Employer Tax Update
Employers face ongoing challenges with complying with the various obligations imposed by the tax system. Various changes have been implemented or announced recently across a range of employer obligations which are explained in more detail below.
Single Touch Payroll
Single Touch Payroll (STP) reporting is now required for all businesses regardless of size.
Most accounting and payroll solutions are now offering compliance with the STP requirements.
From a practical perspective, the adoption of STP means that:
- You will run your payroll (with no change in pay cycle), pay your employees as normal, and give them a payslip.
- Your STP-enabled payroll software should send a report to the Australian Taxation Office (ATO) covering information such as salaries and wages, Pay As You Go (PAYG) withholding and super information.
- Super funds are also reporting to the ATO to let them know when you make the payment to your employees' chosen or default fund. With this information, the ATO will have much greater visibility to ensure that employees are paid their correct entitlements on a timely basis.
- ATO systems will match the STP information to employer and employee records.
- Your employees will be able to see their year-to-date tax and super information in ATO online services, which can only be accessed through myGov. Their data is updated every time you report (each payday for most employers). Without STP reporting, employee data is only reported at the end of the financial year.
- At the end of the financial year, you'll need to finalise your STP data. This is a declaration to the Commissioner of Taxation to state you have completed your reporting for the financial year.
- Importantly, and this is bound to cause confusion amongst employees, you will no longer have to give your employees a payment summary for the information you've reported and finalised through STP. Once you finalise your data, your employees or their registered agent will be able to lodge their income tax return using the STP information available in ATO online services.
- You will also no longer need to provide the ATO with a payment summary annual report at the end of the financial year for the payments you report through STP.
FBT – Uber travel
The ATO has recently advised that they do not consider Uber travel as taxi travel. This means that the Fringe Benefits Tax (FBT) exemption available that is otherwise available on taxi travel from home to work or vice versa is not available when the relevant journeys are undertaken in an Uber (or via another ride-sharing platform). Consideration will need to be given to use of other exemptions (e.g. otherwise deductible or minor and infrequent) to exempt such travel from FBT. Employers will also need to consider how to record and distinguish between Uber and taxi travel for record-keeping purposes. This ATO guidance does appear inconsistent with their approach to other tax issues affecting Uber drivers (e.g. GST registration) so their position on this should be monitored.
FBT – Home phone and internet
The ATO has updated its FBT guide for employers in relation to the taxable value of fringe benefits related to home phone and internet expenses and the evidence required to support the claim. In brief, the ATO expects that where the employer reimburses an employee’s home or internet costs, in order to reduce the taxable value of the benefit, both the employer and employee will need to keep records of the actual expenses and the employee will need to provide a declaration detailing the percentage of business use and the purpose of incurring the expense.
Administrative changes to payroll tax in NSW
The NSW State Government has made some administrative changes to the payroll tax process in an attempt to reduce the compliance burden on NSW businesses. Accordingly, from 1 July 2019:
- NSW businesses with an annual payroll tax liability of up to $20,000 will only be required to make an annual payment and lodge an annual payroll tax return and reconciliation.
- Businesses with a liability greater than $20,000 and up to $150,000 may make automatic monthly payments of a fixed amount but need only provide an annual return and reconciliation.
- Businesses with payroll liabilities above $150,000 will continue to pay monthly and make monthly lodgements, with an annual reconciliation.
For more information, please contact our expert Tax team on (02) 8346 6000.