A new payroll reporting framework for employers, Single Touch Payroll, is being introduced by the Australian Taxation Office effective for employers with fewer than 20 employees, from 1 July 2019. Employees to be included are full time, part time, casual and any seasonal employees.

Commonly used accounting software with payroll function will be ready for Single Touch Payroll and satisfy the ATO pay run reporting requirements.

‘Micro employers’, those with 1-4 employees who rely on registered tax agents, may report quarterly for the first two years rather than on each pay run!

There is also a lodgement concession for businesses with ‘closely held payees’ – i.e. directly related to the entity including family members of a family business, directors of a company and shareholders or beneficiaries. The ATO recognises that the process of paying oneself may not be typical payroll process, and may occur as and when cash is available in the business. Going forward, the ATO will move to quarterly reporting obligations for these payees.

As well, there being a significant number of smaller employers not using any type of payroll software, they will not be required to adopt/buy software in order to comply, but will be able to use no cost or low cost single touch payroll solutions .

For further advice CONTACT US TODAY .

Want a tax deduction for payments to contractors and employees?

Legislation was passed in March, effective from 1 July 2019, regarding payments to contractors and employees. The ATO will deny tax deductions for payments made to contractors and employees where the appropriate withholding tax is not withheld OR where no required notification is made to the Australian Taxation Office.

Any payments made to contractors who do not quote their ABN, and  the payer fails to withhold the required 47%, will not be tax deductible.

The legislation covers payments in respect of:

–        Employees – e.g. salaries, wages, commissions, bonuses, allowances.

–        Contractors – e.g. service providers.

–        Labour hire (?) arrangements.

–        Directors – e.g. fees.

Tax planning for 30 June 2019

Traditionally, 30 June each year brings forth a rash of initiatives through which the level of taxation for the current financial year may be reduced. Consult your tax advisor about tax planning for 30 June 2019 as follows:

Timing of income

Where possible, defer receipt of income until after year end.

Timing of expenses

Where possible, incur expenses prior to year end.

Bad debts

Review debtors and, where debts are unrecoverable, physically write off before year end to claim a tax deduction.

Trading stock on hand

Scrap any obsolete or damaged stock by year end.

Superannuation

Ensure payments for employees or by self-employed persons are physically made (and received) on or before year end.

Pre-payments

Immediate deductions are available for:

• Pre-payment of salary;
• Expenses <$1,000;
• Individuals, for non business expenses incurred on or before 30 June for the next twelve months –        e.g. interest on rental property.

Superannuation rebates

Contributions made on behalf of a low or no income spouse of up to $3,000 can attract an 18% rebate – i.e. $540.

Superannuation co-contributions

The Government will contribute up to a maximum $500 to add to eligible employees’ personal contributions to superannuation funds of up to $1,000, subject to an assessable income (reportable fringe benefits, reportable employer superannuation contributions and salary sacrifice superannuation contributions) limit of $37,697, phasing out at $52,697, subject to age, income and total superannuation balance.

Motor vehicle expenses

Where significant employment or business use of a personal motor vehicle is claimed, maintain a log book for twelve weeks to maximise the tax deduction and keep records of all expenses. The log book must be renewed every five years and can be kept in an electronic or paper format.

Record the financial year end odometer reading.

Small businesses (turnover <$10m) can claim an instant deduction for motor vehicles used for business 100% and costing up to <$30,000 (this concession is extended to 30 June 2020).

Plant and equipment

Review your asset schedule to scrap obsolete, worn out, lost or stolen items to maximise your depreciation claim.

Delay the disposal of any plant and equipment likely to be profitable in terms of written down value until 1 July.

Small businesses (turnover <$10m) can claim an immediate deduction for assets acquired, first used or installed ready for use, costing under $30,000 (GST exclusive).

Home office expenses

If carrying on a business from your home, pro rata tax deductions for interest or rent, insurance etc are available but impact on the main residence exemption from capital gains tax.

Directors / employees’ entitlements

Ensure any 2019/2020 salary packaging arrangements are in place before the commencement of the new tax year.

Bonuses and fees for the 2018/2019 year need to be approved at meetings and in place prior to 30 June 2019.

Private company loans

Any loans to shareholders or associates during 2017/2018 need to be repaid on or before 15 May 2019, unless a formal loan agreement is in place.

Sale of investments

Delay the sale until after year end where a gain is anticipated to defer tax for a year.

Crystallise any capital losses in the tax year to offset against any gains made in the same year.

Timing of disposal under a contract for capital gains tax purposes is generally the date of making the contract, not settlement.

Capital gains tax concession

Assets need to be held for at least twelve months to access the 50% discount for individuals and trusts and the 33⅓% discount for superannuation funds

Ceasing business / sale of business assets

Consider redundancy payments for employees.

Plan “golden handshake” payments for after the tax year end.

Small business capital gains tax relief measures may be available for:

• 15 year exemption
• 50% reduction
• Retirement exemption
• Replacement asset rollover

PAYG payment summaries

Summaries and summary statements for employees are required by the ATO by 14 August, otherwise substantial penalties apply.

Superannuation fund expenses

All expenses of a fund ought to be paid by the fund in order to claim a tax deduction.

Depreciable plant costing $300 or less

Salary and wage earners and rental property owners will be entitled to an immediate deduction if plant for work related purposes costing $300 or less is purchased before 1 July 2019. Some purchases you may consider include:

• Books and trade journals;
• Briefcases/luggage or suitcases;
• Calculators, electronic organisers;
• Software;
• Stationery; and
• Tools of trade.

Clothing expenses

Purchase and pay for work related clothing/expenses prior to the end of the income year, such as:

• Compulsory, non-compulsory (and registered) occupational specific and protective clothing;
• Other expenses associated with such work related clothing such as dry cleaning, laundry and repair        expenses.

Self-education expenses

Consider pre-paying the following self-education items before the end of the income year:

• Course fees (but not HELP fees), student union fees and tutorial fees;
• Interest on borrowings used to pay for any deductible self-education expenses.

Also, bring forward purchases of stationery and text books (i.e. those which are not required to be depreciated).

Other work related expenses

Employees can pre-pay any of the following expenses prior to 1 July 2019:

• Union fees;
• Subscriptions to trade, professional or business associations;
• Magazine and newspaper subscriptions;
• Seminars and conferences;
• Income protection insurance (excluding death and total/permanent disability).

 Note:  When pre-paying any of the above expenses before 1 July 2019, ensure that any services are provided within 12 months of the payment and before 1 July 2020. Otherwise, the deductions must be claimed over the period of the pre-payment. Any expense under $1,000 is exempt from pre-payment rules.

To ensure you don’t miss out on saving yourself $$$, CONTACT US TODAY about tax planning 30 June 2019.

Concessional / deductible contributions by employers for employees

Maximum contributions for each employee up to 75 years of age, including “salary sacrifice” (needs to be proactive) and superannuation guarantee payments without incurring excess concessional contributions tax: $25,000

Condition:
Between 65 – 74 years must satisfy the work test and only contributions received before the 28th day after the end of the month in which member turns 75 are deductible.

Concessional / deductible personal contributions by individual taxpayers, including investors

Maximum contribution by each individual up to 75 years of age without incurring excess concessional contributions tax: $25,000

Conditions:
• The individual must notify the fund of intention to claim a deduction (form NAT 71121) and the fund must acknowledge the notice.
• Contribution cannot create or increase a loss (deduction cannot exceed taxable income).
• Over 65 years must satisfy work test.
• For individuals turning 75, only contributions received before the 28th day after the end of the month in which member turns 75 are deductible.

High income earner contributions (Division 293)

From 1 July 2017, an additional 15% “contributions tax” is applied to those with adjusted taxable incomes (broad definition) exceeding $250,000.

Non-concessional/ non-deductible contributions by individual taxpayers

Maximum contribution by each individual up to 75 years of age without incurring excess non-concessional contributions tax: $100,000 subject to individual’s total superannuation balance

Note: Over 65 years the work test will need to be satisfied.

Note: An individual taxpayer who is under 65 years of age in an income year can bring forward two years’ entitlements and make one contribution of $300,000 without exceeding the cap ─ i.e. no further contributions over the three years.

Note: The annual maximum amount will be indexed and remain at six times the concessional amount.

Note: If an individual’s total superannuation balance at 30 June 2017 was $1.6 million or higher, the non-concessional cap will be nil.

Excess concessional / deductible and non-concessional / non-deductible contributions

From 1 July 2013 excess concessional (only) contributions will be taxed at the member’s marginal tax rate with tax offset and an interest charge applied. The excess may be withdrawn from the fund.

The punitive tax rate of 47% remains for excess non-concessional contributions.

Government co-contributions

The co-contribution made by the Government of up to $500 is available to employees and the self-employed less than 71 years of age at the end of the income year who make non-concessional/undeducted personal superannuation contributions of up to $1,000 and whose total income (assessable, reportable employer superannuation contributions and reportable fringe benefit amounts) is less than $52,697; the lower threshold of $37,697 allows for the full co-contribution 50c/$1.

Conditions:
• 10% or more of the person’s total income is attributable to employment or carrying on of a business.
• Total superannuation balance at 30 June 2017 must be less than $1.6 million.

Government contributions for low income earners

From 1 July 2017, concessional contributions made by or on behalf of individuals with adjusted taxable incomes of up to $37,000 will be matched by the Government up to an annual maximum amount payable of $500.

Contributions for spouse – tax offset

A taxpayer making a personal non-concessional/non-deductible contribution for his/her non working or low income spouse is eligible for a tax offset of up to $540 where a contribution of up to $3,000 is made for a spouse whose assessable income, reportable fringe benefit and reportable superannuation contribution amounts do not exceed $37,000. The offset is phased out at $40,000.

Condition:
No work test is applied if the spouse is under age 65, but between 65 and 70 years the spouse must satisfy the work test. No offset over 70 years of age.

Fund acceptance of contributions – age and work test

A regulated superannuation fund may accept contributions as follows:

• If the member is under age 65

–        all contributions made.

• If the member is 65 or more but under 70 years

–        mandated employer contributions

–        employer or member contributions provided the work test is satisfied.

• If the member is 70 or more but under 75 years

–        mandated employer contributions

–        employer/member contributions up to 28th of the month in which member turns 75 and  satisfies the work test.

• If the member is 75 years or more

–        mandated employer contributions.

A person satisfies the work test if gainfully employed at least 40 hours in a period of not more than 30 consecutive days in that financial year.

Superannuation guarantee contribution rate

From 1 July 2014, the contribution rate has increased from 9.25% to 9.5%, and will remain so until 1 July 2021 when it will increase by 0.5% each year until the rate is 12%.

Reportable employer superannuation contributions

From 1 July 2014, the payment of salary sacrifice superannuation and other additional* superannuation over and above the compulsory superannuation guarantee charge of 9.5%, paid by employers for employees, will need to be recorded on employees’ year end PAYG summaries.

*where employee influences the rate or amount of employer contributions.

An employee is considered to have the capacity to influence if he or she can directly negotiate the rate or amount of employer contributions.
As a guideline, the capacity to influence may be shown by:
1. The employer’s relationship with the employee. For example, the employee is the spouse of the employer.
2. The employee’s involvement in negotiations/preparation concerning the terms of any industrial agreement governing super contributions;
3. The amount contributed for the employee relative to the compulsory contributions the employer is required to make;
4. The employer’s super contribution arrangements for other employees; and
5. Any non-arm’s length dealings.

Unused concessional / deductible contributions (both for employers and individual tax payers, including investors)

From 1 July 2018, where an individual’s superannuation fund balance is less than $500,000, unused concessional contributions (up to the maximum $25,000) may be aggregated and claimed on a rolling five year basis. The unused contributions can be accessed from 1 July 2019.

Home proceeds (known as  “downsizing”, one-off contribution, not subject to usual cap)

From 1 July 2018 proceeds from sale of home may be contributed, subject to:

• Individuals aged 65 years or more
• Proceeds from sale of primary dwelling / main residence
• Lived therein and owned for at least 10 years
• Provided house sells for at least $600,000, each joint owner may contribute up to $300,000
• Contribution must be made within 90 days of settlement
• Contract must be signed on or after 1 July 2018
• Usual age and work tests not applicable.