As the 2019-20 financial year has just drawn to a close, business owners should now be focusing on their end of financial year tax reporting requirements which include:
PAYG payment summaries
Where a business has not yet commenced single touch payroll reporting to the ATO due to the closely held employee exemption (refer below), employees need to be issued with their 2020 Payment Summaries by Tuesday 14 July 2020.
Also the 2020 PAYG Payment Summary Statements need to be lodged with the ATO by Thursday 14 August 2020.
Where a Tax Agent prepares this documentation on behalf of the business, the due date is extended to the date of lodging the 2020 tax return.
End-of-year finalisation through single touch payroll
Employers need to finalise their employees’ STP information through their STP-enabled solution by making a finalisation declaration.
This declares to the ATO that the employer has provided all required information for the financial year through STP reporting.
Once the employer has provided the finalisation indicator for employees, the ATO will pre-fill the employee's income tax return and display the information as 'tax ready' in their MyGov account.
For the 2019-20 year, the due dates for making the finalisation declaration are:
- employers with 20 or more employees - Tuesday 14 July 2020
- employers with 19 or less employees – Thursday 31 July 2020
Single touch payroll deferral
In light of COVID 19, the ATO extended the STP reporting exemption deadline from 1 July 2020 to 1 July 2021 for business with only closely held employees.
A closely held (related) employee is a person who is directly related to the business and includes:
- family members of a family business
- directors or shareholders of a company
- beneficiaries of a trust.
Monthly jobkeeper reporting
Each month businesses, or their authorised representative, must complete a business monthly declaration to be able to keep claiming JobKeeper payments. This must be done in the first 14 days after the month the business is claiming for ends – the declaration for the month of June needs to be made by Tuesday 14 July 2020.
Businesses will be asked to reconfirm the business participant details and eligible employees. If any eligible employees change or their employment is terminated, the business will need to update this employee information through the monthly declaration.
Businesses also need to provide the ATO with their GST turnover for the reported month and projected GST turnover for the following month.
Taxable payments annual report (TPAR)
Businesses that operate in the following industries need to lodge the annual TPAR by Friday 28 August 2020:
- Building & construction services
- Cleaning services
- Courier services
- Road freight services
- Information technology (IT services)
- Security, investigation or surveillance service.
The TPAR informs the ATO about payments made to contractors for providing the above services to the business.
Contractors include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.
Tax deductions denied for non-compliant payments
New laws that apply from 1 July 2019 deny tax deductions for certain payments where the payer has not complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.
The new laws apply to the following types of payments:
- salary and wages, commissions, bonuses or allowances to an employee;
- directors’ fees;
- to a religious practitioner;
- under a labour hire arrangement; and
- for a supply of services as a contractor where the service provider has not quoted their ABN.
Deductions will be denied for the above payments where the payer has failed to either:
- withhold the amount from the payment; or
- report the amount via their BAS .
There are specific exemptions to these rules as follows:
- a supplier of goods or real property has failed to provide their ABN (these rules only apply to service providers);
- an employer honestly mistakes an employee for a contractor and didn’t withhold PAYG from the payments as an ABN was provided; and
- the taxpayer has voluntarily notified the ATO of a mistake before an audit or compliance activity has commenced.
The new laws don’t deny a tax deduction where no actual payment of the withholding amount has been made to the ATO so long as the payment has been correctly reported to the ATO.
Payroll tax annual reconciliation
Payroll tax is a state tax that applies to all employers (or group of employers) that have total taxable wages which exceeds the threshold amount.
Each state and territory has its own payroll tax legislation with different rates and thresholds. The definition of taxable wages also differs between each state and territory.
For example businesses (including related entities) that operate in New South Wales are from 1 July 2020 liable for payroll tax at the rate of 5.45% on Australia wide wages that exceed the threshold of $1,000,000.
The due date for the 2020 payroll tax annual reconciliation for employers registered in New South Wales has been extended to Friday 30 October 2020. Employers registered in other States or Territories should check with their local Revenue office about any similar extension provided.
