tax

Employees and payment summaries

The ATO has also reminded employees that how they get their end of financial year information from their employer, showing their earnings for the year, depends on how their employer reports their income, tax and super information to the ATO.

Specifically:

  • Employers that are not yet reporting through STP will continue to provide employees with a payment summary by 14 July.
  • Employers that report through STP are no longer required to give employees a payment summary; instead this information will be provided in an ‘income statement’, available via the employee’s myGov account by 31 July (i.e., when the employer marks it as ‘Tax Ready’).

Editor: We will be able to access employee clients’ payment summaries or income statement information through our connections with the ATO (this has not changed).

Please contact our office if you have any queries about STP (whether as an employer or employee).

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Single Touch Payroll Update

Employers with 19 or fewer employees are required to start reporting through Single Touch Payroll (‘STP’) from 1 July 2019.

The ATO will be working with employers to support them as they transition to STP, including allowing small employers to start reporting any time from 1 July to 30 September (and the ATO will also be “generous” in granting deferrals to small employers who need more time to start STP reporting).

Note also that employers with 19 or less employees do not need to report ‘closely held payees’ in 2019/20 and can report closely held payees information quarterly from 1 July 2020.

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FBT: Record-keeping exemption threshold & Benchmark interest rate

Record-keeping exemption threshold

The exemption threshold for the FBT year commencing 1 April 2019 is $8,714 (up from the amount of $8,552 that applied in the previous year).

Benchmark interest rate 

The benchmark interest rate for the FBT year commencing on 1 April 2019 is 5.37% per annum (up from the rate of 5.20% that applied for the previous FBT year).

This rate is used to calculate the taxable value of:

n       a fringe benefit provided by way of a loan; and

n       a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

Example

On 1 April 2019 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a. with interest charged and paid six-monthly, and no principal being repaid until the end of the loan.

The actual interest payable by the employee for the current year is $2,500 (i.e., $50,000 x 5%).

However, the notional interest, with a 5.37% benchmark rate, is $2,685, so the taxable value is $185 (i.e., $2,685 – $2,500).

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FBT issues on the ATO’s radar

The ATO has updated its list of ‘What attracts our attention’, with six items that specifically relate to fringe benefits tax (‘FBT’), as follows:

  • Failing to report motor vehicle fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
  • Incorrectly calculating car parking fringe benefits due to:
    • significantly discounting market valuations;
    • using non-commercial parking rates; or
    • parking rates not being supported by adequate evidence.
  • Mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer’s tax return.
  • Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising.
  • Not reporting fringe benefits on business assets that are provided for the personal enjoyment of employees or associates.
  • Not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.
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Scammers impersonate ATO phone numbers

The ATO is warning that scammers have adopted ‘Robocall’ technology to target taxpayers across the country.

Assistant Commissioner Gavin Siebert said: “Scammers are sending pre-recorded messages in record numbers and are manipulating caller identification so that your phone displays a legitimate ATO phone number despite coming from an overseas scammer”.

“If the scammers do make contact, they will request payment of a tax debt – usually through unusual methods like bitcoin, gift cards and vouchers.  Legitimate ways to pay your tax debt are listed on our website.  The scammers will threaten you with immediate arrest, attempt to keep you on the line until payment is made and may become rude or aggressive.”

The technique of displaying misleading phone numbers is known as “spoofing” and is commonly used by scammers in an attempt to make their interactions with taxpayers appear legitimate.

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New industries entering the taxable payments reporting system

The ATO has reminded businesses that provide road freight, information technology (‘IT’), security, investigation, or surveillance services that they need to lodge a Taxable payments annual report (‘TPAR’) each year to tell the ATO about the payments they make to contractors who use an Australian business number (‘ABN’) (even if these services are only part of their business activities).

Such clients’ first TPAR will be due by 28 August 2020 for payments made from 1 July 2019 to 30 June 2020.

Editor: We can help with the lodgment of this report, but affected clients will need to keep records of the payments made to contractors.  The required information, including the contractor’s ABN, name, address, and total amounts paid during the financial year (including GST) will normally be contained in the invoices received from the contractors.

tax

2019/20 Budget Update

The Government handed down the 2019/20 Federal Budget on Tuesday 2 April 2019.

Some of the important proposals include:

  • Increasing and expanding access to the instant asset write-off from 7:30 pm (AEDT) on 2 April 2019 (i.e., ‘Budget night’) until 30 June 2020, as follows
    • Increasing the instant asset write-off threshold from $25,000 to $30,000.
    •  Making the instant asset write-off available to medium sized businesses (with aggregated annual turnover of $10 million or more, but less than $50 million).

Editor: The legislation to make the above changes to the instant asset write-off has already been passed and received Royal Assent.

  • Allowing individuals aged 65 and 66 years to:
    • make voluntary superannuation contributions (both concessional and non-concessional) without meeting the work test from 1 July 2020; and
    • make up to three years of non-concessional contributions under the bring-forward rule (without satisfying the work test).
  • Increasing the upper threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022, and reducing the 32.5% marginal tax rate to 30% from 1 July 2024 (in addition to changes already legislated).
  • Increasing the Low and Middle Income Tax Offset (‘LAMITO’), with effect from the 2019 income year, to provide tax relief of up to $1,080 per annum, as well as an increased base amount of $255 per annum.
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Federal Election called!

The Federal Election has been called for Saturday 18 May 2019, and the Governor-General has ‘prorogued’ the Parliament from 11 April 2019 until 18 May 2019, and dissolved the House of Representatives.

The election will also be for half the Senate.

As a result, all outstanding Bills have also lapsed (so any measures not yet passed will need to be reintroduced in new Bills after the election if they are to become law).

intangible-capital-improvements

What’s new for Australian business

The ATO has recently reminded small businesses of the expanded tax concessions potentially available to them, as outlined below:

  • The pending increase in the small business instant depreciating asset write-off to less than $25,000 (as discussed in further detail above).
  • Accelerated depreciation deductions for primary producers for eligible fodder storage assets, as well as for fencing and water facilities.
  • Assistance for primary producers impacted by drought at Drought Help, or by contacting the ATO on 1800 806 218.
  • A lower company tax rate of 27.5% for companies qualifying as a Base Rate Entity (‘BRE’).
  • Increased Small Business Income Tax Offset (‘SBITO’) for eligible sole traders and individual partners and beneficiaries.

Finally, the ATO has reminded taxpayers that more businesses are now eligible for most small business tax concessions.

Specifically, from 1 July 2016, a range of small business tax concessions became available to all businesses with an aggregated turnover of less than $10 million (i.e., the turnover threshold).

Previously the turnover threshold was less than $2 million.  The $10 million turnover threshold applies to most concessions, except for:

  • the SBITO – which has a $5 million turnover threshold from 1 July 2016; and
  • the small business CGT concessions – which continue to have a $2 million turnover threshold.

Note: The relevant turnover threshold for accessing the lower company tax rate is $50 million from  the 2019 income year (increased from $25 million in the 2018 income year).

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Non-compliant payments to workers

The rules for claiming deductions for payments to workers are changing.

From 1 July 2019, businesses can only claim deductions for certain payments made to workers where they’ve met the Pay As You Go (‘PAYG’) withholding obligation for that payment.

Specifically, a business can only claim a deduction for the following payments if it complies with the relevant PAYG withholding rules:

  • Salary, wages, commissions, bonuses or allowances to an employee.
  • Directors’ fees.
  • Payments to a religious practitioner.
  • Payments made under a labour hire arrangement.
  • Payments made for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.

Where the PAYG withholding rules require an amount to be withheld, the business must:

  • withhold the amount from the payment before they pay their worker; and
  • report that amount to the ATO.

Importantly, a deduction will not be lost if an incorrect amount is withheld (or reported) by mistake.