

Entertainment can be taxing.  That’s an understatement as there are 3 aspects – tax deductibility, GST and Fringe Benefits Tax (FBT).  There are 38 outcomes depending on who does with whom where and why.  It therefore requires careful analysis

No wonder the ATO has such a great strike right in FBT audits on entertainment. 

But that’s not all that has to be considered.  For FBT purposes, an employer has to determine which of three methods produces the best result.  Although that said, the actual method for quantifying the FBT taxable value of entertainment is usually best for small employers (but not always!).

You can read more on the following factsheet – FBT Flyer – Meal Entertainment Factsheet

Confused or concerned?  That’s understandable.  We would be happy to discuss your situation.

We take this opportunity to state that the prudent action is to lodge an FBT Tax Return – even if nothing is payable (which is usually the case for small businesses).  This extra step is not a waste of time nor money as it starts the audit clock ticking – after 3 years the ATO can’t go back and audit you; don’t lodge an FBT Tax Return and the ATO can go back as far as they like.

Urgent SG super reminder

Wednesday 28th April is the end date for satisfying Super Guarantee (SG) super obligations for the March 2021 quarter.

But beware as some of the clearing houses have a submission and payment deadline well before then.  May be even today!

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; which is 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 $57,090

  • Non-residents performing work for an Australian business outside Australia

If your payroll system has been set up correctly then it will perform these calculations for you.  We would welcome the opportunity to assist you with this and if need be refer you to a good book-keeper.

SG 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 SG rate remains at 9.50%.

So if you haven’t paid your employer super obligations already, we recommend doing so today!

 

Do I have to pay FBT on my workhorse vehicle?

Do I have to pay FBT on my workhorse vehicle (think utes, vans and taxis)?

Well it depends.

There has and still is an exemption for private use that is minor, infrequent and irregular.

The problem is the ATO recently announced safe harbour provisions.  And those safe harbour provisions are probably more restrictive than what most people think.

These provisions also dictate record keeping that wasn’t required previously.

Want to know more – then click on the following link.

FBT Flyer – Workhorse Vehicles and new safe harbour provisions

Why is this important?

Well if any private use doesn’t satisfy the safe harbour tests to minor, infrequent and irregular travel then the business is subject to Fringe Benefits Tax.

And this leads to the next point of how important it is to lodge an FBT Return (even if no FBT is payable).   Lodging and FBT Return starts the audit clock ticking.  When three years have passed, the ATO can’t go back and audit that year.  Don’t lodge a FBT Return and they can go back as far as they like.  

Not sure about your exposure?  Don’t want to risk not complying and paying FBT 9and penalties and interest)?  Then call us.

 

Why getting your FBT exposure right is so critical

So why getting your FBT exposure right so critical?

Before we answer that question, I will answer the base question of what is a fringe benefit.  A fringe benefit is anything provided by an employer to an employee other than by wage/salary and super. 

As such it includes such things as:-

  • Passenger cars

  • Car parking

  • Entertainment

  • Selling firm’s goods at a discount

  • Providing accommodation

  • Paying any employee bill whether that be school fees, mortgage, health club membership and so on.

And this leads to the understanding of how to address your FBT exposure which can be summarised as:-

  1. Determine whether you the employer are exempt (charities, public hospitals) or subject to a reduced rate (private schools).

  2. Determine what fringe benefits you have provided to whom

  3. Assess whether an exemption or concession applies to that type of benefit.  There are some special rules which benefit small businesses.

  4. Calculate the taxable value

  5. Then, and this what most people get wrong, determine whether the employee is better off making a contribution to reduce the fringe benefit rather than pay FBT tax (which is equivalent to the highest marginal tax rate).

  6. Prepare and lodge the FBT Tax Return.

The reality is that all too many employers get this wrong as the ATO is successful in making an adjustment in 50% of FBT audits.  That’s every second audit!

And don’t think the ATO doesn’t think this is a big audit target.  One recent project was their recording the number plates of all utes parked at an AFL game at the MCG.  Those plate numbers registered to companies were then cross matched with lodged FBT and Income Tax Returns.  The ATO had a field day.

So what should you do?

Well for our clients we run through a checklist to make sure all benefit s provided are identified.  We will then work through (a) quantifying the benefit before (b) determining the most efficient manner of dealing with the benefit and then (c) lodge an FBT Return (we do this even if the taxable value has been reduced to nil as the ATO have therefore issued an assessment and then only have two years to audit.

And with that I return to the question of why is getting your FBT exposure right is so critical?  As you will now be able to appreciate there is more than answer to this question:-

  • It is a key ATO audit area.

  • If it is wrong in one year, the ATO will start auditing all years.

  • With the FBT tax rate being the equivalent of the highest marginal tax rate, the tax can be significant.

  • The ATO readily applies both interest and penalties.

  • The audit clock will start clicking once an FBT Tax Return sis lodged – after that the ATO can’ t go back further than 2 years.

Do you have any questions?  We would welcome the opportunity to discuss them with you.

JobKeeper reminder & reality check

We will start with an important reminder to meet your turnover reporting obligation in order to receive your February JobKeeper entitlement by this coming Friday.  This means you have to report the actual GST turnover for the month of February and what you think it will be for March.

And with JobKeeper due to conclude with the fortnight ending 28th March, this is the second last time you or your accountant will need to complete this task.

The bigger issue though on the horizon is what happens when JobKeeper ends?

Whilst the drop in the unemployment rate and growth in the GDP rate have been welcome, come April small businesses will be on their own.  There is no (as yet but will there be?) targeted assistance to those industries decimated by covid.

So the four biggest questions you face are?

  1. How will your business survive?

  2. How will the businesses of your customers and suppliers survive? 

  3. And have you, your customers and suppliers addressed the impact of the end of rental relief?  And not only may you soon be paying full rent, what about the portion of relief that was deferred?

  4. And are your financiers going to continue to support you?

And with cash flow being the life blood of any business you need to understand what the impact starting in as soon as 3 weeks.  Some accounting software providers market their cash flow capabilities, but it is very simple and for the immediate short term.

We however have advanced software which can:-

  • Model out various post 28th March scenarios.

  • Show the cash flow peaks and troughs in the months ahead.

And with our many years of collective experience of working with all sorts of industries, we are able to provide recommendations as to how to rectify and improve what is predicted to unfold.

Our first meeting with clients is free of cost or obligation and we welcome your call.

Am I paying the right award wage?

Awards set out employment conditions and minimum pay rates. 

There are over 100 industry based awards and they cover most workers in Australia.  That said, whilst financial planners come under an award, accountants don’t; but some workers within an accounting firm may come under an office award depending their duties.

Larger employers with a registered agreement in place have the terms of that agreement over-rule any award(s) that may otherwise be applicable.

Awards can also determine what the default super choice fund.  No wonder industry super funds have go to be so big!

So with all this complexity it’s important to make sure you pay under any applicable award.  But how do you do that?

You can find a list of awards at – https://www.fairwork.gov.au/awards-and-agreements/Awards/list-of-awards

Better yet, you can see what awards that may relate to your employees at Fair Work Australia’s award checker – https://www.fairwork.gov.au/awards-and-agreements/awards/find-my-award/  Please also refer to clause 4 as that is usually the clause that sets out who is covered by the award.  You can also check the most important job classifications which can usually be found within the pay clause or a schedule.