With the end of the financial year approaching, it is an opportunity for employers to revisit the key points surrounding activity statements and superannuation obligations. Here are seven key tips to consider in the lead-up to June 30.
As part of year-end tax planning, employers should review income tax instalments paid throughout the year against the estimated tax payable.
Where overpayments are made, taxpayers can revise their June 2019 PAYG instalment to claim back an overpayment, or reduce a payment due. It’s important to note the variation must be lodged by the due date. Caution must be applied, as penalties may apply to variations made throughout the year that result in tax payable at the end of the year.
Overall, this is a good way to put cash back in your pocket earlier, rather than waiting for the lodgement of your tax return.
Employers are entitled to a tax deduction for unpaid wages that have accrued from the last pay run up until the end of the financial year.
This allows employers to bring forward the expense for wage payments that would ordinarily fall into the following financial year. It’s important to note that this does not get reported on your activity statement until physical payment is made.
The same cannot be applied to superannuation, which is specifically excluded from being accrued for tax purposes.
Superannuation is only tax deductible to a business once it has been received by the employees’ superannuation account. To maximise current year tax deductions, employers can make their super payments for the June quarter prior to June 30.
The trade-off is that cash flow will have to be managed to bring forward this payment before it is otherwise due. Employers must be ready to calculate the April to June 2019 liability prior to June 30 in order to make the payment on time.
You may have noticed fewer requests from employees wishing to salary sacrifice into superannuation this year.
From July 1, 2018, since the removal of the ‘10 per cent rule’, employees do not need to salary sacrifice their superannuation payments to claim a tax deduction. This allows individuals to claim a tax deduction when they lodge their tax return. The Labor Party had proposed to reverse this change.
Employers should consider lodging electronically to provide more flexibility to manage cash flow while still meeting Australian Taxation Office obligations.
Where employers prepare a Business Activity Statement via a paper form, the due date for BAS is generally 28 days after the end of the quarter, or 21 days after the end of the month for monthly lodgers.
An additional two-week extension is granted to businesses that lodge electronically, allowing for additional time to prepare the BAS and manage cash flow for any tax-payable amounts.
Registered BAS agents and tax agents obtain a four-week extension from the original due date.
From July 1, 2019, employers won’t get a tax deduction for ‘non-compliant payments’. Non-compliant payments are when employers don’t meet their PAYG withholding obligations by not deducting tax and reporting payment details to the ATO. These mainly include payments for wages, director fees and contractor payments where no ABN has been quoted.
This is a timely reminder that all employers need to be ready to meet their Single Touch Payroll obligations, which is mandatory for all employers from July 1, 2019.
The ATO will receive real-time data for wages, PAYG withholding and superannuation for every pay run made by employers.
To achieve this, employers must use STP-compliant software, capable of reporting to the ATO. Employees will be able to access their year-to-date pay details via mygov accounts.
Generally, cloud-based accounting programs are STP compliant. For some businesses, this is forcing the change from a traditional computer-based software to cloud-based programs. The ease of being able to access the software from anywhere using an internet connection, access to real-time data linked to business bank accounts, as well as sophisticated reporting capabilities has proven to significantly add value to businesses.
The end of the financial year is an opportune time to meet with your accountant and ensure your year-end planning is in order.
Author:
Vincent Ferraro,
Senior Accountant, RSM
As published: Wednesday, 22 May 2019
The West Australian - Tax Toolkit
Read in full: Business Tax Toolkit
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