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Single Touch Payroll

Single Touch Payroll

Single Touch Payroll (STP) is coming – are you ready?

 

What is STP?

It is the new ATO requirement that will change the way tax and super reporting is managed.  It means that employers will report payments such as salaries, wages, PAYG withholding and Super information DIRECTLY from their payroll solution at the same time as paying their employees.

 

Does it affect me?

Eventually, all employers will be required to comply. Currently it only affects businesses employing more than 20 people.  This started on 1 July 2018.

 

From 1 July 2019 it will include smaller business with less than 19 employees. Transition provisions will be available.

 

What do I need to do?

Check out the ATO information on Single Touch Payroll

 

If you would like to discuss this or any topic further, please email:  mail@watsonerskine.com.au

Employers - Changes to deductions for non-compliant payments to workers

From 1 July 2019 the rules for claiming deductions for payments to workers are changing. 

 

Deductions can only be claimed for payments made to workers where the employer has met the pay as you go (PAYG) withholding obligation for that payment.

 

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

  • withhold the amount from payment before you pay the worker
  • report that amount to the ATO

 

The deduction won't be lost if the following is withheld:

  • An incorrect amount by mistake – to minimise any penalties the mistake can be corrected by lodging a voluntary disclosure in the approved form from the ATO.
  • The correct amount but make a mistake when reporting

 

The deduction will only be lost if there is a withholding or reporting requirement and no amount is withheld or reported to the ATO unless a voluntary disclosure in the approved form is made before the ATO has begun an examination of your affairs.

 

The change is part of the government response to recommendations from the Black Economy Taskforce.

 

From the ATO website:  changes to deductions for non compliant payments to workers.

Fringe Benefits Tax and Christmas Parties

Fringe benefits tax and Christmas parties

 

Christmas parties

There is no separate fringe benefits tax (FBT) category for Christmas parties and you may encounter many different circumstances when providing these events to your staff. Fringe benefits provided by you, an associate, or under an arrangement with a third party to any current employees, past and future employees and their associates (spouses and children), may attract FBT.

 

Implications for taxpaying body

If you are not a tax-exempt organisation and do not use the 50-50 split method for meal entertainment, the following explanations may help you determine whether there are FBT implications arising from a Christmas party.

 

Exempt property benefits

The costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. The property benefit exemption is only available for employees, not associates.

 

Exempt benefits – minor benefits

The provision of a Christmas party to an employee may be a minor benefit and exempt if the cost of the party is less than $300 per employee and certain conditions are met. The benefit provided to an associate of the employee may also be a minor benefit and exempt if the cost of the party for each associate of an employee is less than $300.The threshold of less than $300 applies to each benefit provided, not to the total value of all associated benefits.

 

Gifts provided to employees at a Christmas party

The provision of a gift to an employee at Christmas time may be a minor benefit that is an exempt benefit where the value of the gift is less than $300.

 

Where a Christmas gift is provided to an employee at a Christmas party that is also provided by the employer, the benefits are associated benefits, but each benefit needs to be considered separately to determine if they are less than $300 in value. If both the Christmas party and the gift are less than $300 in value and the other conditions of a minor benefit are met, they will both be exempt benefits.

 

Tax deductibility of a Christmas party

The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) cannot be claimed as an income tax deduction.

 

The costs of entertaining clients are not subject to FBT and are not income tax deductible.

 

Christmas party held on the business premises

A Christmas party provided to current employees on your business premises or worksite on a working day may be an exempt benefit. The cost of associates attending the Christmas party is not exempt, unless it is a minor benefit.

 

Be Aware!

Be Aware!

 

From time to time, the ATO may contact you by phone – but you should be wary of unsolicited phone calls claiming to be from the ATO and offering you a refund, or demanding payment.

 

Never give out your bank account details or your tax file number.

 

The calls - demanding payment - can be upsetting and threatening.

 

You should contact the ATO or your tax agent if you have any concerns.

 

Follow this link for some useful information:  www.scamwatch.gov.au and click here for information from the ATO.

 

If you would like to discuss this or any topic further, please email:  mail@watsonerskine.com.au

 

Read our newsletters at www.watsonerskine.com.au and find current and archived information under client tools, newsletter and report.

Claiming deductions for your holiday home?

Claiming deductions for your holiday home?

As a rental property owner, you probably know that you can claim deductions on expenses for your investment property when it's rented out. But what happens when your property isn't rented out? You can claim a deduction if your property is genuinely available for rent; ask yourself the following four questions to help you determine this:

 

How do you advertise your rental property?

You need to advertise in a way that maximises exposure to potential tenants such as an online site. Advertising in ways that limits exposure to potential tenants, such as by word of mouth, means your property may not be genuinely available for rent.

 

What location and condition is your rental property in?

It's important that your rental property is in a location and condition that tenants will want to rent it in. If your property is poorly cared for, or in a remote area, it is unlikely to be tenanted, and may not be classed as genuinely available for rent.

 

Do you have reasonable conditions for renting the property and charge market rate?

If you place unreasonable conditions that reduce the likelihood of your property being rented out, such as setting the rent above market rate, your property may not be considered genuinely available for rent. Likewise, if you, your family or your friends stay for free, your property will not meet the criteria during that time period. If the property is being tenanted at a discounted rate ('mates' rates') then the allowable deductions are limited to the amount of rent charged, not market rates.

 

Do you accept interested tenants, unless you have a good reason not to?

If you refuse to rent out your property to interested potential tenants without a good reason, this indicates that you may not have a genuine intention to make income from the property and could be reserving it for private use. In this case, your property wouldn't meet the criteria for being genuinely available for rent.

 

Different rules apply if you're renting out your private residence – check out the ATO information on the sharing economy and tax

 

If you would like to discuss this or any topic further, please email:  mail@watsonerskine.com.au

 

Read our newsletters at www.watsonerskine.com.au and find current and archived information under client tools, newsletter and report.



Single Touch Payroll - coming soon

 

    As an employer, what you need to know about Single Touch Payroll (STP)

Key Dates:

1 April 2018 – Employers will need to do a head count of their employees.  If there are more than 20 employees on this date, they will need to make sure the payroll software is STP enabled from 1 July 2018.

1 July 2018 – The official start date for STP

 

What is STP?

This is a new way that employers will report salary and wage payments to the ATO and will be in effect from 1 July 2018.

 It is a government initiative to simplify business reporting obligations.  Single Touch Payroll is a reporting change for employers with 20 or more employees.

Employers will need to report payments such as salaries, wages, PAYG withholding and super information electronically to the ATO directly from their payroll solutions at the same time they pay their employees.

This means that the payroll summaries for employees won't need to be completed at the end of the financial year as the payroll information is reported directly to the ATO in real time throughout the year.

 

Check out the ATO information on Single Touch Payroll

If you would like to discuss this or any topic further, please email:  mail@watsonerskine.com.au

Read our newsletters at www.watsonerskine.com.au and find current and archived information under client tools, newsletter and report.

 

The Sharing Economy

What is the sharing economy?

 The sharing economy connects buyers (users) and sellers (providers) through a facilitator who usually operates an app or a website.

Popular sharing economy services include:

·         renting out a room or a whole house or unit for a short-time basis, for example Airbnb and Stayz

·         providing 'ride-sourcing' services for a fare (considered to be taxi travel) such as Uber and GoCatch

·         providing personal services, including creative or professional services like graphic design, creating websites, or odd jobs like deliveries and furniture assembly, like Airtasker and Mad Paws

·         renting out a car parking space, for example Parkhound and Spacer.

 For information from the ATO on tax obligations from providing services through ride-sourcing, click here

 If you would like to discuss this or any topic further, please email: mail@watsonerskine.com.au

 

 

Taxation ruling on commercial website deductibility

Taxation ruling on commercial website deductibility

A new taxation ruling from the ATO sets out the tax deductibility of expenditure incurred in acquiring, developing, maintaining or modifying a commercial website for use in carrying on a business.

Broadly, the ruling explains that acquiring or developing a commercial website for a new or existing business is considered to be a capital expense, and is therefore not deductible. On the other hand, maintaining a website, including remedying software faults, is generally a revenue expense, so may be deductible.

Deductions you can claim

Deductions you can claim

 

When completing your tax return, you are entitled to claim deductions for some expenses, most of which are directly related to earning your income.

 

To claim a work related deduction: 

  •     You must have spent the money yourself and were not reimbursed
  •     Related to your job
  •     Provide a record to prove it (there are some limited exceptions)

If the expenses were for both work and private purposes, you can only claim a deduction for the work related portion.

 

For more information from the ATO on deductions you can claim such as vehicle and travel expenses, clothing, laundry, gifts and donations, tools and equipment, click here and follow the links.

 

If you would like to discuss this or any topic further, please email:  mail@watsonerskine.com.au

 

Read our newsletters at www.watsonerskine.com.au and find current and archived information under client tools, newsletter and report.

 

Hobby or Business?

Hobby or Business?

 A hobby is a spare time activity or pastime pursued for pleasure or recreation.  Unlike a hobby, a business is run with the intention of making a profit and has basic reporting requirements such as declaring income and claiming expenses. 

 If you determine your activities are a hobby, you don't have any additional tax or reporting obligations. You should check regularly to make sure your activities still qualify as a hobby.

If your activities are a hobby but you supply goods or services to businesses, they may request your ABN when they pay you. As you don't need an ABN, you can use the Statement by a supplier form to avoid the business withholding an amount from their payment to you for not having an ABN.

See the ATO information on this topic here

If you would like to discuss this or any topic further please email:  mail@watsonerskine.com.au

 

ATO sounds warning on illegal tax schemes

ATO sounds warning on illegal tax schemes

SMSF practitioners have been cautioned by the ATO on the dangers of promoting illegal tax schemes, after some advisers putting themselves at risk of prosecution by inadvertently recommending these schemes to clients.

 

The ATO announced yesterday there has been a recent increase in the number of illegal tax schemes, particularly those targeting individuals approaching retirement. It said it has launched an initiative aimed at identifying promoters of these schemes.  

The ATO has advised that some of these arrangements may appear to comply with the law at an initial glance when they are in fact illegal.

 

"We recognise that the vast majority of advisers provide excellent service to protect their clients' interests and we don't want to see them inadvertently advising their clients to enter into these schemes and putting their [client's] retirement nest eggs at risks," the spokesperson said.

"We want to ensure that SMSF advisers and accountants are aware of the dangers of these schemes and are in the best position to prevent their clients from making ill-informed decisions that will adversely impact their future."

 

According to the ATO, dividend stripping arrangements are one of the main schemes being operated.

 

This involves shareholders in a private company transferring ownership of their shares to an SMSF, so that the company pays dividends to the SMSF, with the purpose of stripping profits from the company in a tax-free form.

 

The ATO said it is also concerned about non-arm's length limited recourse borrowing arrangements where an SMSF trustee undertakes a borrowing arrangement with terms that are not consistent with an arm's length dealing.

 

Personal services income schemes are another worrying example, where individuals divert income earned from personal services to an SMSF where it is concessionally taxed or treated as exempt from tax.

 

ATO deputy commissioner Michael Cranston reminded practitioners on the consequences of recommending any of these schemes to SMSF clients.

 

"Promoters of retirement planning schemes may incur significant punishment including prosecution, and where intermediaries are found to have been encouraging clients to adopt these arrangements, the ATO will consider the application of the promoter penalty laws. The ATO may also consider referring the matter to the Tax Practitioners Board," Mr Cranston said.

 

What is a Novated Lease?

What is a Novated Lease?

A novated lease is a type of motor vehicle lease that allows a business to lease a motor vehicle on behalf of an employee, with the responsibility for the lease lying with the employee and the lease payments being made from the employee's re-tax income.

 

It is a three-way agreement between the employer, employee and the finance company.

 

There are two main types of novation arrangement:

 

     A full or split full novation

     A partial novation

 

Follow the link below for more information and find out about:

 

Vehicles purchased under novated leases

 

Or please email us if you need any further information:  mail@watsonerskine.com.au

 

Data Matching

Data Matching to uncover wealth

Matching external data with the ATO data helps the ATO to ensure that people and businesses comply with their tax and super tax obligations. It also helps the ATO to detect fraud against the Commonwealth.  The ATO is now working with insurance provers to identify Australians with policies covering an expanded range of luxury assets.

 

Starting from the beginning of 2016, the ATO has commenced issuing formal notices to insurers to provide policy details, based on specific criteria, it expects to receive 100,000 records that may require further examination.

 

Please check your policies to make sure that you are insured via the correct entity, especially if you are a small business.

 

The ATO is required to comply with strict laws to protect your privacy when they collect data from other agencies and organisations for the data matching programs. These laws include the Privacy Act 1988, the secrecy provisions of the Income Tax Assessment Act 1936, the Taxation Administration Act 1953 and other tax laws.

 

The ATO also adheres to the Privacy Commissioner's Guidelines on Data Matching in Australian Government Administration by preparing and publishing a protocol for each of the data matching programs. In broad terms, each protocol explains the purpose of the program, what data is collected, which agencies or organisations will be providing the data and how the data will be used.

 

Current data matching protocols

 

The ATO prepares and publishes a protocol for each of the data matching programs to explain the program's purpose, what data is collected and how the data will be used.

Please email us if you need any further information:  mail@watsonerskine.com.au

 

 

What is salary packaging?

What is salary packaging?

An employee agrees with their employer to forego part of their future salary or wages in return for the employer providing benefits of a similar value.  By paying for items out of pre-tax salary the employee can reduce taxable income.  Benefits typically provided include cars by way of novated lease, provision of property (such as a computer) or payment or reimbursement of expenses.

As an employee, you need to be aware of how entering into a salary sacrifice arrangement with your employer can affect you:

·         you pay income tax on the reduced salary or wages

·         your employer may be liable to pay FBT on the non-cash benefits provided

·         salary sacrificed superannuation contributions are classified as employer superannuation contributions (rather than employee contributions) and are taxed in the superannuation fund under tax laws dealing specifically with this subject

·         your employer may be required to report certain benefits on your payment summary

For the employer, salary packaging has some advantages, such as the ability to attract employees and may act as an incentive to reward employees.  Benefits that employees can package can be dependent on the type of organisation as well as the items the employer is willing to consider.

There can be additional administration costs to the employer in making sure that it is all processed correctly.

Follow the links below for more information and find out about:

Salary sacrifice and salary packaging

If you would like more information, please contact:

mail@watsonerskine.com.au

Personal Services Income 2016

What is Personal services income?

PSI – Under the Income Tax Assessment Act Personal services income is income produced mainly from your personal skills or efforts as an individual. It doesn't matter whether you are a sole trader or operating through a company, trust or other structure. If the PSI rules apply to you there are restrictions on the types of expenses that are tax deductible for you or your business structure.

You can receive PSI in almost any industry, trade or profession, however, some common examples include financial professionals, information technology consultants, engineers, construction workers and medical practitioners. PSI does not affect you if you are and employee receiving only salaries and wages.

Income is classified as PSI when more than 50% of the amount you received for a contract was for your labour, skills or expertise.

The first thing you need to do is work out if any of your income is classified as PSI. If it is, you then need to work out if special tax rules (the PSI rules) apply to that income.

Follow the links below for more information and find out about:

o    Working out if the PSI rules apply

o    What to do when the PSI rules apply

o    What to do if the PSI rules don't apply

o    Record keeping for PSI

o    Seek further advice

If you would like more information, please contact:

mail@watsonerskine.com.au

Are you ready for FBT?

FBT  - Fringe Benefits Tax – the year runs from 1 April to 31 March.

Fringe benefits tax is a tax employers pay on certain benefits they provide to their employees, including their employees' family or other associates.  The benefit may be in addition to or part of their salary or wages package.

Follow the links below for more information:

o    Types of fringe benefits

o    Do you need to pay FBT?

o    How to register for FBT

o    How to report, lodge and pay FBT

o    FBT exemptions and concessions

If you are a director of a company or trust, benefits you receive may be subject to FBT.  FBT is separate to income tax and is calculated on the taxable value of the fringe benefits provided.

You will need to lodge your FBT return by 21 May, however, if you use a tax agent to prepare your FBT return, different lodgement arrangements apply. 

If you need help with FBT or more information, please contact:

 mail@watsonerskine.com.au

 

Key changes to tax time 2015

If you would like to know more about any of the following topics please contact mail@watsonerskine.com.au.

Temporary budget repair levy commencing 1 July 2014

Mature age worker tax offset abolished

Net medical expenses tax offset phase-out

Medicare levy increase from 1 July 2014

Dependent (invalid and carer) tax offset name change

Dependant spouse tax offset to be abolished

Notice of assessment and tax receipt delivery for myGov account holders

Small business concessions

Accelerated depreciation for primary producers

Research and development tax offset changes

SMSF bank account and electronic service address details

SMSF supervisory levy

SMSF tax rate changes

Conservation tillage refundable tax offset repealed

Managed investment trusts - a new tax system

Company loss carry-back tax offset repealed

Commonwealth penalty units

Each year your SMSF auditor will form an opinion on the fund's financial statements and its compliance with super laws. Generally, as long as you follow the rules, the auditor will give you an unqualified Independent Auditor's Report (IAR).

If your SMSF auditor forms the opinion that the financial reports are inaccurate or you have not complied with the super laws, they will qualify the IAR. Your auditor is also required by law to report certain matters to the ATO in an Auditor Contravention Report (ACR).

The ATO are aware that some trustees (or their advisers) have terminated an auditor engagement when the auditor raised issues or concerns, and appointed a different auditor instead. While it is your right to appoint the SMSF auditor of your choice, you should be aware that an auditor's obligation to report to the ATO exists whether they complete the audit engagement or not. Even if they are removed from an engagement, they are still required to report identified contraventions.

Auditors can also report any additional information they believe is relevant. The ATO encourages auditors to advise if they believe they were removed from an engagement because they raised an issue or concern with the trustees. This information will be considered when the ATO undertake a risk assessment of your fund.

Your auditor is a professional who can help you to understand how a contravention occurred and discuss options to fix it. It is better to work with your auditor when an issue is identified rather than try to cover it up or ignore it.

Is your auditor communicating effectively with you?

When was the last time you sat down with your auditor to discuss his findings about your internal control of your business?

Have you discussed with your auditor the risk of fraud in your business? Fraud is an ongoing problem for businesses and addressing such risks regularly is vital. You need to be discussing these matters with your auditor to safeguard your business.

When was the last time you assessed the skills and effectiveness of your auditor? The Institute of Chartered Accountants has released a guide on assessing your auditor's performance.  Ask us for a copy.

Did you know that your auditor is required to self- assess any threats to independence arising from a long association and document how those risks have been mitigated?

If you want to know more, please feel free to contact us.

Self-Managed Super Funds - is your fund compliant?

The growth in SMSF's in Australia is enormous. Here are some facts:

  • SMSF's are growing at a rate of around 2,500 new funds every month
  • There are now 500,000 plus SMSFs in Australia
  • There are now more than one million SMSF members in Australia
  • 3,000 to 3,500 new SMSF trustees are created each month

Can you be sure your SMSF is compliant with tax law and the SIS Act?

Are you aware of the penalties the ATO can impose on trustees for breaches of the SIS Act?

Do you discuss these matters with your accountant or tax agent?

Can you be sure that your documentation is up to scratch?

The obligations on trustees to get their SMSF paperwork right are ever increasing. Trustees must ensure their SMSF's investment strategy matches the investments made. Trustees must consider insurance for members and document their decision.

Is your SMSF independently audited?

Talk to us today if you want to know more.