Session 4C: 24 November 2016

Transcription

1 Session 4C: Employment Taxes Tips Tricks and Traps Judy White 24 November

2 JUDY WHITE, ASSOCIATE DIRECTOR - BDO Thursday 24 November 2016 EMPLOYMENT TAXES TIPS TRICKS AND TRAPS OVERVIEW The area of employment taxes is complex! In particular, there are different definitions for whether persons are caught under each of the taxes, to navigate in the tax legislation. On top of this, in recent times the Australian Taxation Office has significantly increased their compliance focus on this area putting it firmly in the spotlight. Employment Taxes reviews include Fringe Benefits Tax, Superannuation Guarantee, PAYG Withholding and also covers generally Employee versus Contractor areas. This seminar will be a memorable journey through the world of Employment Taxes including the Tips Tricks and Traps in these areas. 2

3 EMPLOYMENT TAXES TIPS TRICKS AND TRAPS TOPICS: TIPS TRICKS AND TRAPS FOR: 1. Fringe Benefits Tax. 2. Superannuation Guarantee. 3. PAYG Withholding. 4. Employee versus Contractor. 5. ATO Compliance. Page 5 1. Exempt Cars HR Policy and monitoring required of incidental private use (extremely limited private use). 2. Cars versus non-cars and exempt vehicles: Cars Only vehicles that meet the definition of a car are eligible to apply the Statutory Formula method of valuing the fringe benefit. Non-cars Where vehicles do not meet the definition of a car, then any private use is considered a residual benefit (rather than a car fringe benefit); usually valued by an operating cost type method. Exempt vehicles There is an exemption for cars Section 8(2) and for non-cars Section 47(6) which may not cover all vehicles. Page 6 3

4 3. Cars Car versus Expense: Ensure where possible that the car is in the name of the Employer (Car fringe benefit); rather than the Employee (Expense payment fringe benefit). 4. Travel vs Living away from home vs Relocation: Examples contained on following slides. Examples One to Three demonstrate potential LAFH scenarios please assume these occurred during the 2016/17 FBT year. Page 7 Page 8 4

5 Page 9 Page 10 5

6 5. Housing Remote area housing: Ensure the lease is in the name of the employer (Section 58XC 100% exemption); rather than the employee (Section 60(2A) 50% reduction). The exemption under Section 58XC can only apply if it is a housing benefit; therefore the employee must have changed their usual place of residence (ie relocation, rather than living away from home). There is a reduction under Section 59 of 50% for residential fuel (ie electricity/ gas) supplied in relation to remote area housing benefits. Page Entertainment: Provide benefits that are exempt minor benefits and not entertainment. These are not subject to FBT, will be income tax deductible and GST creditable. Eg David Jones gift voucher costing $250. Gym memberships are considered entertainment (by way of recreation), therefore if qualify as exempt minor benefits (per the example in TR 2007/12); then will not be income tax deductible. Tax Exempt Body Entertainment The calculation of taxable value of such benefits does not allow for a reduction for recipient/ employee contributions. Page 12 6

7 7. FBT is a cost of employment: How to view benefits and FBT in an organisation? - On top of salary? Part of Remuneration package? Bit of both? Example Facts based on the 2015/16 FBT & financial year: - Jonathan Brown is an employee of The Best AFL Club Ever Pty Ltd. - He is paid a salary of $200,000 - He is also provided with: - A fully maintained car costed at $25,000 p.a - Private insurances and fee costs at $15,000 p.a - Various other accommodation, gifts and benefits at $30,000 p.a. - Total benefits: $70,000. Page 13 FBT is a cost of employment Example continued: Example Facts: - Anthony The Man Mundine is an employee of Boxers Anonymous Pty Ltd - He is provided with: - A remuneration package of $200,000; which he chooses to take as $130,000 cash plus $70,000 benefits. Page 14 7

8 Summary of Remuneration Package: Page 15 Summary of Net Pay plus Benefits: Remuneration Jonathan The Man (FBT on top) The Man (FBT packaged) Salary take home $132,453 $91,353 $52,338 Benefits $70,000 $70,000 $70,000 Total $202,453 $161,353 $122,338 Jonathan vs The Man (excludes 2% budget repair levy for ease of demo) $(41,100) $(80,115) Page 16 8

9 2. SUPERANNUATION GUARANTEE TIPS TRICKS AND TRAPS 1. Be aware of disgruntled employees Likely source of ATO audits on organisations for potential unpaid superannuation. 2. Avoid late payment of superannuation contributions - Omission of payment, or late payment of superannuation contributions, may lead to ATO audits and imposition of superannuation guarantee charge (which includes an interest charge of 10%; plus administration fee $20 per employee; plus the superannuation shortfall amount). Page SUPERANNUATION GUARANTEE TIPS TRICKS AND TRAPS 3. Remind Directors they are personally liability: Directors of a company can be held personally liable for unpaid superannuation guarantee contributions. 4. Be aware of Clearing Houses contributions are counted as paid on the date the superannuation fund receives it, not the clearing house (except the ATO clearing house). Page 18 9

10 3. PAYG WITHHOLDING TIPS TRICKS AND TRAPS 1. PAYGW applies to Directors and Officeholders: PAYG withholding applies commonly to payments of salary and wages. It also applies to payments made to Directors for remuneration. And beware for Not-for-profit entities, that PAYGW may apply to payments made to officeholders. 2. Ensure the client is the correct remitter: The ATO have been reviewing the frequency of PAYGW remittances and whether these match the type of remitter. Page PAYG WITHHOLDING TIPS TRICKS AND TRAPS Type of remitter small medium or large: Page 20 10

11 3. PAYG WITHHOLDING TIPS TRICKS AND TRAPS 3. Be aware of PAYGW for Mileage allowance > 66 cents: The current tax deduction for the cents per kilometre method is 66 cents. However, some Awards/ Enterprise bargaining agreements/ employment contracts still state a rate higher than this eg 78 cents. In this case PAYGW is required on the difference between 78 cents and 66 cents. 4. Handy reference ATO Website document: Withholding from allowances document provides handy Table 1 and Table 2 regarding PAYGW obligations for allowances. Page EMPLOYEE v CONTRACTOR TIPS TRICKS AND TRAPS 1. Employee versus Independent Contractor - Topical item at present often raised in ATO audits. 2. Common indicators The following table provides the following indicators per case law and TR 2005/16. Page 22 11

12 Summary of the factors indicating employee or contractor Page ATO COMPLIANCE FEEDBACK ON AUDITS 1. Always includes Employee versus Contractor questions. 2. Independent contractor review ATO asks for the contract/ agreement and copies of the invoices. 3. Initial enquiry may be on one area eg PAYGW, but audit made on all employment taxes eg PAYGW, FBT, SG etc. 4. Some ATO audits on SG request paper documents and facsimiles of information, rather than electronically. 5. Information often requested for 2 to 4 years - onerous. 6. Information may be requested in a different format to that easily available on system (eg Payroll system). Page 24 12

13 QUESTIONS AND THANK YOU Completion of session Any questions? If you would like any further information please contact: Judy White Associate Director, Tax BDO Brisbane Office: Page 25 Judy White, BDO 2016 Disclaimer: The material and opinions in this paper are those of the author and not those of The Institute of Public Accountants. The Institute of Public Accountants did not review the contents of this presentation and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests. Page 26 13

14 14