Financial & Retirement Planning Government News & Incentives SMSF & Superannuation Taxation & Tax Tips

Australian Federal Budget 2022-23

Man Reads Business Newspaper Australian Federal Budget 2022-23

Australian Federal Budget 2022-23 – Who is going to benefit? How will it affect you?

On Tuesday the 29 March 2022 at 7:30pm the Federal Treasurer presented the Australian Federal Budget 2022-23 and we wanted to provide you with our summary.

In the Federal Budget 2022, there was an update on how Australia has fared compared to the rest of the world and is always an interesting performance marker to consider.

Australia’s recovery is one of the fastest in the world – faster and stronger than the United States, the United Kingdom, Canada, France, Germany, Italy and Japan. The unemployment rate was confirmed at 4 per cent which is the equal lowest in 48 years and forecast to drop to 3.75%.

The expected Australian Federal Budget deficit for 2022-23 is estimated at $78.9 billion but over 5 years $103 billion better compared to last years budget. Over the 5 year forward estimates the estimated deficits will total almost $225 Billion. Ouch !!!!! This has been left for another time to deal with.

The argument from the treasurer is that due to international uncertainties and pressure on the cost of living something must be done now. Possibly to stave off a potential drop in consumer confidence and balance the risk of damaging inflation.

The following key provisions in the Federal Budget 2022 provide cost of living relief:

  • an increased Low and Middle Income Tax Offset in the 2021-22 year of $420 will bring the maximum offset to $1,500. This will be received once individuals lodge their tax returns and only if they have paid tax,
  • a one off $250 payment will be made to individuals who are currently in receipt of Australian government social security payments, including pensions.
  • from 30 March 22 a 6-month fuel excise relief of 50% which equates to a 22cent per litre saving

The concern that these stimulus measures will contribute to inflation was countered by the argument that the reduction in the fuel excise has a cascading effect of reducing input costs for the production of goods and services and therefore should be deflationary.

Business support includes the following key measures:

  • Technology Investment Boost – Small and medium businesses that turnover less than $50Million will be able to deduct an additional 20% of eligible expenditure supporting digital adoption up till 30 June 2023.
  • Skills Investment Boost – Small and medium businesses with less than $50Million in turnover will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees up till 30 June 2024.

For Example: if you spend $1000 on cyber security or subscription you can claim $1200 as a deduction on your tax return.

We have broken the Australian Federal Budget 2022 all down for you by Individual, Business, Superannuation and Tax Administration Efficiency.

There are also a range of spending measures in infrastructure, health, education, defence Government assistance for floods and other measures which have not been included in our summary.

Please refer to the budget website for a more detailed analysis of the budget.

Individual Benefits From The Federal Budget 2022

Federal Budget For Individuals

In addition to the cost of living relief mentioned in the introduction, there will also be the following provisions:

  • A From 1 July 2022, the Government is again reducing the PBS Safety Net thresholds. As a result, patients will reach the safety net with around 12 fewer scripts for concessional patients and two fewer scripts for general patients in a calendar year.
  • Additional funding for managing the impacts of the COVID-19 pandemic will be provided over 5 years to support older Australians in the aged care sector.
  • As previously mentioned by the government the costs of taking a COVID-19 test to attend a place of work will be tax deductible for individuals and exempt from fringe benefits tax from 1 July 2021. (substantiation requirements still apply here so keep your receipts)
  • A single Paid Parental Leave scheme of up to 20 weeks paid leave will replace the existing system of 2 separate payments.
  • The Government is expanding the Home Guarantee Scheme to make available 50,000 places per year, more than double the current number of places available to assist home buyers who have a lower deposit.
  • First Home Super Save Scheme – From 1 July 2022, the maximum amount of voluntary contributions that can be released under the FHSSS will be increased from $30,000 to $50,000

Federal Budget 2022 for Business

In addition to the Technology Investment Boost and the Skills Investment Boost:

  • Additional state and territory COVID-19 business support grant programs will be eligible for tax treatment as non-assessable non-exempt income until 30 June 2022.
  • The Boosting Apprenticeship Commencements wage subsidy will be extended by 3 months.
  • Concessional tax treatment will apply from 1 July 2022 for primary producers selling Australian Carbon Credit Units and biodiversity certificates.
  • Access to employee share schemes in unlisted companies will be expanded reducing red tape and making it easier to compete globally for skilled employees.
  • Business registry fees will be streamlined over 3 years from 2023–24.

Superannuation Drawdown

Account based pensions will be given a 50% reduction of the superannuation minimum drawdown requirements for an additional year.

 

Efficiency For Business 

  • Companies will be able to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.
  • Businesses will be allowed the option to report taxable payments reporting system data (via accounting software) on the same lodgement cycle as their activity statements.
  • Trust and beneficiary income reporting and processing will be digitalised.
  • IT infrastructure will be developed to allow the ATO to share single touch payroll data with state and territory revenue offices.
  • The ATO will be given funding to extend the operation of the Tax Avoidance Taskforce by 2 years.

 

If you would like to understand more about how you can benefit based on your business’s circumstances, we would love to assist so get in touch.

Audit & Assurance FAQ’s

Cybersecurity – Not Getting Caught During Phishing Season.

CYBERSECURITY PHISHING SEASON AFISHING HOOK WITH A PIECE OF PAPER THAT SAYS PASSWORD BISHOPCOLLINS ACCOUNTANTS LOGO IN BOTTOM RIGHT CORNER

With the festive season just around the corner, and potentially the end of many health orders and government-related restrictions in sight, many people will be looking forward to spending this time with loved ones.

While this period presents an opportunity to celebrate, exchange gifts and enjoy some downtime, many people will still be connected online; let’s face it, going online is probably part of your daily routine now.

Unfortunately, there are some people, scammers, who don’t take a break. These people exploit the weaknesses in online applications and devices as well as our vulnerabilities. Scammers undertake various scams to target people of all backgrounds, ages and income levels across Australia.

Scammers usually engage in an activity called ‘phishing’. Phishing is the fraudulent practice of sending emails (or phone calls) pretending to be from reputable companies to induce individuals to reveal personal information (click here to see some of the ATO warnings regarding tax phishing scams). There’s not one specific group of people who are more likely to become victims of a scam. Our article this month will assist you in considering and revising your cybersecurity awareness, improve your risk awareness, and hopefully minimise any exposures.

What is Cybersecurity?

Cybersecurity is the act of protecting digital assets (such as computers, servers, mobile devices, electronic systems, networks, and data) from malicious attacks. The Australian Cyber Security Centre compiles a report each year on cyber crime data collected. This report can be viewed here.

This term can be applied to multiple contexts (such as network, application or information security); however, we’ll focus on the most unpredictable cybersecurity factor: People. Anyone can accidentally introduce a virus to an otherwise secure system by not following good security practices.

Good cybersecurity practices help prevent cyber-crime, cyber-attack and cyber-terrorism. Cyber-crime specifically includes ‘actors’ or ‘groups’ targeting systems for financial gain. A key objective in targeting vulnerable systems is the installation of “malware”. Malware means ‘malicious software’.

A cybercriminal or hacker has created malware to disrupt or damage a legitimate user’s computer or extract sensitive personal and financial information. Malware spreads via (unsolicited) emails, legitimate-looking downloads, or through user interaction with a third party. The increasing prevalence of malware, and the ability to perform cybercrime, is achieved by scammers through a scam.

Types of scams

Let’s explore several commons scams:

  • Tech-support (or remote-access) scam: Scammers trick you into unnecessary technical support services to supposedly “fix” device or software problems that don’t exist. At best, scammers are trying to get you to pay them to “fix” fake issues; at worst, they’re trying to steal your personal or financial information. This type of scam also extends to contact made by a scammer via phone, text or email falsely claiming to be from other familiar companies, such as a bank or government agency.
  • Online shopping scam: Online (or “classifieds”) scams involve scammers establishing fake websites and tricking people into buying from them. Once the order is placed and payment is made, shoppers might receive an inferior product to what was promised (or worse, nothing at all). Unsurprisingly, there has been an increase in these scams due to the health pandemic lockdowns and residents purchasing their goods digitally.
  • Romance scam: Scammers know that the quickest way to the purse strings is via the heartstrings. They usually create fake online identities designed to lure you in. Once they’ve gained your trust, they use your newfound relationship to request you send them money or gifts. These requests are usually connected with an urgent need for cash to help with fake health, travel or family problems. These scams are unique in that they may occur over many months and use manipulative, psychologically controlling, and devious tactics.
  • Investment scam: An investment scam is when someone contacts you, usually “out of the blue”. Investment scams may be via phone or email, offering the chance to invest in a “once-in-a-lifetime opportunity”.

There are multiple types of scams and you’ll note, as you step through each of our common examples, several emerging and consistent elements. These are:

  • The use of scare tactics
  • A sense of urgency
  • A promise or commitment (which is likely connected to something too good to be true or believable).
  • A call to action – that is, you must “do” something (i.e. ‘engage’ in a particular behaviour (such as clicking on a link, downloading software or facilitating a payment or transaction).

Best Practice Cybersecurity Tips

Good cybersecurity practices apply to everyone and should be practiced daily. Our non-exhaustive, helpful tips are summarised as follows:

  • Use security software: Install security software on your devices and keep it updated.
  • Use auto-updates on your devices: Whether you are a user of an Apple, Microsoft, Samsung, or another platform manufacturer, we recommend enabling auto-updates on your devices. Device and product updates often include security fixes (or ‘patches’) that enhance your overall security position and address any identified vulnerabilities.
  • Use multi-factor authentication: This is also sometimes referred to as two-factor or dual authentication. This method relies on a user providing a password as the first factor and a second, different factor. The second factor could be your mobile device, token, fingerprint scan etc. We recommend this be set up for most sensitive websites (e.g. your online banking account). Helpful hint: This safeguard can prevent someone from logging in to your account if your login details have been compromised.
  • Use strong passwords: Research conducted by IT-sector companies has reported passwords can be guessed and, you guessed it, the most common passwords used by users include ‘password’, ‘123456’, ‘qwerty’ or a variant. Password-protect all your devices with a strong password. Use a different password for each site. Choose passwords that would be difficult for others to guess and update them regularly. Importantly, keep your passwords and pin numbers in a safe place. (A password manager can simplify the task of creating complex, unique passwords and storing them securely.)
  • Be discreet with your information (“share with care”): Protect your personal information, especially when using social media sites. We recommend adjusting your privacy settings to minimise who can identify and locate you online, as well as not sharing essential information, no matter how basic or insignificant it may seem. Scammers can readily create fake identifies and exploit weaknesses through utilising basic elements such as your surname, address, phone numbers, date of birth etc.
  • Be alert for scams: Be careful when clicking on links within emails and untrustworthy websites. Do not open suspicious texts, pop-up windows, click on links or attachments in emails, delete these emails. If unsure, verify the contact’s identity through an independent source – for example, if it’s a supplier, call them directly based on their listed phone number – never use the contact details provided in the communication sent to you. The same goes for unsolicited phone calls.
  • Avoid using public Wi-Fi: Public Wi-Fi can be convenient, especially in places such as shopping centres and hospitality venues. Remember, it’s a shared network and you don’t know what vulnerabilities there are (including other users). We do not recommend checking your social media or logging into your online banking account when using public Wi-Fi.
  • Back up your data regularly: Cybersecurity goes beyond safeguarding your personal and sensitive information – it extends to protecting your data from loss or destruction. Maintain reliable backups of your data.
  • Log out of applications and websites when you are done using them: Equally, delete untrustworthy emails. Do not open these or click on links within them.
  • When shopping online, always use an online shopping service that you know and trust: This includes only providing your credit card details to companies you recognise online. Importantly, be wary of unusual payment requests – scammers often ask you to use an unusual payment method (including pre-loaded debit cards, gift cards, iTunes cards or virtual currency such as Bitcoin).
  • Utilise external support networks: Consider a trusted source to serve as a second set of eyes and ears. Family members (including tech-savvy grandchildren) may be willing to assist or contact a reputable IT provider.
  • Regularly review bank and credit card statements: Regularly check your accounts to identify any unusual transactions, activity, or potential breaches.

Remember, if it looks (or sounds) too good to be true, it probably is.

The Bishop Collins Audit and Assurance team can assist you in identifying processes in your business that can be improved to prevent being a victim of a phishing scam. You can contact us here.

Taxation & Tax Tips

A Complete Overview to Fringe Benefits Tax (FBT)

fringe benefits tax

Fringe Benefits can help you enjoy some job perks, and, depending on your personal circumstances and type of employer, reduce your taxable income.

Fringe Benefits Tax (FBT) is a tax paid on the benefits provided by an employer to their employees that is in addition to their salary. Examples include the use of a work car or phone for non-business use.

Warning!

A word of warning, the advantages of using Fringe Benefits as a tax minimisation strategy are limited. Many business owners now understand, the complex rules and cost to comply with FBT provide only small value. The biggest advantages are reserved for Charities and Not For Profit organisations, to assist them in attracting employees.

Understanding FBT

Most importantly, when looking at FBT rules, make sure you are not creating unnecessary cost and complexity in employee remuneration.

The ATO offers a Comprehensive Guide to FBT and one we recommend downloading and reading. Click here for the FULL ATO FBT GUIDE

Due to the enormity of the FBT rules we will only cover some of the Fringe Benefits that provide advantages to employees.

Not-for-Profit Organisations and Fringe Benefits Tax (FBT)

Depending on your type of organisation, certain benefits provided to employees receive favourable FBT treatment. Charities that want to access FBT concessions must be registered with the Australian Charities and Not-for-Profits Commission (ACNC) as a charity and endorsed by the ATO.

For Charities and NFP’s salary packaging for employees provides opportunities for considerable tax savings. The logic of providing favourable treatment is, in our view, to level the playing field in attracting talent. Allowing these organisations the ability to compete in the labour market and offer FBT concessions that can be taxed at concessional rates.

Concessions for Not For Profits and charities

Such concessions for NFP’s and Charities include the following:

  • FBT Exemption
  • FBT Rebate
  • Car parking
  • Remote area concessions, and
  • Certain benefits to religious institutions.

There are eligibility conditions for each so take time to read the ATOs FBT Guide (Link above) or contact your accountant or Bishop Collins Accountants.

Let’s look at the most significant of these concessions, the FBT Exemption.

FBT Exemption

Depending on the status of the organisation an employee can claim between $9,010 of Fringe Benefits for a Public or NFP hospital, and public ambulance service to $15,900 of Fringe Benefits for a Registered Public Benevolent Institution (PBI) and health promotion charity.

Examples of common Fringe Benefit payments that are eligible for the FBT exemption are:

  • Mortgage or Loan repayments
  • Rent for employees’ residence
  • Credit card repayments
  • Private Health Insurance
  • HECS/HELP repayments
  • School fees

There are other expense payments that can be made however, if they attract GST such as gym membership, utility bills or travel, then the amount that can be exempt from FBT is reduced. If all Fringe Benefits payments were made that attracted GST, then the limit is $8,172 and $14,421 respectively.

Be aware of Fringe Benefit Rules

Important notes to be aware of here:

  1. The Fringe Benefit payment cannot be made direct to the employer’s bank account or in cash. It must be made to a supplier of those services or goods.
  2. These Fringe Benefit payments on the employee’s behalf add to their HECS/HELP repayment income. However, they are not calculated when working out your periodic HECS/HELP deductions. Employees may need to complete a withholding declaration and provide this to the employer to take out additional HECS/HELP deductions.
Fringe Benefit Tax Example.

The best way to illustrate is to look at an example.

An executive at a registered PBI charity earns $180,000 + super and hears about a great article written by Bishop Collins Accountants. She asks to have $1,325 per month paid by the organisation on her home mortgage account. At the end of the 2022 FBT year she has received $15,900 in benefits and paid no tax on this amount. Assuming all other tax positions have remained constant before and after the change, her tax saving is approximately $6,201 per year.

If she was earning $196,000 plus super and received $15,900 of the above mortgage repayments, her savings would be even greater at approximately $7,473! every year. Not a bad incentive and well worth taking advantage of.

Exempt benefits

Several benefits are exempt from FBT. Although these are popularly called ‘exempt Fringe Benefits’, they are referred to in the FBT legislation as ‘exempt benefits’ – in fact, by definition, an exempt benefit cannot be a Fringe Benefit.

Exempt benefits are not only exempt from FBT, but they are also (with one exception, car expense payments) exempt from Income Tax to the employee.

Some of the more common examples of exempt benefits include:

  • Employees private use of a taxi, panel van or utility designed to carry less than 1 tonne
  • Accommodation considered to be in a remote area in Australia or overseas
  • Parking provided to a disabled employee
  • Small business car parking provided to employees where the business has income less than $10million per year.
  • Compassionate and some medical travel expenses
  • Taxi travel that is single trip beginning or ending at place of work
  • Recreational and childcare facilities provided on business premises
  • Relocation exemptions – Living Away from Home Accommodation and Food
  • Property provided to an employee that is consumed on a working day on the premises eg. Bread roll eaten at lunch on a working day at a bakery.
  • Remote area housing
  • Otherwise, deductible rule – The expense payment would be otherwise deductible to the employee
  • Minor and infrequent benefits less than $300/employee such as Christmas parties and gifts.
  • Provision of work-related items such as portable electronic devices, computer software, protective clothing, briefcase, or tools of trade.
  • Membership fees and subscriptions such as subscription to trade or professional journal, corporate credit card or airport lounge membership.

PLEASE NOTE: Nearly all the above exemptions have eligibility criteria and provisions that must be considered before adopting.

Car Fringe Benefits

A car Fringe Benefit commonly arises where you make a car you own or lease available for the private use of an employee. A car is taken to be made available for private use by an employee on any day the car is:

  • used for private purposes by the employee or associate
  • not at your premises, and the employee can use it for private purposes
  • garaged at their place of residence, regardless of whether they have permission to use it privately.

Generally, travel to and from work is private use of a vehicle.

Determining Fringe Benefits Tax and the overall benefit to an employee is influenced by several factors. Please contact Bishop Collins to discuss the benefits and likely tax associated with having a car fringe benefit provided by your organisation.

Taxation & Tax Tips

How Much Tax Do You Pay On A Superannuation Withdrawal?

burgundy background with words referring to superannuation withdrawal and the amount of tax you pay for a superannuation withdrawal and the bishop collins accountants logo in the lower right corner of the image

How much tax you pay on a superannuation withdrawal depends on various factors. These include whether the payment has been made before or after your death. So, whilst this article isn’t intended to be an exhaustive list of how much tax you pay on a superannuation withdrawal, it should provide you with a reliable guide for some of the more typical circumstances.

When can you withdraw money from superannuation?

You can only draw money from superannuation if you satisfy a condition of release. A condition of release is defined by legislation and has specific tests needing to be met. Some of the more common conditions of release are:

  • Retirement,
  • Death,
  • Reaching preservation age (refer below),
  • Permanent or temporary incapacity,
  • Severe financial hardship and/or
  • Compassionate grounds.

How much tax do you pay on a superannuation withdrawal before a member’s death?

Once you’ve satisfied a condition of release, many factors will affect the rate of tax you pay on a superannuation withdrawal. These factors include:

a) The age of the person receiving the benefit. A person’s preservation age can impact the amount of tax and will vary depending upon when they were born. A person born before 1 July 1960 will have a preservation age of 55, whereas a person born after 30 June 1964 will have a preservation age of 60. For further information about determining a person’s preservation age, follow this link: When you can access your super | Australian Taxation Office (ato.gov.au).

b) The nature of the benefit (lump sum or income stream). A lump sum is one or more payments from a superannuation fund, whereby an application is made to withdraw a single amount for each payment. In contrast, an income stream is typically a series of regular payments paid at least annually.

c ) The components of the benefit (tax-free or taxable). The superannuation fund determines the taxable and tax-free parts of a person’s superannuation interest. It will be impacted by the type of contributions made to the superannuation fund over time. For further information relating to calculating the taxable and tax-free components of superannuation interest, follow this link: Calculating components of a super benefit | Australian Taxation Office (ato.gov.au).

d) The components of the taxable part (taxed or untaxed elements). The superannuation fund determines the parts which are taxed and untaxed of a person’s superannuation interest. Factors impacting these elements are:

  • Superannuation benefits accumulated from specific public sector superannuation schemes and/or
  • Where life insurance premiums have been claimed and a lump sum death benefit is paid.

For further information relating to calculating the taxed and untaxed elements of the taxable component of superannuation interest, refer to the link in item c) above.

The table below summarises how much tax you pay on taxed superannuation withdrawn:

Tax on the taxed element of a superannuation withdrawal.

tax table 1

Note: The low-rate cap amount is $225,000 for the 2022 financial year. It’s a lifetime limit, which applies concessional tax treatment to the taxable component of any lump sum payments you receive between your preservation age and age 60.

The table below summarises how much tax you pay on a superannuation withdrawal for the untaxed element.

Tax on the untaxed element of a superannuation withdrawal.

tax table 2

Note: The untaxed cap plan amount is $1,615,000 for the 2022 financial year. There may also be additional consequences if the income stream is capped with a defined benefit income which exceeds the defined benefit income cap for the year.

The tax-free component of a superannuation withdrawal is not subject to tax in all instances.

Withdrawing money from superannuation following death

If a person passes away with money in superannuation, the superannuation fund’s trustee is obligated to pay a death benefit as soon as practicable after the member dies.

The trustee generally only pays a death benefit to one or more of the deceased member’s dependents, or their estate, per the trust deed. The law defines a deceased member’s dependents. These include their spouse, child, or someone with whom the member has an interdependency relationship.

Interestingly, the definition of dependent for income tax purposes is slightly different. The critical difference is a child of any age can be a dependent for superannuation purposes. However, only a child under 18 can be a dependent for taxation purposes (assuming there’s no relationship of interdependency for a child over 18).

How much tax do you pay on a superannuation withdrawal after a member’s death?

The taxation consequences arising from a superannuation withdrawal after a member’s death will depend on many factors. Some of these factors include:

  • Ages of the deceased and the recipient.
  • The nature of the benefit.
  • Components of the benefit.
  • The elements of the taxable component; and
  • Whether the payment is made to a dependent or non-dependent for income tax purposes.

The table below summarises how much tax you pay on a superannuation withdrawal for a death benefit payment to a dependent:

Tax on death benefit payments to a dependent

tax table 3

The table below summarises how much tax you pay on a superannuation withdrawal for a death benefit payment to a non-dependent:

Tax on death benefit payments to a non-dependent.

tax table 4

The tax-free component of a death benefit payment is not subject to tax in all instances.

The amount of tax you pay on a superannuation withdrawal is impacted by various factors unique to your circumstances. For this reason, it’s best to seek advice before making any withdrawals from superannuation.

Business Coaching Government News & Incentives

Director ID Number

Female director standing at a boardroom table, with text calling all directors to the side of her. Bishop Collins Accountants logo in lower right corner

Calling all Directors!

Are you a director of one of the following entities?

  • A company,
  • Registered Australian body, such as an incorporated association,
  • A registered foreign company or,
  • Aboriginal & Torres Strait Islander corporation,

If so, you will need to obtain a Director Identification Number DIN (Director ID) by the dates below.

What is a Director ID Number?

A Director Identification Number (DIN) is a 15-digit number given to a director or someone who intends to be a director and has identified themselves with the Australian Business Registry Services (ABRS).

It’s the director’s responsibility to apply for their Director ID. It is free to apply. There will only ever be one Director ID given to you as a director. This remains with the director regardless of whether they change companies, stop being a director, change their name, or move interstate or overseas.

Why do you need a Director ID?

In simple terms, you need this so creditors, shareholders, employees, consumers, administrators and regulators know the names and specific details of directors of a company.

Having a Director ID will achieve the following:

  • Prevent the use of false or fraudulent director identities
  • Make it easier for external administrators and regulators to trace directors’ relationships with companies over time.
  • Identify and eliminate director involvement in unlawful activity, such as illegal phoenix activity.

Important Dates to Apply By:

Applying for your ID number depends on your date of becoming a director.

You can apply for a Director ID from 1 November 2021.

Date you Become a DirectorDate you Must Apply
On or before 31 October 2021By 30 November 2022
Between 1 November 2021 and 4 April 2022Within 28 days of appointment
From 5 April 2022Before appointment

To be a director, under the Corporations Act, you must:

  • Be an individual who is at least 18 years old.
  • Not be disqualified from managing corporations unless the appointment is made with the permission of ASIC or the Court.

What are the director obligations regarding a Director ID?

Your Director Identification Number (DIN) obligations include:

  • Applying for a DIN within the relevant timeframe for your situation.
  • Applying for a DIN when directed by the Registrar to do so.
  • Ensuring you only apply for no more than one DIN (unless directed by the Registrar to do so).
  • Not misrepresenting your DIN to a Commonwealth body, company, registered Australian body or Aboriginal and Torres Strait Islander corporation.
  • Making sure you are not involved in breaching any of the above DIN obligations.

You must meet the above obligations. Serious consequences may apply if you are unable to meet the duties required. These include:

  • Possible civil or criminal penalties, or
  • You may be issued with an infringement notice.

How do you apply for your Director ID?

You can apply in three easy steps:

If you need further information, you can refer to the following link for more details:

https://www.abrs.gov.au/director-identification-number/apply-director-identification-number

Remember, it is a legal requirement to obtain a Director ID, so please ensure you contact our office if there is a problem completing these steps by the due date or if you have any questions.

Business Coaching FAQ’s Taxation & Tax Tips

What is Payroll Tax NSW?

payroll tax nsw on an orange background

A Colourful History

Payroll Tax has a long and colourful history in Australia. The federal government first introduced the tax in 1941 to fund a national scheme for child endowment. In 1971, the Federal Government passed Payroll Tax to the States. The uniformity of this tax has diminished over time, and currently State Payroll Taxes are levied at rates ranging between 4.75% and 6.85%.

The Current State of Play of Payroll Tax

The current rate of Payroll Tax in NSW is 4.85%. The NSW 2021-22 budget shows forecast Payroll Tax collections at $8.9b, amounting to 25% of forecast tax collection in the state. As recently as FY 2020, Payroll Tax was the leading tax collected in NSW. However, in the past 12 months, Stamp Duty has exceeded this. The following is an extract from the NSW Government 2021-22 Budget Statement summarising NSW taxation revenue:

tax revenue nsw

Source: NSW Budget Statement 2021-22 – Budget paper No. 1. https://www.budget.nsw.gov.au/budget-papers

 

Does Payroll Tax Apply to My Business?

If your business employs staff and pays wages in NSW, you will be required to register for Payroll Tax if your Australian wages exceed the relevant monthly threshold.  The annual thresholds determine the monthly threshold. The following is a summary of the historical Payroll Tax thresholds and rates in NSW:

historical tax thresholds in nsw
monthly tax thresholds

Source: Rates and thresholds | Revenue NSW

 

What is Included in “Wages” For Payroll Tax?

You might think the definition of wages is straightforward, but this is not necessarily the case. For example, payments to employees employed on a permanent, temporary, or casual basis will be subject to Payroll Tax. In addition to this, payments made to certain contractors may also be deemed wages for Payroll Tax purposes.

 

Wages may include the following:

Payment TypeApplication on Payroll Tax
AllowancesAllowances paid to employees will be liable for payroll tax subject to exemptions for certain travel and living away from home allowances.
Bonuses & CommissionsThese will be liable for payroll tax when paid to the employee.
Directors FeesFees paid to a director, including non-working directors, will be liable for payroll tax even if paid to someone other than the director.
SuperannuationAll superannuation payments an employer makes on an employee’s behalf are considered “taxable wages” and are liable for payroll tax.
Fringe benefitsAll taxable fringe benefits under the Fringe Benefits Tax Assessment Act 1986 are liable for payroll tax. However, if the benefit is exempt or has a zero value, it will not be liable for payroll tax.
Apprentice & Trainee WagesAs with other employees, all wages, including superannuation, paid to apprentices are subject to payroll tax. However, there is an opportunity to claim a rebate on wages paid to approved apprentices and new entrant trainees.
JobKeeperIn NSW, if you are an employer who made top-up payments to meet the Jobkeeper rate, there is an exemption from Payroll tax on these payments. However, other wages paid, payable to, or relating to the employee are taxable and not entitled to the exemption.
Salary SacrificePayroll tax will be payable on the reduced salary paid to the employee plus any superannuation contributions (refer above) and FBT amounts on benefits subject to the salary sacrifice arrangement, such as motor vehicles.
Shares & OptionsWhere an employee is granted shares or options through an Employee Share Scheme, the value of this payment must be declared as wages for payroll tax purposes.
Termination paymentsEligible termination payments (ETP) to an employee will generally be liable for payroll tax.  However, this is reduced by any income tax-exempt component included in the ETP.
Third-Party PaymentsWhere an employee or director provides services, all payments for these services are liable for payroll tax, regardless of who makes or receives the payments.

What Wages, if Any, Are Exempt from Payroll Tax?

Some wages are exempt from Payroll Tax. These include:

  • Additional wages paid to employees to meet the requirements of the JobKeeper scheme.
  • Wages paid from 1 June 2020 funded by any payment made under the Commonwealth program, Aged Care Workforce Retention Grant Opportunity.
  • Adoption and maternity leave.
  • Paid parental leave.
  • Contributions to redundancy benefit schemes.
  • Wages paid to employees absent from work to volunteer as firefighters or respond to other emergencies.
  • Wages paid to a person while on military leave as a member of the Defence Forces.
  • Bonafide redundancy or early retirement payments.

What About Interstate Wages?

Wages your business pays to interstate-based employees will generally be subject to Payroll Tax.  If your company pays interstate wages, you can’t claim the total Payroll Tax threshold deduction in NSW. Your available threshold is reduced based on the quantum of your interstate wages.

Grouping for Payroll Tax Purposes?

Grouping of businesses for Payroll Tax purposes can be done for a variety of reasons. However, the most common reasons for grouping businesses include:

  • Related companies – Grouping companies or businesses for Payroll tax purposes occurs if they meet the definition of related companies under the Corporations Act 2001. This will apply even if the companies have an overseas holding company.
  • Common employees – Grouping may apply where one or more business employees perform services under an arrangement between multiple employers.
  • Common control – When a situation arises where an individual or group of individuals have a controlling interest in multiple businesses, those businesses will be grouped for payroll tax purposes. The definition of controlling interest depends on the legal structure of the businesses involved.

Will My Business be Audited?

It is critical you understand your obligations when it comes to reporting your Payroll Tax obligations. The system is based on voluntary self-assessment. Audited businesses who are found with a tax shortfall will be subject to penalties and interest on the Payroll Tax shortfall. In addition, the NSW Government works closely with the ATO to share information and data concerning wages and FBT. This data is matched to the information contained in Payroll Tax returns.

The NSW Government has been auditing Payroll Tax compliance in the 2020-21 financial year. The results of this compliance program are summarised below:

  • Audited 1,623 registered Payroll Tax customers and identified $159.1 million in additional Payroll Tax.
  • Lodgement enforcement activity was undertaken on 2,860 customers and identified over $55 million in compliance revenue.
  • Investigated over 685 unregistered businesses with undeclared liabilities, assessed 94% of these and recovered over $24.3 million in additional payroll tax – 252 of these businesses were informed of their potential obligations and assisted in getting their assessments right the first time without penalty.

From this we would encourage you to make sure you are reporting your Payroll Tax correctly to avoid being caught out. If you need assistance with Payroll Tax speak with a professional advisor or contact us at Bishop Collins Accountants.

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