Employment Taxes are back in the spotlight

Single Touch Payroll Phase 2.0 becoming mandatory for all businesses from 1 January 2022; updated rules for employee share schemes; a revised approach to superannuation penalties – just to name a few.

For many organisations and payroll teams, the pressure to keep up-to-date and compliant with changing employment taxes is significant.

Below is a snapshot of the key changes and how they could impact your business. If you need support or would like to discuss this in more detail, please get in touch using our contact details below.

• Single Touch Payroll Phase 2
• Employee Share Schemes
• Superannuation Guarantee Charge Draft PS LA 2021/D1
• Data Matching program - Novated Leases
• Residual value of Leased cars
• Payroll Tax update

Single Touch Payroll (STP) Phase 2

STP Phase 2.0, due to commence on 1 January 2022, will significantly increase transparency, with gross salary to be reported split into:

• Bonuses and commissions
• Separate Allowances
• Directors fees
• Overtime
• Paid Leave
• Salary Sacrifice

This will provide a greater level of information to the ATO every pay run. Employers should ensure that all protocols are correct and up to date, so as to avoid the higher level of scrutiny from the ATO that will inevitably arise as a result of the increased data matching potential that STP Phase 2 provides.

Your payroll provider will no doubt be reaching out to you to obtain the payroll breakdowns and employment tax reporting treatment in order to be STP Phase 2.0 ready Grant Thornton, can work with you to ensure the correct treatment for each pay code is identified before this is integrated into the ongoing payroll reporting. We will either apply our own reporting template, or can work with your payroll provider’s template in undertaking this review.

For more information regarding STP Phase 2, please refer to the article by Thomas Isbell, Partner.

Read more on Single Touch Payroll Phase 2

Employee Share Schemes

Employee share schemes are to become more attractive, particularly for private businesses, through updated rules that remove the taxing point on cessation of employment.

The draft legislation, slated in the 2021 Federal Budget, has just been released and addresses the issue where employees could have inadvertently given rise to an accelerated taxing point upon cessation of employment, with no way to sell the shares and fund the tax liability.

For more information regarding the proposed employee share scheme amendments, please refer to the article by Peter Hills, Partner.

Read more on Employee share schemes

Superannuation Guarantee Charge Draft PS LA 2021/D1

Following the conclusion of the Superannuation Amnesty employers have been on high alert as a result of the automatic application of penalties for failure to lodge an SGC statement by the due date. The penalties can as much as triple the SGC exposure, with a minimum 100% penalty in the case of ATO instigated reviews.

Through Draft PS LA 2021/D1 the ATO intends to revise its approach to penalty relief, applying a sliding scale assessed over a 4 step process, to differentiate between good compliers and repeat offenders.

This approach considers:

• The timeliness of late payments and whether they are made prior to ATO contact.
• Whether disclosures are before the due date, before contact from the ATO, or as a result of a default assessment from the Commissioner.
• The compliance history - number of quarters outstanding, previous audits etc.
• Other mitigating factors.

Key to this new approach is recognition that timeliness and making active attempts to correct SG issues will make a significant difference in reducing exposure to penalties.

In light of the upcoming transparency of payments from STP Phase 2, and the continuing benefit of engaging prior to an ATO notification (including possible 100% remission), we strongly recommend employers review the treatment of their pay codes for Superannuation Guarantee purposes and ensure all payments and processes are accurate and up to date.

Fringe Benefits Tax

Data Matching program - Novated Leases

The ATO is ramping up their FBT data matching activities by acquiring novated lease data from car lease providers.

The data will include a number of personal details in addition to lease transaction data impacting approximately 260,000 individuals, with the aim of matching against ATO records to identify key areas of non compliance.

We suggest employers should ensure:

• They are up to date with their FBT reporting for leased cars and any exemptions are being applied appropriately;
• The correct income tax deductions are being taken for Luxury Cars.

Employees will also be under scrutiny with the potential review of their income tax returns for ‘double dipping’ with tax deductions relating to their novated lease arrangements.

Residual value of Leased cars

Continuing on the novated lease theme the ATO has recently issued an Addendum to TD 93/142, in an attempt to clarify the minimum residual values of leased cars for FBT purposes. The Addendum has come about as a result of practice by some taxpayers of entering into multiple short-term novated leases in order to obtain the lowest possible residual value at the end of the leases.

Accordingly, the Addendum clarifies that the minimum residual value percentage to be applied should be that which corresponds with the total period for which the car is to be leased, rather than for the period of each short-term lease.

Payroll Tax update

As NSW continues to grapple with the latest COVID outbreak, Revenue NSW has undertaken a number of supportive measures including;

• 25% reduction in the payroll tax liability for business with grouped Australian wages of $10 million or less who experience a 30 percent decline in turnover.
• Cash flow boost Eligible entities will receive 40% of their NSW payroll payments, at a minimum of $1500 and a maximum of $10,000 per week.
• Deferral of lodgement and payment to 7 October 2021

As other states, unfortunately, fall into similar lockdown measures, we expect supportive measures to continue to develop across the states. Examples include:

• Victorian 400 million support package for SME’s
• Queensland introducing a similar grant program to NSW with up to 5,000 for eligible businesses with a 30 reduction in turnover