With the Turnbull Government now settled in, many tax changes previously raised in the Budget are now coming through Parliament. Here is a rundown of the key changes impacting employers.
1. Personal Tax Cuts
Employers be aware as of 1 October 2016, the PAYG Withholding rates for employees have changed. The 32.5% tax threshold from $37,001 – $80,000 has increased to $37,001 – $87,000 for the income year ended 30 June 2017 as follows:
*Rates do not include the Medicare Levy Surcharge and Temporary Budget Repair Levy for taxable incomes >$180,000
The non-resident tax rates have also been updated to increase the 32.5% tax threshold to $87,000, up from $80,000 as below
The ATO have released updated PAYG withholding rates for both resident and non-resident individuals who earn over $80,000.
The new withholding rates have application from 1 October 2016, so will apply to your first payroll run from this date.
- If you haven’t already updated your payroll systems, we recommend downloading the current tax tables from http://www.ato.gov.au/taxtables or contact your payroll software provider for the relevant update.
- No further adjustments are required to be made by employers.
- While the updated tax tables do not include any catch-up component for the portion of the year prior to 1 October, individuals affected will receive a tax adjustment for the 1 July to 30 September period upon assessment of their income tax return for the 2017 income year.
2. SuperStream deadline is approaching for ‘small employers’
SuperStream is a new standard where employers pay superannuation contributions and disclose other relevant information electronically in the approved format. It applies to all employers and includes contributions made to self-managed superannuation funds (subject to some exemptions).
While medium to large employers (i.e. employers with 20 employees or more) were required to be SuperStream compliant from 1 July 2015, small employers were provided with an extended deadline until 28 October 2016. Where an employer is not SuperStream compliant by the deadline, the ATO can impose penalties, particularly where it considers that no or little effort has been made to comply with the SuperStream requirements.
- If not already SuperStream compliant, you should review your current payroll systems to ensure that it meets the SuperStream reporting capabilities, or choose an alternative SuperStream option, such as:
o A super fund’s online payment system;
o The ATO Small Business Superannuation Clearing House; or
o Messaging portal.
- Once you have chosen an option, you should then collect the relevant information for each employee and their chosen super fund as required under the SuperStream rules in order to commence SuperStream reporting and payment of super contributions.
3. Backpacker tax changes on the horizon
The House of Representatives has passed changes which impose a ‘backpacker tax’ on individuals holding a Working Holiday 417, 462 or certain related bridging visas commencing 1 January 2017. The proposed changes seek to apply a 19% income tax rate on a working holiday maker’s taxable income on amounts up to $37,000, with the ordinary individual marginal tax rates applying against amounts in excess of this.
- Employers of working holiday makers must register with the ATO in order to withhold at the 19% tax rate.
- Failure to register requires an employer to withhold at the 32.5% rate and may expose the employer to ATO penalties.
4. Simplified FBT approach for fleet cars
The ATO has released Practical Compliance Guidelines PCG 2016/10 which provides a welcome concession for employers in managing the logbooks of their employees using work fleet cars. The ATO now permits an employer to use a single average business use percentage across all work fleet cars calculated from valid logbooks – this means that the occasional missing or incomplete logbook should no longer cause the problems around FBT time.
There are several conditions in obtaining this logbook concession:
- The cars must be used predominantly for business – i.e. they are ‘tools of trade’ and are not salary packaged;
- The fleet has at least 20 cars and none of these cars exceed the luxury car threshold (currently $64,132);
- The employees are required to keep logbooks for the fleet for each logbook year (i.e. once every five years) and valid logbooks are in fact held for at least 75% of the fleet the relevant year; and
- The employer either chooses the type of fleet cars, or allows the employee to choose a car from a limited list.
The logbook average can be applied across the entire work fleet for a period of up to five years, including to new and replacement cars in the fleet (subject to certain limited circumstances).
- Review your logbooks
- Ensure that at least 75% are valid and compliant with the logbook requirements.
- The logbooks should be maintained for a 12-week period.
- Review your payroll system
- Ensure the appropriate value is selected as the reportable fringe benefits on PAYG payment summaries
- The average business use percentage can be used
- A comparison should be undertaken as to whether it is more favourable to use the actual logbook business use percentage, versus the average percentage to provide the lowest RFBA
- We note however that where the total taxable value of reportable fringe benefits provided to an employee is less than $2,000 for an FBT year, no amount is required to be reported in the PAYG payment summary.