Category: Blog

Low and Middle Income Tax Offset Now Law

The Federal Government’s Personal Income Tax Plan is now officially law. For 2018/2019 (the financial year just gone) the centrepiece of this plan was an increase to the low and middle income tax offset (LMITO) from a maximum $530 to $1,060. 

Taxpayers with a taxable income:  

  *   of $37,000 or below can now receive a LMITO of up to $255  

  *   above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080  

  *   above $48,000 and below $90,000 are now eligible for the maximum LMITO of $1,080  

  *   above $90,000 but is no more than $126,000 are now eligible for a LMITO of $1,080, less an amount equal to three per cent of the excess.  

With Tax Time 2019 just over a week old, 810,000 individual tax returns have now been lodged, an 88% increase from the same time last year – an increase largely attributable to anticipated refund as a result of the increased LMITO. 

Despite the increase, ATO commissioner Chris Jordan has sought to reassure taxpayers that returns will begin flowing through from the end of this week. 

“We were able to work over the weekend to make changes to our systems once the legislation was passed last week,” Mr Jordan said on Tuesday. 

“All safety nets have been lifted from our processing, so our processing is now working absolutely full bore, 100%.” 

“People do not need to do anything special; they just put their return in, and we will calculate their offsets and money will be hitting people’s bank accounts by Friday this week.” 

Now the law has been passed, you may wish to get your 2018/2019 records to your Tax Agent and instruct them to lodge early rather than in the first part of next year (which is the normal lodgement time if lodging with a Tax Agent). By doing so, all other things being equal, you will bring forward your LMITO entitlement with a potential additional refund of up to $1,080 (subject to the above income limits, and subject to not otherwise having underpaid tax during the year). 

If you lodge your own tax return, then remember you do not need to claim the LMITO separately – rather the ATO will process your claim automatically upon lodgement. 

Single Touch Payroll for Micro Employers

If as an employer you are not ready for Single Touch Payroll (STP) don’t panic!   Although 1 July has rolled around, smaller employers (those with less than 19 employees) have three months from this date (until 1 October 2019) to be STP-compliant. Furthermore, no penalties will be imposed during the initial 12 months of STP, therefore there is no need to be worried. 

While for many employers, their STP solution will be to adopt STP-compliant software or outsource their payroll to their registered Accountant or Bookkeeper, many very small employers may be eligible for the micro-employer concessions including: 

  • Reporting quarterly through their registered accountant or bookkeeper for two-years until 30 June 2021 (instead of reporting each time you pay your employees) 
  •  Adopting a free or low-cost, simplified STP solution (as opposed to payroll software). 

Micro employers are those with less than five employees at the time of application. Virtually all employees are counted (including casuals, those on leave, and employees working overseas), however closely-held payees are excluded – namely, family members of a family business, directors or shareholders of a company, and beneficiaries of a trust. 

In the event that a business is currently a micro employer but later no longer qualifies as it puts on extra staff, the ATO adopts a different approach in respect continued eligibility for the above concessions. While eligibility for quarterly reporting will be unaffected by an increase in staff above four, the ATO expects employers to cease using the simplified, low cost STP reporting solutions if they later cease to qualify as a micro employer. This would then generally mean adopting STP-compliant software, or lodging via your registered accountant or bookkeeper. 

In respect of the low-cost, simplified STP solutions, an updated list of products now available and currently in development is maintained on the ATO website.  <//www.ato.gov.au/business/single-touch-payroll/in-detail/low-cost-single-touch-payroll-solutions/> There are a wide range of products available including free solutions such as apps to install on your phone that allow employers to simply key in employee payroll information (gross amounts per pay, and tax withheld etc.) and send it to the ATO (and thereby maintain your manual payroll systems if you so choose). 

Of course, micro employers can opt to disregard these free or low-cost solutions and instead adopt STP-compliant software and, in doing so, enjoy the advantages of computerizing your payroll processes. 

 

 

 

MTS July / Aug 2019 Bimonthly

Is now in your members area, log in to check it out!  

Just some of the Articles to read –  
 
Are You Carrying on a Business? The ATO recently finalised its position on when a company will be deemed to be carrying on a business. 
Taxable Payments Reporting has recently been expanded to several more industries. 
New Tax Whistle-Blower Laws. This has implication for taxpayers, business and tax agents. 
Post 30 June Tax Considerations.There are significant matters that still must be attended to post-30 June which may impact your overall tax position for the financila year just passed. 
Super Opportunities – From 1 July, two first-time superannuation opportunities present themselves. Are you eligible to ttake advantage? 
Plus much more – log into your Members Area to read…..  

As always your hard copy of the mag is in the post, look out it for it! 

SINGLE TOUCH PAYROLL

1 July Employers with less than 20 employees should start transition to Single Touch Payroll (STP)

Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO.

If you are using a solution that offers STP reporting, such as payroll or accounting software, you will send your employees’ tax and super information to the ATO each time you run your payroll and pay your employees.

The information is sent to the ATO either directly from your software, or through a third party – such as a sending service provider.

If you have a software provider, they can tell you more about the type of STP solution they offer. For a list of available STP solutions visit the //api.gov.au/productregister/

There will also be a number of options available for employers who do not use payroll software, such as //No-cost and low-cost Single Touch Payroll solutions.

Options will depend on your number of employees:

  • Large employers with 20 or more employees should now be reporting through STP, or have applied to the ATO for a later start date.
  • Small employers with 19 or less employees will need to report through STP from 1 July 2019. This is a gradual transition, and the ATO is providing flexible options.
    • If you’re an employer with four or less employees you will have additional options.

Key Dates for July & August

Many lodgement and payment deadlines are looming for business including those relating to Activity Statements, superannuation, and more

JULY 2019

1 July – First day of the 2019/2020 financial year

1 July – Employers with less than 20 employees should start transitioning to Single Touch Payroll (STP)

14 July – 2018/2019 Payment Summaries – due date to issue to employees

21 July – Monthly Activity Statements (June 2019) due for lodgement and payment

28 July – Quarterly Activity Statements (April-June) due for lodgement and payment (if lodging by paper)

28 July – Superannuation Guarantee Contributions (April-June) due for payment to superannuation funds or Clearing Houses

AUGUST 2019

11 August – Quarterly Activity Statements (April-June) due for lodgement and payment (if lodging electronically)

14 August – PAYG withholding Payment Summary Annual Reports – due for lodgement

21 August – Monthly Activity Statements (July 2019) due for lodgement and payment

21 August – Final day for eligible monthly GST reporters to elect to report annually

28 August – 2018/2019 Contractor Taxable Payments Annual Reports – due for lodgement

Where one of these dates falls on a weekend or a public holiday, the due date is extended to the next business day.

National Minimum Wage to Increase by 3%

Get set for a 3.0% wage increase – 2019 Annual Wage ReviewThe Fair Work Commission has announced a 3.0% increase to minimum wages.
The new national minimum wage will be $740.80 per week or $19.49 per hour.
The increase applies from the first full pay period starting on or after 1 July 2019.
Link to the Commissions’ Annual Wage Review 2018–19 //www.fwc.gov.au/documents/wage-reviews/2018-19/decisions/2019fwcb3500.pdf

FBT

FBT Issues on ATO Radar

With the date for lodging and paying FBT approaching (21 May), on Wednesday 1st May, the ATO reminded employers that the following mistakes attract the ATO’s attention:

*         failing to report car fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits

  *   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

  *   incorrectly calculating car parking fringe benefits

  *   not applying FBT to the personal use of an organisation’s assets provided for the personal enjoyment of employees or associates (e.g. spouses) and

  *   not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.

The New Importance of Tax Compliance

New legislation could see businesses lose tax deductions for payments to employees and contractors. This article details this new law, and provides a checklist of how to be compliant…

BASICS

In March, legislation was passed which will deny an income tax deduction for certain payments if the associated withholding obligations are not complied with by the business making the payment. This new law commences on 1 July 2019, and provides a very strong incentive for employers to comply with their withholding obligations. Under current law, employers are entitled to a deduction for actually having made a payment to an employee or contractor – irrespective of whether they have correctly met the withholding requirements in respect of these payments. This is, the payment itself is sufficient to claim a deduction.

NEW RULES

From 1 July 2019, a deduction will no longer be allowed in relation to the following payments:

  • Of salary, wages, commissions, bonuses, or allowances to an employee
  • Of directors’ fees
  • To a religious practitioner
  • Under a labour-hire arrangement
  • For a supply of services – excluding supplies of goods and supplies of real properyt – where the recipient of the payment has not quoted their Australian Business Number (ABN)

….if withholding applied to the payment, and the payer was required to withhold an amount from the payment and did not withhold an amount OR did not notify the ATO when required. To be clear, deductions will only be denied where no amount has been withheld at all from the payment that attracts withholding or no notification is made to the ATO. Withholding an incorrect amount (such as from an allowance etc.) or reporting the withholding incorrectly will not result in a deduction being denied.

To finish reading this article, log in to your Members Area – May/June Newsletter page 6.

If you are not a subscriber Join Now //mytaxsavers.com.au/plans/subscriptions/

Or phone our friendly staff on 0755264933

Super Guarantee Amnesty Update

The Government’s proposed Superannuation Guarantee (SG) Amnesty will not proceed. To recap, the SG amnesty was to be available for the 12-month period from 24 May 2018 to 23 May 2019. To get the benefits of the Amnesty (set out below) employers must have during this 12-month period voluntarily disclosed any SG underpayments that existed in the past (going as far back to when SG commenced in 1992). For an employer, the tax benefits of the amnesty were:

  *   The administration component of the SG Charge (SGG) would not be payable (this is a $20 per employee, per quarter, for whom there is an SG Shortfall)

  *   Part 7 penalties would not be applied. This can be up to 200% of the SG Charge that is payable (note that SG Charge includes the SG Shortfall that is owed to employees)

  *   All catch-up payments made during the 12-month amnesty period were to be tax deductible.

By contrast, under the current law, when SG has been underpaid or paid late, the SG Charge that must paid to the ATO is not deductible, and late contributions that an employer has made to an employee’s superannuation fund and has elected to offset against their SG Charge liability are also not deductible.

With Parliament having been prorogued for the Federal Election, the legislation to enact the Amnesty (which is opposed by the Labor Party) will not pass into law. Therefore, employers who disclosed SG shortfalls during the Amnesty period will be subject to the current law and not enjoy the Amnesty concessions, irrespective of any assurances offered by ATO employees at the time employers made disclosures. The ATO have however indicated that it will exercise its discretion and not apply Part 7 penalties to these employers. The Part 7 penalties aspect of the SG Charge regime did not require a change to legislation as the discretion to waive penalties already sits with the ATO.Going forward, with super funds now reporting to the ATO more regularly (at least once per month), we would strongly urge all employers to pay SG on time and in full by the quarterly cut-off dates

Update – Instant Asset Write-off Changes now Legislated

In the Budget on Tuesday, the Government announced that it would increase the instant asset write-off threshold to $30,000 and extend it to medium sized businesses (those with an aggregated annual turnover of less than $50 million).

This, and the earlier change announced in January (to extend the write-off threshold to $25,000) passed both Houses of Parliament yesterday and is now law (subject to the formality of Royal Assent).

The amendments mean there will be three tiers in the 2018/2019 financial year:

1.     $20,000 threshold for depreciable assets that are acquired and installed ready for use before 29 January 2019. Only available for businesses with an aggregated turnover less than $10 million.

2.     $25,000 threshold for assets first used or installed between 29 January 2019 and 2 April 2019. Only available for businesses with an aggregated turnover less than $10 million.

3.     $30,000 threshold for assets first used and installed after the 2 April budget announcement and before 1 July 2020. Available for businesses with a turnover of less than $50 million.

Going forward, all businesses with a turnover under $50 million are now eligible for a write-off of $30,000. This will be available under 30 June 2020.

To get the taxation benefit of this in the current financial year, you will need to have the asset installed ready for use on or before 30 June 2019.