Posts Categorized: Employment matters

A welcome change to super

There has been a welcome change to super. Without going through all the rules and a carve out, there was a basic prohibition against employees obtaining a tax deduction for personal contributions into super.  However, from July an employee can claim a deduction for personal super contributions (and the 10% rule has been removed).

How will this work? Say Fred is employed by Turnbull Wind Farms Pty Ltd.  If Fred’s salary was $100,000 the SG super thereon would be $9,500.  Fred could make a personal contribution of up to $15,500 so that he uses all of his $25,000 concessional contribution cap.

A word of warning though – the $25,000 is measured on contributions received by your super fund.  As such, one needs to be aware of contributions for the June 2017 quarter which can legally be paid as late as 28th July 2017 and/or whether an employer has changed from making contributions at the end of each quarter to doing so on a monthly basis.  You need to check with your super fund before making any final contribution(s) as you might be closer to your contribution cap thank you think.

In Fred’s case, he may not need the last $15,500 of income. Paid as a salary, it is subject to tax and Medicare Levy of 39% whereas the tax on the super contribution would only be 15%.  Fred will save tax of $3,720 by making a personal contribution.

So those who will benefit from this welcome change include:-

  • Those whose employer who won’t allow an employee to salary sacrifice into super. You would be surprised how common this is.
  • Those whose employer legally follows the book and bases SG super off the after super salary sacrifice pay. This too is surprisingly common.
  • Those employers who charge through a packaging provider for a super salary sacrifice arrangement.
  • Where a client could better use the cash during the year and only make a contribution at year end.
  • An employee of one’s business who doesn’t wish to incur WorkCover and Pay-roll Tax on employer contributions in excess of SG super.There have been some other welcome changes to super which will outline in future weekly blogs.The removal of the basic prohibition against employees obtaining a tax deduction for personal contributions into super is a welcome change .

There have been some other welcome changes to super which will outline in future weekly blogs.

What should you do? You should discuss your situation, needs and goals with a financial planner to ensure making a personal super contribution is in your best all round interests.

Reasonable travel allowances

Getting receipts whilst travelling can be hard and at times bordering on next to impossible. Getting your employees to do so can be even more difficult.  Fortunately, the ATO recognises this and provides relief through what are called reasonable travel allowances.

One can claim travel expenses in one of two ways:-

  • Have your Company or Trust keep all receipts and claim the deduction in the entity’s Tax Return.
  • Have your Company or Trust pay you an amount no greater than the ATO set travel allowance.  This allowance will be deductible to your Company or Trust.  It will be income within your personal Income Tax Return against which you can claim an amount of not greater than the allowance without being required to substantiate it.  Being an allowance, it is to be included on a PAYG Payment Summary.

Reasonable travel rates are set for:-

  • Domestic travel – amounts in respect of overnight stays for accommodation, food & drink and incidentals.  These amounts vary for each major centre and high cost remote areas. 
  • Overseas travel – amounts for food & drink and incidentals (receipts must be kept for all accommodation).  Allowance rates vary for each country and the employee’s salary level.

The ATO have recently released the rates for 2017/18 in TD 2017/19 which you can access at http://tinyurl.com/ybclevu8

Please don’t hesitate to call if you would like to discuss how you may be able to benefit from using this system.

Finally, please always remember that an overseas travel claim is not deductible unless it is supported by a travel diary or record.  The same applies in respect of a domestic trip which is for 6 or more nights.

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.

 

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.

Christmas and tax

Entertaining and providing gifts at Christmas time to staff, customers and suppliers is a cost of doing business. However, there are some important FBT, GST and income tax considerations and outcomes.

Under-pinning the implications are the following key points:-

Christmas parties, entertainment and gifts are all treated under entertainment tax rules.

  • FBT applies to benefits given to employees. 
  • There are no FBT implications on entertainment and gifts given to customers, clients and suppliers. 
  • There are three methods under which an employer can quantify the taxable components of any entertainment expenditure – in fact there are 38 permutations depending on who is entertained where, how and with whom.  We will largely address the actual method which the vast majority of clients use and which delivers more favourable outcomes.  It is beyond the scope of this briefing to address 12 week log method and we will only touch upon the 50/50 method where relevant. 
  • Christmas comes but once a year and to the best of my knowledge and experience does so on 25th December.  Nevertheless, the ATO treats Christmas parties and gifts as being what are called minor, infrequent and irregular benefits. 
  • Such minor benefits are FBT exempt where they cost less than $300 (including GST) provided the actual method is used to quantify entertainment.

 

The Christmas party

Where entertainment is calculated under the actual expenditure method:-

  • If a Christmas party is held on-site on a work day, the whole cost for each employee will be an exempt fringe benefit.  So too will the spouse’s cost provided the cost per spouse is less than $300.  No income tax deduction can be claimed for the cost of the party including that in respect of any family members that may attend.  Taxi travel to or from the workplace (not both ways) will be exempt from FBT and not tax deductible. 
  • If a Christmas party is held off the work premises, then the whole cost will be exempt from FBT provided the party costs less than $300 per person (employees and their spouses).  No income tax deduction can be claimed for the cost of the party including that in respect of any family members that may attend. 
  • If an external Christmas party costs more than $300 per person then the total cost is subject to FBT. 
  • The cost of any entertainment provided during the party (whether that be at the work premises or outside) will be exempt if it costs less than $300 per head – for example DJ, musicians, clown and comedian. 
  • The cost of entertaining clients, customers and suppliers is not subject to FBT and is not tax deductible. 
  • If any exemption is exceeded then FBT is payable.  Consequently, an FBT Tax Return must be lodged and FBT paid.  Please keep this in mind when completing the 2015/16 FBT Questionnaire in early April 2016. 

Where entertainment is calculated under the 50/50 method:-

  • 50% of the cost will be subject to FBT and this portion will be tax deductible.  The other 50% will not be subject to FBT and will not be tax deductible.  An FBT Tax Return must be lodged and FBT paid. 
  • Only taxi travel from home to the venue will be FBT exempt and not deductible for tax.

 

Gifts

The following gifts are exempt from FBT and are tax deductible:-

  • Hampers, bottles of wine, gift vouchers, a pen set costing less than $300 (inclusive of GST).

The following gifts are subject to FBT and are not tax deductible:-

  • Tickets to a sporting event or theatre, holiday, accommodation, etc.

 

GST

  • The GST component of any tax deductible portion can be claimed back.
  • The GST component that relates to the non tax deductible portion can’t be claimed.

 

Please do not hesitate to call us should you have any queries.  

 

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

 

Single Touch Payroll is coming

Single Touch Payroll is coming. Single Touch Payroll (STP) will require all employers to report to the ATO at the time of every pay how much they are paying and to whom.  No more advising the total of all wages at W1 and tax thereon at W2 on the following activity statement (with the detail only being provided to the ATO with the supply of the PAYG Payment Summaries after the end of the year).

A test program is underway. It will become optional from July 2017 and mandatory for all employers with 20 or more employees from July 2018.  Once the systems is fully up and running the need for PAYG Payment Summaries (group certificates) will be dropped as the ATO will know exactly how much has been paid as of an employee’s last pay.  Employees will be able go into their MyGov account and see these details – as well as the super that is to be paid.

STP will also allow employers to provide employers with TFN Declarations and Super Choice forms.

Thankfully it was announced in September that the proposed requirement for employers to pay the PAYG WH to the ATO at the time employers are paid has been dropped – exactly how cashed up did they think the typical small & medium sized business is?

So if you don’t have a complying and/or efficient payroll system, now is the time to explore your options. Speak to us about your options and what you need to do.

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

SG super obligations

Friday 28th 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.

Travel expenses made simple

Travel expenses made simple. Most would disagree as keeping, and at times even getting receipts when you’re travelling is difficult.  This is a problem that is even more difficult in respect of getting employees to hand over the right records.

Fortunately, the ATO provide some relief. Each year, the ATO issues what are called reasonable travel rates; the determination also covers overtime meal allowances.

Reasonable travel rates are set for:-

  • Domestic travel – amounts in respect of overnight stays for accommodation, food & drink and incidentals.  These amounts vary for each major centre and high cost remote areas.
  • Overseas travel – amounts for food & drink and incidentals (receipts must be kept for all accommodation).  Allowance rates vary for each country and the employee’s salary level.

Employers who pay no more than these reasonable amounts are set by the ATO do not have to withhold PAYG withholding.

Employees who receive a reasonable allowance are not subject to substantiation unless their expenses exceed the reasonable amount.  You can obtain a copy of the 2016/17 rates at http://tinyurl.com/jft95s2

Please always remember that an overseas travel claim is not deductible unless it is supported by a travel diary or record.  The same applies in respect of a domestic trip which is for 6 or more nights.

We would welcome your questions as to how you may benefit from using this system.

 

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

 

Deadline for 2016 PAYG Payment Summaries

The deadline for 2016 PAYG Payment Summaries being lodged was 14th August.  Whilst employee should have received their PAYG payment summary by 14th July, employers had until 14th August to lodge a copy of each individual summary as well as the PAYG Payment Summary Statement.

If you haven’t lodged these yet, please do so immediately to avoid the imposition of any fines. And for those lodging paper copies, please remember to keep a copy of the PAYG Payment Summary Statement for your records.

There are however two exemptions:-

  1. September 30 where we as tax agents have been involved in there preparation.
  2. The date of lodging the 2016 Tax Return where only family members have been employed.

Even though you may have until as late as March 31, 2017 to certify your 2016 WorkCover remuneration, now would be a good time to do so, particularly if your estimated remuneration for 2017 will be less than for 2016.

And as always, please don’t hesitate to ask as for assistance with any part of this.

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 14th July and that copies of those Payment Summaries as well as the PAYG Summary Statement are to be sent to the Tax Office by 14th 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.