Single Touch Payroll
The ATO will shortly be writing to employers who are due to commence, on 1 July 2018, reporting information through the Single Touch Payroll regime. The ATO communication will remind them of their obligations in reporting:
- employee payments, such as salaries and wages;
- pay as you go (PAYG) withholding; and
- super information.
Note that the Single Touch Payroll regime commences on 1 July 2018 for employers with 20 or more employees and 1 July 2019 for employers with 19 or less employees.
The ATO's Assistant Commissioner, John Shepherd, said STP will provide greater transparency and connect businesses to the ATO through their existing software and that "Employers need to start preparing now in order to be ready for this important reporting change."
The next steps to get ready for STP are:
- Visit www.ato.gov.au and download the ATO's "Get ready checklist"
- Do a headcount of your employees on 1 April 2018 to find out if you have 20 or more
- If you have payroll software: talk to your provider to find out how and when your product will be ready
- If you don't have software: choose a product that offers STP. You can ask your tax or BAS agent for advice on choosing a product that suits your business needs.
- Update your payroll software when it's ready
- Start reporting to the ATO through STP.
Small Business Insurance Stamp Duty Exemption
From 1 January 2018 certain types of insurance for small businesses are not liable to duty.
At present, you are a small business entity if you are an individual, partnership, company or trust that:
- is carrying on a business, and
- has an aggregated turnover of less than $2 million.
Aggregated turnover is your annual turnover plus the annual turnovers of any business entities that are your affiliates or are connected with you.
The exemption will apply to the following types of insurance:
- Commercial vehicle insurance – being motor vehicle insurance for a vehicle used primarily for business purposes
Commercial aviation insurance - being aviation insurance for an aircraft used primarily for business purposes
Occupational indemnity insurance – insurance covering liability arising out of the provision by a person of professional services or other services (other than medical indemnity cover within the meaning of the Medical Indemnity Act 2002 of the Commonwealth)
Product and public liability insurance – insurance covering liability for personal injury of property damage occurring in connection with a business or arising out of the products or services of a business.
For a policy to be exempt, the insured must be a small business as at the date the policy is effected or renewed and the insurer must have a small business declaration. If an insurer does not have a small business declaration as at the date the policy is effected or renewed then the policy is liable to duty.
Is Your Debtors' Days Outstanding Under Control
Debtors' management is an enormous problem for a significant number of small/medium enterprise operators.
The Small Business and Family Business Ombudsman indicated last year that Australia had the highest debtors' days' outstanding figure in the world at 56.4 days, thus debtors' management issues are a significant contributor to cashflow management problems confronting small/medium enterprises.
The Australian Prime Minister announced in late 2017 that he had instructed all Australian government departments to pay bills owing to SMEs within twenty calendar days of the date of the invoice. This is great news for the small/medium enterprise community – especially for those SMEs that have dealings with Federal government departments. Hopefully, State and Territory governments and big business will follow the initiative of the Federal government.
However, another significant problem that many small/medium enterprises have is that they have not implemented appropriate debtors' management systems nor do they regularly calculate their own "debtors' days outstanding".
A Debtors' Management System would include:
- a written policy manual for all aspects of debtors' management for an individual business;
- procedures for checking credit applications;
- procedures for the approving of a credit limit and terms of trade for a new customer;
- confirmation letter to be sent to a new customer including Terms of Trade Agreement and Retention of Title Agreement;
- processes to ensure that there is a prompt follow-up with a new customer to receive the signed Terms of Trade Agreement and Retention of Title Agreement back from the new customer before any goods are provided;
- procedures for the decision making process as to whether the new customer is to be registered on the Personal Property Securities Register;
- if a decision is made to register a customer on the Personal Property Securities Register, is the registration process being completed within the very short time allowed by the legislation?
- an emphasis on ensuring that tax invoices are sent promptly to customers and that the due date for payment is clearly identified on the tax invoice;
- processes to ensure that at the end of a month the Debtors' Aged Analysis is prepared promptly and, if Debtors' Statements are still being sent to customers, that emphasis is being given to ensuring that the Debtors; Statements are sent no later than forty-eight-hours after the end of the month;
- the debtors' days' outstanding figure is calculated at the end of the month and the figure is treated as a key performance indicator and is circulated to all personnel involved in sales and debt collection.
This type of system will contribute to a reduction in debtors' days outstanding in virtually every type of business.
Deaths Highlights Workplace Health and Safety Issues
A recent incident where two men, with substantial experience in their industry, were found dead at the bottom of a tank they had been cleaning has highlighted the necessity for business owners and management to be very vigilant on workplace health and safety issues.
The National Workplace Health and Safety Laws require business owners, directors and managers to assess the potential risks inherent in work practices utilised in workplaces. The business should only be utilising practices which minimise the possibility of injury occurring. If a potential risk is identified the business needs to prepare work plans to address that particular risk in the workplace.
Many businesses will find it necessary to engage a Workplace Health and Safety Expert to create appropriate systems for the business, especially if the business does not employ personnel who have adequate experience in the implementation of appropriate systems under the Workplace Health and Safety Regulations.
The ATO is Looking at Interest
Have you ever woken up in the morning thinking that it was going to be a great day and then you get a letter from the Australian Taxation Office? In particular, the letter is in regards to interest deductions where an individual had purchased land for the development of a unit complex and derivation of rental income.
The Australian Taxation Office is currently reviewing individual tax returns for the 2016 financial year. In particular, properties which have large losses from interest expenses and no or little income.
Currently investigations seem to be happening where the Australian Taxation Office has identified continued large and long term losses from investments held by individuals. So far, the Australian Taxation Office's focus is on interest incurred prior to assessable income because the units have not been constructed within a three year time period, without consideration of local conditions in the economy and lending positions.
The second situation is a rural parcel of land treated as a rental property, deemed to be non-commercial in purpose after review by the Australian Taxation Office, because the property is used for agistment purposes and drought conditions have resulted in significantly lower income for several years. The Australian Taxation Office has denied deductions for interest and all other expenses limiting the deductions to the amount of income derived.
The Australian Taxation Office has a mandate to ensure that these matters are investigated and that government revenue is not misappropriated by taxpayers incorrectly making claims for deductions to which they are not entitled to. The concern is that, where taxpayers make decisions based upon information that they are aware of, how time can affect matters and change the nature of interest from being deductible to being treated as capital due to the length of time between the initial purchase and the final construction of the investment or when the Australian Taxation Office conduct the audit.
The taxation treatment of losses from rental properties and the Australian Taxation Office's focus on these matters, particularly where the land is held for more than three years, can be complex. If you have any concerns from these types of transactions, please do not hesitate to contact us.