End of year obligations Norman Kochannek
Session outline • Pay as you go (PAYG) withholding • Superannuation guarantee • Choice of superannuation fund • Fringe benefits tax • Compliance issues
Obligations • PAYG Payment Summary to each employee by 14 July 2005 • PAYG Payment Summary Statement to Tax Office by 14 August 2005
PAYG payment summary • Types of payment summaries: • Individual Non Business • Voluntary Agreement • Labour Hire and Other Specified Payment • Eligible Termination Payment • Personal Services Attributed Income • No ABN Provided
Payment summary – individual non business • Other information on a payment summary: • fringe benefits • lump sum payments • other income • union fees.
Payment summaries • Use Tax Office forms or print your own • More information: • www.ato.gov.au/rsf • phone 13 28 66 • fact sheet • PAYG Guide no.1. • Due by 14 July
Payment summary statement • Summarises withholding activities • Send statement and copies of payment summaries to Tax Office by 14 August
End of year tips • Use correct stationery • Filing and record keeping • Tax tables • Reconcile amounts with Activity statements • Any discrepancy adjust on Activity statement due in July
Reporting by magnetic media • You can report by magnetic media: • TFN Declaration information • Payment Summary information • Withholding where ABN not quoted Annual Report • Must use commercial software authorised by the Tax Office
Income tax • Tax rate on taxable income • (2005-06) • Individual • sole trader • partner in partnership • beneficiary of trust 47¢ $80,000 42¢ $63,000 30¢ $21,600 17¢ $6,000 0¢ 30% • Company
Income tax • Tax rate on taxable income • (2005-06) • Individual • sole trader • partner in partnership • beneficiary of trust 47¢ $95,000 42¢ $63,000 30¢ $21,600 15¢ $6,000 0¢ 30% • Company
Superannuation guarantee: who is covered • Most full-time, part-time or casual employees: • some exemptions. • Contractors supplying mainly labour – even if they have an ABN: • for example accredited specialists. • Individual workers only: • does not apply to companies or partnerships you engage.
Superannuation guarantee: exemptions • Individuals who are: • paid less than $450 per calendar month • under 18 years of age and work 30 hours or less per week • aged 70 years or over • perform private or domestic work of 30 hours or less per week. • Other exemptions in Superannuation guarantee guide for employers
Superannuation guarantee: how much to pay • Employee earnings base x 9%: • earnings base may be specified in award or agreement, or • use ‘ordinary time earnings’.
Other factors to consider • Employee contributions not counted • Payments made under a salary sacrifice arrangement are employer contributions • Employers and employees cannot agree to disregard SG obligations • Superannuation guarantee complements rather than replaces award superannuation: • existing award obligations count towards the minimum level of support.
Superannuation guarantee • Contributions must be paid at least quarterly, and received by the superannuation fund by: • 28 October • 28 January • 28 April • 28 July.
Superannuation guarantee charge • If you don’t pay minimum level of superannuation support: • Superannuation guarantee charge applies: • lodge a statement • pay the charge: • shortfall component • administration component • interest component. • usually costs you more: • NOT tax deductible.
When is the superannuation guarantee charge due? • Employers that fail to make the minimum contribution by the cut-off dates must; • pay the superannuation guarantee charge and • lodge a superannuation guarantee statement by the 14th day of the second month following the end of the relevant quarter
Choice - employer obligations • Step 1 - identify eligible employees • Step 2 - provide a Standard choice form to eligible employees within the required time • Step 3 - act on an employee’s choice of fund within 2 months
Choice - employer obligations • Keep records to verify your compliance with the choice of fund requirements • Failure to meet your choice of fund obligations may attract the superannuation guarantee charge
Standard choice form • A Standard choice form must be provided to employees: • by 28 July 2005, for employees working for the employer on 1 July 2005 • within 28 days, for employees starting work from 1 July 2005. • A Standard choice form may be provided prior to 1 July 2005
Employee responsibilities • Employees can either: • not make a choice – contributions to go into the fund selected by the employer, or • choose an eligible choice fund - become a member and open an account with the chosen fund (if not already a member).
Employee choices – information required • Additional requirements for self managed superannuation funds • An employer may refuse to accept a nomination if the: • employee has chosen another fund within the previous 12 months • relevant information above is not included.
Record keeping • Which employees are eligible to be offered choice • How and when the Standard choice form was provided to eligible employees • including details of the superannuation fund selected for those employees who do not make a choice and whether this fund meets the insurance requirements. • The receipt of choices made by employees and details of how employee choices were acted on within 2 months
Where do I get more information? • Choice information pack was mailed to stakeholders in April 2005 • www.superchoice.gov.au • Phone our information line on 13 28 64
What is a fringe benefit • A benefit provided to an employee (or associate) ‘in respect of their employment’ • Fringe benefits include rights, privileges or services – for example: • car – allowing an employee to use a work car for private purposes • loan – giving an employee a low interest loan • expense payment – paying an employee’s private health insurance costs.
What to do if you provide fringe benefits • Keep the necessary FBT records • Calculate how much FBT you have to pay • Register for FBT • Report fringe benefits on employees’ payment summaries • Report and pay FBT to the Tax Office on your activity statement
Report and pay FBT to the Tax Office • FBT year is 1 April to 31 March • Annual return and payment usually due by 21 May: • amount of FBT you have to pay • categories of fringe benefits you provide • taxable value of the various categories • any employee contributions made.
Compliance • 2004-5 compliance program available • Blend of education, help and enforcement activities • Promotes and supports a culture of tax risk management
Market segments • Large business • Small to medium enterprises • Micro business • Individuals
Employer Obligations • Employer Obligations focus will be on: • withholding from payments made to workers • withholding at correct rates • reporting of withheld amounts • end-of-year stationery • payment of Superannuation contributions • payment of Fringe Benefits Tax
What Employer Obligations field officers will look at • Verify withholding is correct • Checking that amounts at W2 have been correctly notified • Pursue all outstanding debts/lodgement obligations • Obtain information to determine the status of the worker for Superannuation purposes
What Employer Obligations field officers will look at • Check compliance of superannuation obligations • Check compliance of FBT obligations • Educate clients to assist in complying with obligations • Capture intelligence to gain an understanding of employer behaviour
Key messages • Withhold the correct amounts • Determine whether your workers are employees or contractors • Meet your superannuation guarantee obligations • Meet your superannuation choice obligations • Be aware of and meet your FBT obligations
For more help and advice • Visit www.ato.gov.au • Small business enquiries phone 13 28 66 • Superannuation enquiries phone 13 10 20 • Super choice information line 13 28 64 • Visit www.superchoice.gov.au
Who are TESS? • TESS stands for Tax education and seminars section • TESS speakers deliver free seminars, workshops and other presentations on tax issues • Phone 1300 130 282 • Email firstname.lastname@example.org
Our commitment to you • The information in this presentation is current at May 2005. • In the taxpayers' charter we commit to giving you information and advice you can rely on. • If you try to follow the information contained in our written general advice and publications, and in doing so you make an honest mistake, you won't be subject to a penalty. However, as well as the underpaid tax, we may ask you to pay a general interest charge. • We make every effort to ensure that this information and advice is accurate. If you follow our advice, which subsequently turns out to be incorrect, or our advice is misleading and you make a mistake as a result, you won't be subject to a penalty or a general interest charge although you'll be required to pay any underpaid tax. • You are protected under GST law if you have acted on any GST information in this presentation. If you have relied on GST advice in this Tax Office presentation and that advice has later changed, you will not have to pay any extra GST for the period up to the date of the change. Similarly, you will not have to pay any penalties or interest. • If this information does not cover your circumstances, you can seek further information from our website at www.ato.gov.au, or help from the Tax Office or a professional adviser. Since we regularly revise our presentations to take account of any changes to the law, you should make sure this edition is the latest.