Single Touch Payroll

Single Touch Payroll

It sounds good – one touch and your payroll is done?  Not quite.  This is the name given by the ATO to their new payroll reporting system.

Single Touch Payroll

Does Single Touch Payroll Apply to Your Business?

Single Touch Payroll legislation received Royal Assent in September 2016, it comes into effect 1st July 2018

At as 1 April 2018 every employer will need to perform a headcount of people employed at that time (not just those at work, but number of employees – employees on Annual Leave or Personal Leave, or is not at work for any reason, is still counted).  Any business with 20 or more employees on that date will be affected by the Single Touch Payroll legislation.  At this time only “substantial” employers are being affected, however, this may change in the future.  Smaller employers can elect to join the Single Touch Payroll, but this is voluntary.  The ATO is conducting further research before it is considers making it mandatory for all employers.

What is Single Touch Payroll

The Current System

Under the current system employers run their payroll each Week/Fortnight/Moth (Pay Event).  Monthly or quarterly, depending on the size of the payroll this is reported to the ATO on the IAS/BAS.  At the end of the financial year employers provide their employees with Payment Summaries and provide the ATO with an Annual Summary.  This is then matched to the IAS/BAS issued each period.

Single Touch Payroll

Single Touch Payroll only affects the reporting and not the payment of the PAYGW.  Data is submitted to the ATO each Pay Event via the employers’ accounting system.  For example, if employees are paid weekly each pay is a pay event and reported to the ATO weekly.

The Data submitted is the Gross Wages for the year to date and the PAYG Withheld to date and the amount of the Superannuation Guarantee Contributions accrued.  Because you only report the year to date figures it is a self-correcting system.  This means any errors found after submission will be corrected in the next submission – amended reports are not required.

Why are the ATO introducing this system

For the ATO

  • it gives greater visibility of employers.

For employers:

  • Payment Summaries will not need to be issued to employees;
  • Employers will need to advise the ATO of “Finalisation” of the payroll year. EMPDUPE files will no longer be required, however the ATO must be advised of finalisation by the 14th July each year;
  • RESC and RFBA reporting will be completed as part of the “Finalisation” process;
  • BAS/IAS will be prefilled by the ATO using the data provided (this can be over-written);
  • Employees’ tax returns will be prefilled with payroll information;
  • Payroll information will be available to employees throughout the year via myGov;
  • The ATO receives a copy of the data submitted through the SuperStream system.

As part of this payroll overhaul the ATO are also looking at streamlining the on-boarding process for new employees by automating TFN Declarations and Super Choice forms in the payroll software and myGov.

Thanks to ICB for the summarised information.

Further information can be found here.

Simpler BAS – Reporting GST

Current Situation for Preparing BAS

We currently have to report a lot of information to the ATO via the BAS that does not appear to have any practical use.

We have to report purchases that are capital and non-capital in nature, and the amount of tax free purchases we make; sales are divided into Export Sales, Tax Free Sales, etc.

Not only is this process time consuming but it gives rise to errors.  It should not really matter if that purchase was capital or expense, what matters is if you paid GST on it and is that GST claimable.

The Future of BAS and GST Reporting

From 1st July 2017 The Simpler BAS will be introduced.

Making BAS simple is not the same as making GST simple, only the reporting of it.  There are still items that will have no GST included but you will not have to decide if it GST Free, BAS excluded, Input taxed, etc.  All sales and purchases are either GST or No-GST.

GST Reporting will be limited to: Total Sales / GST on Sales / GST on Purchases

You will still need to report wages, PAYGW, WET etc, this is not changing.

WHY

Simpler BAS has been introduced to allow businesses to simplify their reporting obligations and making it easier to analyze income and expenses.  For each sale or purchase you need to ascertain is there any GST included.

The software companies are all looking to update the software to take into account the changes.

More information from the ATO can be found HERE

Bookkeeper Registration with TPB

Bookkeeper Registration

All bookkeepers providing BAS services (except as an employee) must be registered as a BAS Agent with the Tax Practitioners Board (TPB).

The TPB is the national body responsible for the registration and regulation of tax practitioners. They are responsible for ensuring tax practitioners comply with the Tax Agent Services Act 2009, including the Code of Professional Conduct.

The TPB ensures that your bookkeeper has proven qualifications and experience before they are allowed to register.  In addition bookkeepers are required to have adequate Professional Indemnity insurance and continuing professional development, both of which are checked annually by the TPB.

The Tax Practitioners Board (TPB) is reminding all small business owners to check their tax agents, BAS agents or tax (financial) advisers are registered with the TPB, if you use one.

How do you know your tax practitioner is registered?

There are two ways you can check:

1. search the TPB register.

2. look for the Registered tax practitioner symbol on their website, stationery, brochures or business cards. The registered tax practitioner symbol includes the type of registration and their individual registration number.  The example shown below is my personal TPB symbol, with my agent number.

OTE – Ordinary Time Earnings

At times we need to know the ordinary time earnings (OTE) of an employee, this is not the same as gross earnings as some pay items are not regarded as ordinary time earnings.

OTE is used for superannuation guarantee contributions made by the employer.

Payments Wages OTE
Wages & Overtime
Ordinary hours Yes Yes
Overtime hours Yes No
No ordinary hours of work stipulated Yes –

all hours worked

Casual Employee

·       Shift loadings

·       Overtime payments

 

Yes

Yes

 

Yes

No

Casual employee overtime rates Yes No
Piece Rates – no ordinary hours of work stipulated Yes No
Allowances
Allowance expected to be fully expended No No
Allowance not expected to be fully expended (eg, danger, retention, on-call) Yes Yes
Leave
Annual Leave Yes Yes
Personal Leave Yes Yes
Parental Leave or Ancillary Leave No No
Termination
In lieu of Notice Yes Yes
Unused annual leave Yes No

Superannuation For Employers

Superannuation

Superannuation is money you pay for your workers to provide for their retirement.

If you pay an employee $450 or more before tax in a calendar month, you have to pay superannuation.  This is in addition to their gross wages.  For some industries this is reduced to $350/calendar month.

The minimum you must pay is called the super guarantee (SG):

  • The SG is currently 9.5% of an employee’s ordinary time earnings.
  • You must pay SG at least quarterly, with payment being due by the 28th day following the financial quarter end.  That is 28th of January, April, July, October.  The payment should reach the superannuation fund by these dates so it is advisable to allow at least 7 days processing time – lodge and pay superannuation by 21st of each month.
  • You must pay and report super electronically in a standard format, ensuring you meet SuperStream requirements.
  • Your super payments must go to a complying super fund – most employees can choose their own fund.

If you don’t pay the SG on time, you may have to pay the super guarantee charge.

Superannuation for Contractors

Contractors paid mainly for their labour are employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).

You must make super contributions for these individuals if you pay them:

  • under a verbal or written contract that is wholly or principally for their labour – that is, more than half the dollar value of the contract is for their labour
  • for their personal labour and skills – which may include physical labour, mental effort or artistic effort – and not to achieve a result
  • to perform the contract work personally – that is, they must not delegate.

If you make a contract with someone other than the person who’ll actually provide the labour – for example, with a company, trust or a partnership – you don’t pay that person super.

You can:

  • use the employee/contractor decision tool to work out if a contractor is an employee for super purposes
  • use the superannuation guarantee eligibility decision tool to work out if they’re entitled to super guarantee contributions.

Example: Contractor, not employee

Harry’s Hobby Shop wants to paint their new shop and they contract Pete’s Paints for the job. The entire job is completed by one painter from Pete’s Paints but that does not make the painter an employee of Harry’s Hobby Shop; the contract is between Harry’s Hobby Shop and Pete’s Paints.

Harry’s Hobby Shop paid Pete’s Paints to achieve a result. Pete’s Paints may have SG obligations for the painter.

Example: Employee, not contractor

David’s Caravan Park has a contract with Amanda, a freelance administrative assistant, to answer phones and do administrative work for 15 hours per week. The contract specifies that Amanda herself must perform the work. Amanda has an ABN and invoices David weekly for the hours she works. Amanda is considered David’s employee for SG purposes because:

  • Their contract is wholly for the labour and skills Amanda provides.
  • She performs the work personally
  • She is paid according to the number of hours worked.

End of example

How much super to pay for contractors

The minimum super amount you have to pay is 9.5% of each worker’s ordinary time earnings (OTE).

When you pay super for a contractor employee, you must calculate the minimum super amount on the labour component of the contract.

If the values of the various parts of the contract aren’t detailed in the contract, we’ll accept their market values and take normal industry practices into consideration. If you can’t work out the labour portion of the contract, you can use a reasonable market value of the labour component.

Paying an additional 9.5% wages on top of your contractor’s usual pay does not count as a super contribution. To meet your super obligations for your contractor employees, you must pay at least the minimum super guarantee contribution (9.5%) to their super fund account each quarter.

 

The self-employed

If you’re a sole trader or in a partnership, you generally don’t have to make super guarantee (SG) payments for yourself.

But you may want to make personal contributions to super as a way of saving for your retirement.

From 1 July 2017, regardless of whether you’re self-employed or not, most people will be able to claim a full deduction for contributions they make to their super until they turn 75 years old. Those aged 65 to 74 will still need to meet the work test in order to be eligible to make a contribution and claim a tax deduction. Keep in mind that contributions you make may attract extra tax if they exceed the contributions limit for that year.

You may also be eligible for the super co-contribution payment. This helps eligible low-to-middle income earners save for their retirement. If you’re eligible and you make personal super contributions, the government will match your contribution up to certain limits, unless you have claimed your contribution as a tax deduction.

Make sure your super fund has your tax file number (TFN). If it doesn’t:

  • your super contributions will be taxed an additional 34%
  • your fund won’t be able to accept personal contributions from you, which means you may miss out on any super co-contribution you’re eligible for

Contact me if you need more help with your superannuation reporting.

ATO Lodgement Dates – BAS & IAS

The financial year runs from 1 July to 30th Jun and is used for the lodgement of tax returns with the ATO.  The financial year is further divided into financial quarters for the lodgement of quarterly BAS returns.  These quarters and the lodgement dates are listed below.  For larger businesses lodgement may need to be made on a monthly basis.  Or there could be a combination where PAYG withholding is reported on a monthly basis (IAS) but GST on a quarterly basis.

BAS/IAS Monthly Lodgement

due by 21st of the following month

BAS Quarterly Lodgement

due by 28th of the month following the end of the quarter

  • Jul-Sep due by 28th October
  • Oct-Dec due by 28th February (special concession for holiday season)
  • Jan-Mar due by 28th April
  • Apr-Jun due by 28th July

Registered BAS Agents are allowed more time for lodgement and payment (except Oct-Dec quarter) so if you use a BAS Agent as your bookkeeper your cash flow will reap the benefits.  

Prior to BAS/IAS preparation and lodgement I conduct a series of reconciliations and cross-checks to ensure that all the information provided has been correctly entered and all information is as accurate as possible.

Ensure your lodgements are on time – contact me now.

For more information see the ATO website