From 1 July 2019, key changes will be introduced with respect to PAYG withholding and reporting as well as single touch payroll. Below we have outlined what this means for you and what you need to do to ensure you remain compliant as we approach the new financial year.
Your PAYG Obligations
From 1 July 2019, taxpayers can only claim deductions for payments made to workers (employees and contractors) where the pay as you go (PAYG) withholding and reporting obligations for that payment have been met.
What does this mean for you?
In order to claim deductions, PAYG must be withheld from the payment you make to a worker and reported to the Australian Taxation Office (ATO). These deductions may relate to:
• Salary, wages, commissions, bonuses or allowances to an employee;
• Directors’ fees;
• Payments to a religious practitioner;
• Payments under a labour hire arrangement;
• Payments for a supply of services (excluding supplies of goods and real property) where an ABN has not been provided;
• Non-cash benefits.
What you need to do
It is important that you understand these changes and how they apply to your business so that you avoid penalties and continue to receive tax deductions. Before 1 July 2019, you should ensure you are compliant by reviewing your current PAYG policies and information.
If you meet your PAYG withholding and reporting obligations, you have nothing to be concerned about and you can claim your deductions as per usual.
If the PAYG was not withheld from the payment you made to a worker, you or your tax agent can make a voluntary disclosure to the ATO to correct the error, before the ATO begins an examination. Your deduction will still be available.
If an incorrect amount was withheld by mistake, you or your tax agent can correct the mistake by lodging a voluntary disclosure to the ATO. Your deduction will still be available.
If the correct amount was withheld but reported incorrectly, your or your tax agent can lodge a revised activity statement. Your deduction will still be available.
If the PAYG amount was overstated, you or your tax agent can lodge a revised activity statement. Your deduction will still be available.
Single Touch Payroll
From 1 July 2019, small employers with 19 or less employees will be required to report payroll through a single touch payroll (STP) system.
What does this mean for you?
STP facilitates digital reporting of business payroll activity to the ATO. STP reporting will replace the need to lodge the payment summary annual report and will be a simpler way to report the employees’ payroll information to the ATO.
From 1 July 2019, each employer will be required to send a report after each payday. These reports are to be submitted digitally using a compliant accounting program. As such, there will no longer be any requirement to prepare and send annual payment summaries to your employees or the ATO. Employees will be able to access their annual payment summary through their myGov account.
What you need to do
In preparation for this mandatory change, it is important that your business has the ability to submit the reports digitally to the ATO through an appropriate software provider.
If you already use a cloud version of MYOB, Xero or Reckon, STP can easily be set up using the payroll functions in these programs – check online for each providers instructions on how to do this.
Other employers should check with their software provider to determine whether STP reporting is supported by their current program (please be aware that older desktop versions of MYOB and Quickbooks will not support STP). If your current program is not capable of STP reporting you will need to:
• Upgrade your accounting software to a program that supports STP (please contact us as we can arrange discounted pricing on the major providers).
Or
• Utilise a standalone STP program. Click here for some examples.
If you have any questions about these changes, or have any broader concerns about your overall tax situation, please don’t hesitate to contact us.
Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.