We have prepared the following update in relation to various remuneration matters. Please contact us if you would like to discuss any of these, or if you require further assistance.
Taxi travel exemption
At present, a benefit arising from taxi travel by an employee can be exempt from fringe benefits tax (FBT). This will be the case where the travel is:
- a single trip beginning or ending at the employee’s place of work; or
as a result of sickness or injury to the employee and all or part of the journey is directly between either the employee’s place of work, their place of residence or any other place that is appropriate for employee to go as a result of the sickness or injury.
To utilise the exemption it is necessary for the travel to be in a ‘taxi’. This is defined as a motor vehicle that is licensed by a relevant state or territory authority to operate taxi.
Although a ride sourcing vehicle (such as an Uber vehicle) is classified for GST purposes as a taxi, it does not meet this definition for FBT purposes. To avoid confusion, the definition of a taxi for FBT purposes will be changed so that it is essentially the same as what it is for GST purposes. This will mean that employers will now be able to provide similar travel in a motor vehicle that is not actually registered as a taxi, without attracting FBT. The proposed change will apply from when it is made law, and will not be extended to travel in a limousine.
Benefits provided to religious practitioners
In June the ATO finalised its ruling on the exemption from FBT for benefits provided to religious practitioners. This ruling now correctly refers to the requirement that an employer of a religious practitioner must be a ‘registered’ religious institution, which is what the FBT legislation states. This means that the employer must be registered with the ACNC as having the ‘subtype’ or purpose of advancing religion.
It is now possible for organisations that have the subtype of advancing religion (even though this is not the predominant subtype) to provide exempt benefits, as long as other conditions are met.
The ATO has used the final ruling to provide contemporary examples of pastoral duties and directly-related religious activities. It has also outlined the characteristics that a person should have to be classified as a minister of religion.
Portable long service
The Victorian government has introduced a compulsory portable long service scheme for workers in the community services, contract cleaning and security industries. The scheme is designed to enable workers to receive long service benefits when they change employment but remain in the industry.
The scheme requires businesses in the prescribed industries to register with the Portable Long Service Authority (PLSA). A quarterly return must then be lodged with PLSA with the levy that needs to be paid. The levy ranges from 1.65% to 1.80% of an employee’s ordinary pay. The levy will then be used to fund payment to the employee when they are eligible for long service leave.
More information in relation to this scheme can be found at: https://www.business.vic.gov.au/hiring-and-managing-staff/long-service-leave-victoria/portable-long-service-leave
Superannuation on annual leave loading
Employers are required to pay superannuation guarantee contributions on an employee’s ordinary time earnings (OTE). Earlier this year the ATO reiterated its view that annual leave loading is OTE, unless it is demonstrably referable to the lost opportunity to work overtime.
It was necessary for the ATO to clarify this position as some employers had assumed that superannuation is not payable on annual leave loading due to the fact that it was often incorporated into modern awards to compensate employees who were usually paid overtime for the fact that they would not receive this when on annual leave. Moreover, the fact that annual leave loading will generally be treated as OTE was not clearly stated on the ATO website.
As part of this clarification the ATO also provided guidance for employers in relation to historical obligations for superannuation. The ATO states that it will not devote compliance resources in situations where superannuation had not been paid on annual leave loading where:
the employer reasonably self-assessed that the annual leave loading was not OTE because it was in relation to the loss of opportunity to work overtime; and
there is no evidence in the past five years that suggests otherwise.
The federal government is in the process of finalising legislation to allow the proposed amnesty on unpaid superannuation contributions to proceed. Once enacted, the legislation will allow employers to voluntarily disclose unpaid amounts through a superannuation guarantee charge (SGC) statement. The amnesty will apply for six months after the legislation receives royal assent and can be used for superannuation contributions in respect of all quarters ending on 31 March 2018.
Although employers will need to complete and lodge an SGC statement under the amnesty, they will not be penalised and will not have to pay an administration fee of $20 per employee for each statement lodged. Importantly, SGC amounts paid in accordance with the amnesty will be deductible for income tax purposes.
Although the superannuation amnesty is helpful, it is much better to avoid being in a situation where this needs to be utilised by paying employee superannuation contributions on time. Superannuation contributions are required to be paid by the 28th day after the end of the March, June, September and December quarters. To ensure that you comply with your employer obligations, we recommend that employees’ superannuation contributions be paid regularly and well before these quarterly due dates.
From 1 July 2019 a deduction for income tax purposes for payments made to workers will not be allowed unless the payer has complied with pay as you go (PAYG) withholding and reporting obligations. These obligations require a business to:
withhold tax from an amount before it is paid to a worker; and
report that amount to the ATO
This will affect a payment:
of salary, wages, commissions, bonuses or allowances to an employee;
of directors fees;
to a religious practitioner;
under a labour hire arrangement; and
to a contractor for a supply wholly or partly for services where no ABN is quoted.
The payment will be non-deductible when no amount of PAYG withholding tax was withheld. However, if a voluntary disclosure of this error was made before the ATO commences an audit or compliance review then the amount will be deductible.
If an amount PAYG withholding tax was withheld but this is found to be incorrect then the amount will be deductible. The payer, however, should make a voluntary disclosure of its error to the ATO to ensure that no further penalties apply.
Payments to contractors will not be deductible where no ABN is obtained. However, if the payer has obtained an invoice or other document that quoted the contractor’s ABN and there were no reasonable grounds to believe that the ABN was incorrect then the payment will be deductible. To ensure that this does not occur, payers should check the validity of an ABN using the ABN lookup at https://abr.business.gov.au/.
The payment can also be non-deductible when a PAYG withholding tax amount was applied but has not been reported to the ATO. If this occurs an employer can lodged a revised activity statement to report the amount correctly.
Single Touch Payroll
Over the last few years, we have written several articles and held a couple of seminars about Single Touch Payroll (STP) and its impact on employers – from small to large. We have now just passed the deadline of 30 September for the vast majority of employers to be compliant with STP. The only employers that still have time to comply are those with closely held payees only. Closely held payees are those who are directly related to the entity from which they receive payments from. These employers have until 30 June 2020 to be compliant. There are still some concessions and deferrals available in certain circumstances for “micro” employers (1-4 employees) but most employers should now be up and running with STP.
STP requires employers to report employee information to the ATO using software that is STP ready or through third-party service providers. The main reporting categories include: salaries, allowances and deductions, superannuation guarantee and withholding amounts. There are a number of different types of solutions you can adopt – including STP lodgement only solutions and specialised payroll software.
It is critical that you are on top of your STP compliance as we have already seen the ATO starting to use this information to increase employer compliance, particularly in relation to superannuation obligations. We had previously flagged in our seminars that STP would close the information loop in relation to superannuation and we are now seeing the impact of this.
The ATO has begun to contact employers who have reported superannuation guarantee amounts via STP and have either not paid these or paid them late via SuperStream. It will be enforcing the requirement to submit SGC statements, which will compensate employees for the late contributions with calculated interest. Given that late superannuation is not deductible, the ATO may also review income tax returns of affected employers to ensure they do not claim a deduction for late paid amounts.
If you have not yet adopted STP or are unsure about the accuracy and effectiveness of your current system, please contact Daniel Turcato to discuss this further.