WA Payroll Tax Concessions

The State Government has introduced a number of payroll tax concessions to support businesses affected by COVID-19 including the following:

  • Payroll tax waiver
  • Grant payment
  • Threshold increase
  • JobKeeper payments

Payroll tax waiver

If your Australian taxable wages were less than $5 million at 29 February 2020, your payroll tax will be waived for the March to June 2020 payroll tax returns. You will still need to complete your March to June payroll tax returns as normal. Then record your WA taxable wages in the ‘exempt (other) wages’ field to apply the waiver.

If your Australian taxable wages are more than $5 million at 29 February 2020 but you expect they will be less than $7.5 million at 30 June 2020 or you register for payroll tax after 1 March 2020 you must apply to defer lodging and paying your March to June payroll tax returns until July. If your wages are less than $7.5 million for the year then your payroll tax liability for March to June will be waived

Grant Payment

Employers, or a group of employers, whose Australian taxable wages were between $1 million and $4 million in 2018-19 will receive a one-off grant of $17,500. You do not need to apply for this grant, if you meet the criteria you will receive a cheque from July 2020.

If you recently registered for payroll tax then your 2019-20 Australian taxable wages will be used to determine your eligibility for the grant. The grant payment will be made once you have completed your 2019-20 annual reconciliation.

Threshold Increase

The payroll tax threshold will increase to $1 million on 1 July 2020.

JobKeeper payments Wages paid by employers that are subsidised by the Australian Government’s JobKeeper payment are exempt from payroll tax. The exemption does not apply to any part of wages that are not subsidised

Contact our office if you’d like some assistance or advice around these payroll tax concessions.

Other related blogs:
Jobkeeper stimulus is the best yet
Cash Flow Boost

Author: Jessica Russell
Email: jessica@faj.com.au

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JobKeeper stimulus is the best yet

During the week the Government announced the JobKeeper stimulus targeted at keeping employers and their employees connected through this current crisis.

The intention is that businesses impacted by the Coronavirus will have wage costs subsidised so they can continue to pay their employees, whether they’re currently working or not.

Businesses can register their interest with the ATO now (almost 500,000 businesses did this within 48 hours of the announcement), but won’t be able to apply until the legislation is passed, hopefully within a week or so. 

Here’s how it will work.

If your business has a turnover of less than $1 billion and has suffered a 30% or more drop in turnover compared to the same month last year, you can register with the ATO. The turnover reduction is self-assessed, and the ATO has some discretion for those that don’t quite meet the criteria.

You then pay your existing workers. If they earn more than $1,500 (before tax) per fortnight, you pay them their normal pay. If they earn less than $1,500 per fortnight, you pay them $1,500 (yes, they get a pay rise).

At the end of the month, the government will reimburse you $1,500 per eligible employee. This will be effective from 30 March 2020 for a maximum period of six months, so your first Government payment will be received in the first week of May.

Eligible employees are your staff that have been employed since at least 1 March 2020 and are full-timers or part-timers. The package also extends to casual workers that have been with you for at least 12 months. Employees must be at least 16 years old and Australian citizens or relevant visa holders.

The subsidy is also available to employees that have been stood down (but not those made redundant, unless re-hired). So you are effectively able to re-engage your team at no cost, regardless of whether you ask them to show up for work or not. The aim is that you can continue to employ them, pay them, and maintain connection with them through this crisis, so hopefully when it’s all over you can hit the ground running. 

The JobKeeker subsidy is also accessible by self-employed people who have suffered a drop in income, regardless of whether they employ any staff. However there is little detail yet as to who might qualify as “self-employed” and how those rules will apply..

Not for Profit entities are eligible under the stimulus package too.

You will still need to pay super based on your staff’s normal earnings, but it’s up to you whether you pay the extra super for employees who were previously on less than $1,500.

A quick note for employees – you can only get the JobKeeker payment through one employer, and it may affect your entitlement to other Centrelink benefits.

The JobKeeper stimulus is a great initiative. It keeps workers employed, keeps people away from Centrelink queues, and gives businesses a fighting chance.

Other related blogs:
Cash Flow Boost

Author: Mark Douglas
Email: mark@faj.com.au

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Cash Flow Boost

The federal government has been rolling out a series of measures to support businesses and the economy during the current Coronavirus crisis. One such measure is a cash flow boost for businesses that pay wages.

If you currently withhold tax from salary and wages you may be eligible to participate in the stimulus package. The cash flow boost provides businesses with a minimum $20,000 boost up to a maximum of $100,000.

To be eligible for this payment you need to be a small or medium business who held an ABN at 12 March 2020 with an aggregated turnover under $50 million. To determine if your turnover is under the threshold the tax office will either refer to your 2019 tax return if lodged by the 12 March 2020 or if you have not lodged your return then tax office will refer to your business activity statements lodged from 1 July 2018 to 12 March 2020.

As well as meeting the above conditions you also need to have made one or more of the following eligible payments during the period:

  • Salary and wages
  • Director fees
  • Eligible retirement or termination payments
  • Compensation payments
  • Voluntary withholding from payment to contactors

The cash flow boost will be delivered as credits on your business activity statements and if resulting in a refund will be refunded to your account within 14 days. Note for the March BAS the credit will not be applied until at least 28 April 2020.

The cash flow boost will be paid in two “boosts.” The first boost paid will be dependent on if you are a quarterly or monthly lodger. If you are a quarterly lodger, your boost paid will be 100% of PAYG withheld as reported on your March 2020 BAS and June 2020 BAS with a minimum credit of $10,000 and a maximum of $50,000. For monthly lodgers the boost paid will be 300% of the March 2020 BAS and then 100% of the April 2020, May 2020 and June 2020 BASs with a minimum credit of $10,000 and a maximum of $50,000.

The second boost paid will be equal to whatever amount you got from the first boost. It will be split between your BASs lodged from June 2020 to September 2020. Quarterly BAS lodgers will receive 50% of the total initial cash flow boosts on lodgement of each of the June 2020 and September 2020 BASs. Monthly BAS lodgers will receive 25% of the total initial cash flow boosts on lodgement of each of the June 2020, July 2020, August 2020 and September 2020 BASs.

For further details regarding the boost or to calculate your possible entitlement please contact FAJ on 9335 5211 or contact Jess on the email below.

Author: Jessica Russell
Email: jessica@faj.com.au

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Using bank feeds and rules in accounting software

Accounting software is constantly taking advantage of new and improved technologies including automation and artificial intelligence. But these are features that need to be understood and activated before they can be of use. To optimize your time and obtain the best results from your accounting software it’s best to aim for as much automation as possible.

Bank feeds have revolutionised the way we now reconcile our bank and credit card accounts. A bank feed just means that your bank or financial institution uploads your bank transactions into your software on a regular basis (usually daily). Even transactions from other applications like PayPal and Stripe can be set up to feed into your software. Having your transactions fed into your software removes the need for laborious data entry. The ability to quickly match transactions based on machine learning and on rules you set up, assists in speedier reconciliations of your data and more up to date information for your reporting. Some software allows for cash coding so even small businesses are not weighed down with intricate coding.

Creating bank rules that allow you to automatically match bank transactions is another way of speeding up the process. For example you might set up a rule that every time a description includes the term “Officeworks”, the expense is automatically coded to the stationery expense. Being mindful of using meaningful and identifiable bank references through internet banking can assist in getting the most out of your bank rules. There can also be an advantage in having a business credit card as these tend to highlight suppliers names in the transaction listing. Even recording transfers between your bank accounts and credit cards can be automated with bank rules. Regular loan payments, wages and drawings can all be set up using bank rules.

So utilizing these features in your online software enables up to date information hence more control over your time and your cash. But automation comes with a downside. When using rules or relying on machine learning there’s always a larger margin for error of mis-coding, and once an error is made it tends to repeat. So importantly, you should invest a little bit of the time you save into a quick review of your general ledger and profit and loss statements to identify and correct any errors. The rest of the time saved is all yours.

Other related blogs:

What are bank feeds?
Choosing the right accounting software

Author: Kay Giles
Email: kay@faj.com.au

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What happens if I make excess contributions to super?

We hear everywhere that it’s a great idea to put as much as we can afford into our superannuation funds to set ourselves up for retirement. This money is invested by the fund with the underlying idea that it will result in significant returns that will support us upon reaching retirement until death.

Concessional vs Non-Concessional

What you may not realise is that all super contributions fall under one of the above categories. Concessional contributions are all contributions made to super with your before-tax income, meaning either you or your employer will receive a tax-deduction for the contribution. This is usually super paid by your employer under super guarantee laws, being 9.5% of your ordinary income, but can also include personal contributions you make (see below). Non-concessional contributions are contributions made with income that has either already being taxed in your own name or will be at the end of the financial year when you lodge a tax return. You don’t get a tax deduction for non-concessional super contributions. A potential advantage of concessional contributions is that they are tax deductible at your marginal tax rate (i.e. up to 45%) whereas the super fund generally pays 15% tax on receipt of the contribution. The difference is a real saving towards your retirement and provides opportunities for those wanting to contribute more to super.

Claiming a tax deduction for personal super contributions

It is possible to claim a tax deduction for any personal super contributions made during the year so they can be treated as concessional rather than non-concessional. This will result in the potential tax savings outlined above.

Too good to be true?

We need to keep in mind that there is a concessional contribution cap of $25,000 annually for all taxpayers. This cap includes both employer contributions and personal contributions. Employers only need to pay the 9.5% super guarantee up to a maximum limit on an employee’s earnings each quarter of $55,270. This would result in super paid of $5,250.65 each quarter and $21,002.60 annually, which we find is below the cap. Nevertheless, employers can pay more super to their employees if they wish, at any income level. This may put them over the contributions cap, even if they earn less than the maximum earnings limit.

What next?

If you happen to go over the $25,000 concessional contributions cap, the ATO will send to you an Amended Notice of Assessment for that financial year, increasing your taxable income by the amount you were over the cap. This is done to re-allocate the contributions as non-concessional and to charge at your marginal tax rate. There is also a small excess concessional contributions (ECC) charge which has the intent of acknowledging that the tax is collected later than it would have been if you didn;t have excess contributions. The ECC is calculated from the start of the income year until the day before the tax is due to be paid and uses a compounding interest formula.

Pro tips:

  • When you get your amended assessment you can elect to release the excess contributions from your super fund which can help in paying any additional tax and the ECC.
  • To obtain a tax deduction for personal contributions you must give your super fund a notice of intention to claim a deduction before you lodge your tax return – this is a standard ATO form.
  • If you have made any personal super contributions during the year, bring your annual superfund statement in when you come to complete your annual tax return so an accountant can work out if you can claim a deduction, and if so, how much

Other related blogs:

Allowing catch up concessional contributions
Super Concessional Contribution Cap
Contributing to super – options for employees

Author: Jake Solomon
Email: jake@faj.com.au

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Self-Education Expenses

Further study can improve an individual’s knowledge and skills which will hopefully improve earning capabilities. The decision to undertake further study can often come down to necessity to adapt, passion for knowledge and cost. Self-education expenses can be costly and it is important to know what costs may be deductible when preparing your personal tax return.

Generally, self-education expenses are deductible if the study being undertaken has a sufficient connection with your current employment. There are a number of conditions which would satisfy the sufficient connection criteria, such as:

  • The study will improve or maintain an employee’s skills or knowledge in their current employment. For example, a construction worker enrolling in a course to learn how to use certain machinery at the work site.
  • The study will lead, or is likely to lead, to an increase in income from their current employment.
  • The study is an upgrade of a qualification in the current employment. For example, upgrading from a Bachelor’s degree to a Masters.
  • The study forms part of the traineeship when employed as a trainee.

If the self-education expenses relate to gaining new employment, then those costs will not be deductible. For example, if a nurse enrolls at university to study a medical degree in order to become a doctor, this study would be considered to be in the course of gaining new employment and not connected to the current position as a nurse. The costs associated with the degree would, therefore, not be deductible.

Here’s some examples from previous cases:

  • A mining engineer was denied a deduction for for costs of undertaking an MBA course after he was retrenched as a mine manager – even though he was eventually employed by another mining company.
  • A medical technologist successfully claimed costs for a trip to an immunology conference in Paris
  • An actress successfully claimed costs for a trip to attend a BBC radio drama course
  • A maths and science teacher was denied a claim for costs related to financial accounting and marketing subjects
  • A features editor of a newspaper was allowed a deduction for speech therapy costs undertaken to enable him to better present himself to people in work situations

If a connection between the self-education undertaken and current employment can be established than expenses incurred to carry out the education can be claimed. General self-education expenses to claim can include:

  • Course and tuition fees
  • Text books
  • Stationery
  • Internet usage
  • Car expenses from home to your place of education
  • Equipment costs
  • Home office running costs (52c per hour from 1 July 2018)
  • Meals and accommodation (if travelling away overnight)

The expenses that related to self-education which are not deductible include:

  • Repayments on Higher Education Loan Program (HELP) loans, repayments on Student Financials Supplement Scheme loans (SFSS) or other Government assisted educational loans.
  • Accommodation and meal expenses when not travelling overnight.
  • Home office occupancy expenses. Examples being; a percentage of rent, mortgage interest or rates

Author: Allan Edmunds
Email: allan@faj.com.au

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How are working holiday makers taxed?

The Working Holiday Maker visa program was established in 1975 to promote closer ties between Australia and currently 42 other countries, directed towards young adults wishing to work and study in Australia for up to 12 months.

A person is considered a Working Holiday Maker in Australia if they have either a visa subclass 417 (working holiday), or 462 (work and holiday). Those holding these visas are considered non-residents for tax purposes, but the Working Holiday Maker rules allow a more concessional treatment of taxable income than non-residents.

Working holiday makers must apply for an Australian tax file number. They are taxed at 15% on their first $37,000 of income, and the balance is taxed at ordinary marginal rates. They have no access to the tax free threshold and are not required to pay the Medicare Levy. Working holiday makers are required to lodge a tax return when taxable income exceeds $37,000, or they carried on a business, or they wish to claim any deductions. Tax returns can be lodged early if leaving Australia permanently before 30 June.

Employers of working holiday makers are required to register with the ATO in order to withhold tax at 15%, otherwise will withhold tax at non-residents rates with the first $90,000 taxed at 32.5%. Employers are also required to pay superannuation which can be accessed when leaving Australia as a Departing Australia Superannuation Payment (DASP) and is taxed at 65%.

The working holiday maker rules have recently been in contention with the ATO appealing a Federal Court decision to allow a working holiday maker to be assessed at resident rates. The outcome will only impact working holiday makers found to be Australian tax residents from certain countries.

Author: Danielle Pomersbach
Email: danielle@faj.com.au

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GST Withholding on New Residential Property

New homes and residential property has been subject to GST since the introduction of the tax in 2000. Generally with GST, if you are the seller, you are required to collect the GST portion of the sale and remit this to the Australian Taxation Office.

However this traditional collection method has been thrown out the window when it comes to the sale of new residential premises or potential residential land.

Since 1 July 2018, purchasers of a new residential premises or potential residential land may now be liable to withhold the GST portion from their purchase price and pay this directly to the ATO.

So, what is meant by `new residential premises or potential residential land’?

According to the ATO, a residential premises is considered new when any of the following apply:

  • It has not previously been sold as a residential premises.
  • It has been created through substantial renovations.
  • A new building replaces a demolished building on the same land. Or,
  • One of the properties mentioned above that has been rented out for:
    • Less than five years, or,
    • More than five years but has been actively marketed for sale while it is rented.

Examples may include display homes, off the plan purchases and house/land packages.

Potential residential land is defined as ‘land that it is permitted to use for residential purposes, but that does not contain any buildings that are residential premises’. This essentially means vacant residential zoned land.

You’re selling a new residential premises/potential residential land. What do you need to do?

The supplier of the property is required to notify the purchaser, in writing, of their (the buyers) obligations to withhold the GST and provide information that includes the:

  • Name and ABN of the suppliers.
  • The amount of GST that the purchaser needs to withhold and pay to the ATO.
  • When that amount needs to be paid.

The withholding amount will generally either be:

  • 1/11th of the contract price.
  • 7% of contract price (where the supplier is using the margin scheme). Or,
  • If selling to a related party, the withholding amount is 10% of the GST exclusive market value of the property.

I am buying a new residential property. What do I need to do?

Along with withholding GST from the purchase price and paying this to the ATO, you will also need to lodge two forms with the ATO:

  • Form 1: GST property settlement withholding notification online form
  • Form 2: GST property settlement date confirmation online form

It is important that both the purchaser and seller are aware of these new rules and their obligations, as a failure to comply with these rules may attract penalties for both parties. If you’re not sure if this applies to you, you should get in contact with your tax agent.

Pro tip: As a seller, you should be mindful of the impact of the new withholding regime on your cash flow projections and mortgage repayment schedules.

Pro tip: As a purchaser, the ATO does not require you to be registered for GST to remit this payment.

Other related blogs:

Is there any GST when buying a commercial property?

Author: Georgia Burgess
Email: georgia@faj.com.au

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Concessional contribution carry forward rule

Retirement may be a distant thought or a worrying reminder. However, it is never too early or too late to top up your super fund for the provision of a better future. From 1 July 2018 you may be eligible to top your concessional (tax deductible) super contributions under the new carry forward rule. If you have a total superannuation balance of less than $500,000 on 30 June in the prior financial year, you are now entitled to contribute more than the usual $25,000 concessional contributions cap to catch up on prior unused caps – i.e. where you didn’t contribute and claim a tax deduction for the full $25,000 in a prior year. Concessional contributions include those made by your employer under the super guarantee system, contributions made as part of a salary sacrifice, or personal contributions where you are entitled to claim a tax deduction.

The first year that you are entitled to top up by the unused amounts is the 2019-20 financial year. The unused amounts are available for a maximum of five years and after this the unused caps will expire.

Refer to the table below for an example of when the unused concessional carry forward cap is applicable.

Description 2017-18 2018-19 2019-20 2020-21 2021-22
General contributions cap $25,000 $25,000 $25,000 $25,000 $25,000
Total unused available cap accrued Not Applicable $0 $22,000 $44,000 $69,000
Maximum cap available $25,000 $25,000 $47,000 $25,000 $94,000
Superannuation balance 30 June prior year Not Applicable $480,000 $490,000 $505,000 $490,000
Concessional contributions Nil $3,000 $3,000 Nil Nil
Unused concessional cap amount accrued in the relevant financial year $0 $22,000 $22,000 $25,000 $25,000

Source ATO : https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=3

Pro tip: are you wanting to increase your super fund balance, but you are unable to use the concessional carry forward cap? You will still be entitled to the non-concessional bring forward rule. This may allow you to increase your contributions to $300,000 for one year providing the balance is less than $1.4 Million.

Other related blogs:

Allowing catch up concessional contributions
Super Concessional Contribution Caps

Author: Lachlan Hunn
Email: lachlan@faj.com.au

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Discretionary Trust v Unit Trust

When establishing either a discretionary trust or unit trust, it is important to know how each type of trust operates. The main distinction between a unit trust and discretionary trust is around how beneficiaries entitlements are determined under the trust and how this is distributed.

So what are the key differences?

With discretionary trusts the beneficiary’s entitlements are left to the discretion of the trustee, who chooses which beneficiaries receive trust distributions and how much.

A discretionary trust is often used within a family to help protect family assets or conduct a business, and the trust can make a ‘family trust election’ to take advantage of certain tax benefits by limiting the distribution pool to the family group.

The discretionary structure has the major benefit of flexibility in distributing income, as distributions can be directed to beneficiaries on lower marginal tax rates to minimise the overall tax paid. Other benefits include asset protection from creditors (but note the importance of having a corporate trustee) as the assets of a discretionary trust are separate to the assets of the beneficiaries, and the ability to carry forward losses in certain circumstances. The main disadvantages is that the trust cannot distribute outside of the family group without penalty, and the structure is “controlled” rather than owned.

Unit trusts are fixed trusts in that the beneficiaries receive distributions in proportion to the number of ‘units’ they hold. The trust allocates the units to beneficiaries for consideration, and units in the trust can be bought and sold between parties. Beneficiaries receive a set percentage of the income and/or the capital of the trust in accordance with their unit holding.

Unit trusts are similar to companies, in that much like companies have shareholders with fluctuating share prices, unit trusts have units with changing unit values, and unit holders make an initial contribution to the trust as investors.

Unit trusts benefit from simplicity – the units define exactly who is entitled to the distributions. This is generally more suitable when unit holders fall outside of one family group. Another benefit is that the units in the trust may be transferred to another beneficiary easily, or alternatively cashed in. Additionally unit trusts provide asset protection and are subject to far less regulation in comparison to a company. The main disadvantage is that unit trusts have less flexibility with income and capital distributions.

Overall discretionary trusts give the trustee far more choice in how to distribute profits, but unit trusts define ownership better. Choosing the best structure is unique to your circumstances and ultimately you’ll want to get some professional advice around this because getting it wrong at the start can cause a costly problem further down the track.

Other related blogs:

Why use a Family Trust?

Author: Danielle Pomersbach
Email: danielle@faj.com.au

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