BAS Agent's Blog Archives

Which Income Type do you choose for Closely Held Payees?

BAS Agent's Blog, Payroll & Superannuation, Single Touch Payroll / By Louise McLoughlin / 27 September 2022 / CHP, Closely Held Payees, Income Type, Single Touch Payroll, STP Phase 2 / 3 minutes of reading

As part of the set-up for STP Phase 2, employees must be labelled correctly as per a category of taxpayer (e.g. Regular, Actor, Senior or Pensioner & Horticulturist or Shearer) etc) and an additional layer known as an income type from the list below:

SAW (salary and wages)
CHP (closely held payees)
WHM (working holiday makers)
FEI (foreign employment income)
IAA (inbound assignees to Australia)
SWP (seasonal worker programs)
JPD (joint petroleum development area)
VOL (voluntary agreement)
LAB (labour hire)
OSP (other specified payments)

Most of the above income types are self-explanatory, with the exception of “closely held payees” (CHP). The CHP income type is tripping people up because they assume a payee who is a CHP should automatically be given the CHP income type. While this appears to be a logical choice, a CHP may have either an income type of SAW or CHP, depending on the entity’s situation. So how do you know when to choose one over the other? Below is my explanation of this issue.

Firstly, what is a CHP? The ATO says it’s a person directly related to the entity from which it receives payments such as the following:

family members of a family business;
directors or shareholders of a company; and
beneficiaries of a trust.

Payments made to CHPs which are subject to withholding tax and superannuation guarantee must be reported via STP Phase 2.

When to choose the CHP Income Type

If the following applies to the entity that is paying CHPs, then the CHP income type must be selected during setup for STP 2:

There are 19 or fewer employees (small employer) and
One of the 2 x quarterly reporting concessions is being used
- Option 2 – Report actual payments quarterly
- Option 3 – Report a reasonable estimate quarterly
Payroll finalisation will occur later than 14th July

Choosing either CHP or SAW Income Type

If the above reporting concessions are not being used by the entity and finalisation will occur by 14th July along with other arms-length employees, you may choose the income type CHP or SAW for your closely held payees.

I hope this has clarified the confusion around when to choose CHP as an income type for a payee who is a CHP.

If you are in the process of setting up your payroll for STP Phase 2, the ATO has a number of resources available. See also here for further ATO resources. It is worth checking them out to ensure that your setup is correct. Remember, STP Phase 2 will see a large proportion of payroll data shared with Services Australia on behalf of your employees. Services Australia will use this information as the basis for calculating future payments to your employees, should they be receiving them. For this reason, as well as ensuring employees’ wages are taxed properly, it is very important to ensure that your STP Phase 2 reporting is accurate and correct.

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Complete a TFN Declaration via your myGov account

BAS Agent's Blog, Payroll & Superannuation / By Louise McLoughlin / 27 September 2022 / ATO, employee onboarding, myGov, TFN declarations, TFN Decs / 2 minutes of reading

This excerpt is taken from the ATO website via this link.

Have you taken on new employees? Did you know they can complete a TFN declaration through ATO online services?

This is an easy way for them to provide both you and us with the information we need. If your new employee has a myGov account linked to the ATO, they can:

access ATO online services
go to the ‘Employment’ menu
select ‘New employment’ and complete the form.

This sends the TFN declaration details straight to us so you don’t have to. Your employee will need your ABN to complete the form. Once they’ve submitted the form, they need to print it and give you the summary of their tax details so you can input the data into your system.

You may be able to link your payroll software to the online commencement forms. But check first with your software provider if they offer this service.

You can also use the New employment form to collect a range of information. Despite its name, you can also use this form instead of the:

Withholding declaration form
Medicare levy variation declaration form
Superannuation standard choice form.

Your employees can use the New employment form to update their tax circumstances with you, for example, if:

their residency status has changed
they no longer have a government study and training loan
they are claiming the tax-free threshold from a different employer.

You can continue to use your current processes, including providing a paper TFN declaration where employees can’t create a myGov account or don’t have access to the internet.

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Common STP Phase 2 Mistakes

BAS Agent's Blog, Payroll & Superannuation, Single Touch Payroll / By Louise McLoughlin / 5 September 2022 / ATO, payroll, Single Touch Payroll, STP 2 Mistakes, STP Phase 2 / 3 minutes of reading

STP Phase 2 is in full swing. It began on 1st January 2022 but various accounting software have not been ready until recently. This means many employers are only just now learning about, and setting up their payroll systems, to comply with STP 2 requirements.

Unfortunately, as it is still relatively new, some employers are making errors when reporting via STP Phase 2. Recently, the ATO published a list of those mistakes it is seeing. I am highlighting them here so you can be sure to avoid them when you start to report via STP Phase 2.

Common STP Phase 2 Mistakes List

Breaking the continuity of year-to-date amounts from STP 1 reporting. Unless you are using the replacing IDs method for transitioning to STP 2, you need to ensure that you maintain the STP 1 data that you have already reported. Your accounting solution will help you manage this and you should contact your provider if you require assistance with this issue.

Selecting “not reportable to the ATO” when setting up pay codes/categories. Most payments to employees need to be reported except for:

1. Travel allowance below the ATO’s reasonable amounts

2. Overtime meal allowance below the ATO’s reasonable amount

3. Reimbursements

4. Post-tax deductions except for those you need to separately identify.

Omitting a cessation date and reason. When an employee leaves your business, you need to report the date he finished and the reason why he left. Your accounting solution will include these fields to complete upon termination. The ATO will share this information with Services Australia which means you will no longer need to complete a separation certificate for that employee.

Some income types you report for employees will also include a special country code. If you are required to report a country code, you must report the code relevant to that employee. Some employers are incorrectly reporting a “NA” country code, thinking that it means “not applicable”. It actually means “Namibia”. So if you use NA in your reporting, you are telling the ATO that your employee is either working:

1. Overseas in Namibia or,

2. Is in Australia and they are from Namibia.

Allowances. All allowances must be reported separately using one of 8 specific allowance categories. You must not simply report an allowance to the “Other Allowance” category (allowance type OD). You must report allowances using their appropriate category because each category is treated differently for tax, super and social security purposes. Only report an amount as Allowance type OD if it’s an allowance that does not belong in one of the 8 specific allowance categories.

Not reporting all-purpose allowances separately.

Treating reportable super contributions (RESC) and salary sacrifice as the same thing. These are 2 different things and need to be reported correctly. Check out this ATO video which explains how to report these payments via STP 2.

Here is the link to the ATO webpage which provides more in-depth information about the STP 2 reporting mistakes listed above, including several helpful videos.

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The bookkeeping behind the Taxable Payments Annual Report

BAS Agent's Blog, Taxable Payments Annual Report / By Louise McLoughlin / 22 August 2022 / ATO, Bookkeeping, Taxable Payment Annual Report, TPAR / 5 minutes of reading

There is a lot of information available to you if you just want to understand what a Taxable Payments Annual Report (TPAR) is and why you may need to lodge one. In short, if your business is primarily in one of the below industries and has made payments to contractors in the previous financial year, then a TPAR will need to be prepared and lodged.

Building and construction services
Cleaning services
Road freight and courier services
Information technology services
Security, investigation or surveillance services

If you are new to the TPAR, then I suggest you go to this ATO webpage and have a read!

So, as I said, there is a lot of information you can Google about TPAR in general, but not a whole lot about how to prepare the report from a bookkeeping point of view. Some software will have you believe that you just select a few boxes here and there and then submit the report to the ATO. Voila! Done. Easy. Well, it is easy if you didn’t actually pay contractors in a given year, but if you did, there are a few steps you need to take to ensure your report is true and correct. In this blog, I will share my process for preparing the TPAR for my clients. I hope this helps you if you are feeling a bit lost as to the “how” behind the “what”!

How to prepare your TPAR in 6 easy steps

1. Make a list of contractors

Before you can prepare the TPAR, especially if this is the first time you have done this, you should make a list of all of the contractors you have paid during the financial year. Now move on to step 2.

2. Check contractor Details

The TPAR requires that you report various personal details about your contractors including the full name of the contact person, business name, business address, email address, phone number and the ABN. Before you begin preparing the TPAR, go through your contractor list and make sure these details have been added to their contact cards.

3. Ensure contractors are selected to be part of the TPAR

In your software, each contact card will have a checkbox to select if the contractor needs to be reported on the TPAR. Go through each contractor’s contact card and ensure this is selected if required.

4. Print out the TPAR and check the details

Find the TPAR in your software. At this point, it is only a draft report. Print it out and review each transaction – check that all transactions should be included. Remember, only invoices for labour and materials or just labour, need to be included. Invoices for materials-only do not need to be included. Materials-only invoices will need to be manually removed but clicking into the transaction and deselecting the checkbox for TPAR. If you have made any changes to the draft TPAR, then print out the updated version and move on to step 4!

5. Ensure the TPAR agrees with your profit and loss data

This is where some bookkeeping comes in! Not everyone knows that you need to make sure the total amount quoted in the TPAR agrees with the data reported on your profit and loss. This is called reconciliation. If you don’t do this step, your TPAR may be incorrect, so it’s pretty important! The TPAR only includes payments you made to contractors within a financial year – unpaid invoices are not included. Therefore, in order to perform this reconciliation, you need to print out the profit and loss in cash mode. Now, depending on how many transactions there are, you can either compare the two reports by eye or if you need to, you can export the profit and loss data to a spreadsheet to help you compare the calculations. Note, that the profit and loss data required will be where you recorded your contractor payments. This may be an expense account or a cost of sales account, depending on how your chart of accounts is set up.

Now, you need to ensure that the total amount showing in your TPAR, less the GST, agrees with the profit and loss data. If your initial setup was correct, these two reports should agree. If they don’t, there may be a couple of reasons why. Here are some things to check:

1) Make sure that all contractor transactions in the TPAR also appear in the P&L and vice versa. This may involve checking that those particular transactions have the TPAR checkbox selected or that you have a contractor’s contact card selected for TPAR. 2) If you have included some materials-only transactions in either the P&L data or TPAR, you must remove them. 3) You may also find that some transactions have been coded to other expense accounts and are therefore not included in the P&L data you initially exported or printed. Find those transactions and add them to your exported data.

When you are satisfied that the two reports agree, then print out a final TPAR and save it as a PDF for your records.

6. Lodge the TPAR

Depending on the software you are using, you may be able to lodge the TPAR within the software itself. If not, you will have to download a TPAR file and lodge it with the ATO using Online Services and/or your myGov account. Find more details here about how to lodge via ATO Online Services. Keep a record of the lodgement receipt you will receive from the ATO with your TPAR from your software.

Remember, if you do not have any contractor payments to report, you need to report a Non Lodgement Advice form. See my blog here for more information.

So that’s all there is to it, but as you can see, lodging the TPAR does require some background work. You can’t just click a button and lodge it because you need to ensure the figures and the data are correct. I hope this blog has helped you in the run-up to the TPAR lodgement due date which is August 28th each year. If you need help preparing your TPAR, please don’t hesitate to get in touch with me and I’ll see if I can assist you.

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Minimum Wage Increase July 1 2022

BAS Agent's Blog, Payroll & Superannuation / By Louise McLoughlin / 22 June 2022 / Minimum Wage Increase, payroll, Wages / 2 minutes of reading

As well as the super guarantee increase to 10.5% on 1 July 2022, employers now need to factor in a wage increase. Read more below.

National Minimum Wage Increase

The Fair Work Commission (FWC) has ordered a 5.2% wage increase to the national minimum wage (NMW). From 1 July 2022, the NMW will increase by 5.2%, which amounts to $40 a week. The new National Minimum Wage will be $812.60 per week or $21.38 per hour.

Award Minimum Wage Increase

The FWC has announced that minimum award wages will increase by 4.6%, which is subject to a minimum increase for award classifications of $40 per week and based on a 38-hour week for a full-time employee. This means minimum award wages above $869.60 per week, will get a 4.6% increase and below $869.60 per week, will get a $40 increase.

When to Apply the Increase

The new National Minimum Wage will apply from the first full pay period on or after 1 July 2022. This means if you have a weekly pay period that starts on Mondays, the new rates will apply from Monday 4 July 2022.

If you are covered by an award, award increases happen in 2 stages. Most awards will increase from the first full pay period on or after 1 July 2022 but, for some awards as listed below, the increase will happen from 1 October 2022.

Aircraft Cabin Crew Award 2020
Airline Operations – Ground Staff Award 2020
Air Pilots Award 2020
Airport Employees Award 2020
Airservices Australia Enterprise Award 2016
Alpine Resorts Award 2020
Hospitality Industry (General) Award 2020
Marine Tourism and Charter Vessels Award 2020
Registered and Licensed Clubs Award 2020
Restaurant Industry Award 2020

These awards relate to industries that are considered to be still adversely impacted by the COVID-19 pandemic.

To read more information about the wage increase go to this Fair Work web page.

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How to lodge a TPAR non-lodgement advice form (NIL TPAR)

BAS Agent's Blog, Bookkeeping, Taxable Payments Annual Report / By Louise McLoughlin / 7 June 2022 / NIL TPAR, TPAR, TPAR Non-Lodgement Advice / 1 minute of reading

If you normally lodge a Taxable Payments Annual Report (TPAR) but have decided that this year, you don’t have anything to report, you can lodge a “Non-lodgement Advice” form (NIL TPAR) with the ATO. You can do this online via ATO Online Services.

If you are a sole trader or individual taxpayer you can access Online Services through your myGov account. If you are another structure, such as a company, you can access Online Services via Online Services for Business.

Submitting a TPAR non-lodgement advice form,

allows you to notify multiple years on the same form
allows you to advise when you do not need to lodge in the future
allows you to give a reason for not lodging
validates information entered
provides a reference number for confirmation
appears in the lodgment history tab.

If you are not sure if you need to lodge a TPAR or not, go to this ATO webpage which will help you work this out.

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ATO to Report your Tax Debt to Credit Reporting Agencies

BAS Agent's Blog, Business Topics / By Louise McLoughlin / 7 May 2022 / ATO, Credit Rating Bureau, Credit Score, tax debt / 2 minutes of reading

If your business has a tax debt of at least $100K and it is overdue by more than 90 days, chances are you will soon receive a letter from the ATO explaining its intention to report the debt to credit reporting agencies. These letters are known as “Notices of Intent to Disclose”.

See below for the tax ruling background.

If your tax debt is reported to such credit agencies, this would have a detrimental effect on the business’s ability to maintain a good credit rating or score, leading to a possible inability to lend from banks and finance companies and/or obtain extended payment terms (credit) from suppliers.

The Notice of Intent to Disclose letter will outline ways to avoid reporting action, including paying out the debt, entering into a payment plan and several other methods. It is important to note that where exceptional circumstances have led to, and/or impacted the tax debt, such as family tragedy, serious illness and/or natural disasters, it may be possible to prevent tax debt reporting.

If you think your business may be in the firing line for receipt of one of these letters from the ATO, it would be prudent to contact your tax agent ASAP to discuss the way forward.

More info here: Disclosure of business tax debts (ATO website)

(The measure is known as “Disclosure of Business Tax Debt”, and received Royal Assent on 28th October 2019. This measure can be sourced in Schedule 5 of the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1)).

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Victorian casual workers to receive personal leave pay

BAS Agent's Blog, In My Honest Opinion (IMHO), Payroll & Superannuation / By Louise McLoughlin / 5 April 2022 / Casuals & sick leave, Sick leave, Sick Pay Guarantee / 5 minutes of reading

In what may be just a political stunt given it’s an election year, the Victorian Government has announced that from March 2022, some casual workers will be able to claim personal leave pay. This is very unusual because casual workers are not entitled to sick leave, rather they receive a 25% loading on top of their hourly rate in lieu of holiday and sick pay. The Government is doing this to help stop the spread of COVID-19 and other diseases as it is known that casual staff will attend work when they are ill to avoid loss of wages and shifts. As per their website, their main reason for introducing this new payment is to allow casual workers to take time off if they are ill or if they need to care of family members because in their words, “no worker should have to choose between a day’s pay and their health, or the health of a loved one”. This blog will look at the details behind this scheme and ask the question, “Is this payment fair?”

What is the Victorian Sick Pay Guarantee?

The Victorian Sick Pay Guarantee (VSPG) is a government-paid initiative that allows for some casual and contract workers as listed below, to receive 38 hours of personal leave pay at the national minimum wage (currently $20.33/hour). The program will run as a trial for 2 years after which time, it may become an industry levy on employers. The scheme is active now and those wanting to apply for the leave payment can do so here.

JOB	TYPE OF WORK
Hospitality workers	Providing services to patrons of hotels, bars, cafes, restaurants, and similar venues.
Food preparation assistants	Preparing food in fast food establishments, assisting food trades workers and service staff to prepare and serve food, cleaning food preparation and service areas.
Food trades workers	Baking bread and pastry goods; preparing meat for sale; planning, organising, preparing and cooking food for dining and catering establishments.
Sales support workers	Providing assistance to retailers, wholesalers and sales staff by operating cash registers, modelling, demonstrating, selecting, buying, promoting and displaying goods.
Sales assistants	Selling goods and services directly to the public on behalf of retail and wholesale establishments.
Other labourers who work in supermarket supply chains	Including workers who fill shelves and display areas in stores and supermarkets; load and unload trucks and containers, and handle goods and freight.
Aged and disability carers	Providing general household assistance, emotional support, care and companionship for aged and disabled persons in their own homes.
Cleaners and laundry workers	Cleaning vehicles, commercial, industrial and domestic premises, construction sites and industrial machines, and clothing and other items in laundries and dry-cleaning establishments.
Security officers and guards	Providing security and investigative services to organisations and individuals, excluding armoured car escorts and private investigators.

From: https://www.vic.gov.au/sick-pay-guarantee

Is this fair for employers?

It’s important to remember that for the first 2 years, this scheme will be paid by the Government, not employers. Should it continue, however, it is believed that employers will need to pay an industry levy that will cover the VSPG for casual staff. Therefore, employment costs will increase, placing further financial pressure on employers. Employers are already paying a 25% loading on top of basic wages for casual staff which is supposed to cover their sick and holiday pay. Some would say that the addition of the VSPG is double-dipping, given that a casual worker will receive both the loading and the sick payment. If this scheme continues, some employers may be pushed to employ part-time or full-time staff only in an attempt to avoid increased costs brought on by using casual employees.

Is this fair for employees?

Certainly, it can be argued that casual employees are an “at-risk” demographic. They are subject to reduced hours, unstable employment and increased difficulty in maintaining a robust credit record. They do not have the same job security as their part or full-time counterparts. As they generally do not work full-time hours, their income is greatly reduced and even though they are in receipt of the 25% loading, they do not have the ability to save this loading for sick days, as they need every cent just to live! Many are working paycheck to paycheck in order to pay rent and put food on the table. This being the case, it is understandable that some would choose to go to work sick, rather than lose wages, shifts and/or their job. With this in mind, the VSPG is fair for these employees. They can maintain their income and avoid spreading viruses like COVID-19. This is good for everyone.

Here’s what I think

I do like the idea of the VSPG. I am sure it will really help many casual workers (double-dipping or not). However, I think it’s just a temporary solution because once the VSPG payment is used up (the 38 hours), it is likely that workers will go back to attending work when they are ill. I’ve had a think about it and here are some alternative solutions I’ve come up with. Casual workers could:

Opt-in for loading or leave accruals, but not both.
Receive a smaller loading and accrue leave as well.
Apply for a top-up payment from the Government, when wages fall below a certain point for a particular period.

These are just some ideas jumping around in my head, but as I write this, I am left wondering if the double-dipping issue is the real problem here. Perhaps the real issue is not what is paid to casual staff, but rather, how much.

I believe, underlying the need to top up casuals’ pay with the VSPG and/or loadings, is a wage level problem. If these employees were paid adequately in the first place, then perhaps there would be no need for either the loading or the VSPG.

For many casual employees, wages are just too low, loading or no loading. Many who are students, carers or parents cannot work full-time hours and, as such, are subject to very low incomes. In my opinion, we need to look at wage growth and inflation before offering bandaid solutions such as the VSPG. Wages need to be kept in line with inflation. Simple as that. The Government that makes this happen, will get my vote this election year. Sadly, I think I’ll be left wanting…

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How to Apply for an STP 2 Deferral

BAS Agent's Blog, Payroll & Superannuation / By Louise McLoughlin / 16 March 2022 / ATO, Deferrals, payroll, STP, STP Phase 2 / 2 minutes of reading

As you probably know by now, STP Phase 2 has begun. It began on 1st January 2022, with a deferred hard start date by the ATO of 1st March 2022.

Your payroll software provider may have a deferral in place with the ATO for a later start date (see list below) which will cover you as their customer. However, some software providers are ready now and do not have a deferral in place. Examples of these are Quickbooks Online (KeyPay) and Saasu. If you are using one of this software or something else, then your business should be ready for STP 2 and be reporting data to the ATO as per their requirements. (Note, to check if your software is STP 2 enabled, you can go to this ATO page and search for “Payroll Event 2020”. This will produce a list of software that is STP 2 – ready.)

If you know you are not ready and need more time, you can try to apply to the ATO for a deferral. You can do this via Online Services for Business. Simply log in and follow these steps:

1. Select Employees
2. Select STP deferrals and exemptions
3. Select Delayed transition to STP Phase 2 expansion
4. Complete the request
5. Click Submit.

You will also need to advise:
1. Which payroll software is being used;
2. The reason a delay is being sought, and
3. The expected date the business will be able to start reporting under STP 2.

Software Providers with a Current STP 2 Deferral
The following SPs have a current deferral in place with the ATO which also covers you, as their customer:

Xero – up to 31/12/22
MYOB – up to 01/01/23
Reckon – up to 01/01/23

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$450 Super Guarantee Threshold Scrapped!

BAS Agent's Blog, Payroll & Superannuation / By Louise McLoughlin / 27 February 2022 / Super, Super Threshold, Superannuation Guarantee / 2 minutes of reading

As part of the Government’s Treasury Laws Amendment Bill 2021 which passed on 12th February 2022, it has been decided that the $450 superannuation guarantee threshold will be removed. This will begin on July 1, 2022.

The scrapping of the threshold will make about 300,000 more workers eligible for super contributions, including many low-income employees in part-time and casual positions. This will ensure all workers can build their retirement savings, not just those in higher-paid, full-time positions.

Currently, employees must gross a minimum of $450 per month with one employer in order to be paid super on top of those wages (note, this can be $350 per month for those working in the hospitality industry e.g. award MA000009 Hospitality Industry). Those who work casually or part-time may find that they never quite reach that threshold even if they hold several jobs at once. For example, an employee who has 3 casual jobs, earning $300 per job per month, will not receive super on any of those wages due to the $450 threshold. This hardly seems fair and is the main driver for the removal of the threshold.

So, from July 1, 2022, if you employ staff, you will need to pay super contributions on all their earnings, no matter how little each month. For example, if your employee grosses $100 for the month, then super of $10 (currently paid at 10%) will accrue and be paid to the employee’s super fund.

While the move to remove the super threshold is pleasing in my opinion, it is worth noting that employers’ payroll budgets will increase as a result. The cost to employ staff is currently very high and this change will only serve to make it higher! Add in the next super guarantee increase to 10.5%, also from 1 July 2022, and I think we shall see some employers squirming!

While your payroll software will more than likely be upgraded to take up the removal of the super threshold, it is worth noting the start date to ensure you can check your payroll setup is correct when the time comes.

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