With the new financial year having just started, businesses should now be focusing on their 2021/22 EOFY tax reporting obligations, plus superannuation changes that apply from 1 July 2022 and other EOFY procedures.
Super guarantee (SG) rate increased to 10.5% from 1 July 2022
On 1 July 2022, the SG rate increased from 10% to 10.5%. Businesses need to ensure their payroll and accounting systems are updated to incorporate this increase.
The percentage employers are required to apply is determined based on when the employee is paid, not when the income is derived. The rate of 10.5% will need to be applied for all salary and wages that are paid on and after 1 July 2022, even if some or all of the pay period it relates to is before 1 July 2022.
That means, if the pay period ends before 30 June 2022, but the pay date falls on or after 1 July 2022, the 10.5% rate applies on those salary and wages. The date of salary and wage payment determines the rate of super guarantee payable, regardless of when the work was performed.
Removal of the $450 monthly SG threshold from 1 July 2022
A major change commencing 1 July 2022 is the abolition of the $450 monthly minimum wage threshold to qualify for employer SG contributions.
This scrapping of the monthly threshold amount means employers are now required to make super contributions for all their employees (including casual and part-time employees) regardless of how much they earn. The only exceptions are employees aged under 18 and working less than 30 hours per week.
If an employee is eligible for SG for the first time because of the removal of the $450 eligibility threshold, their employer needs to provide them with a Standard Choice Form.
These two superannuation changes will have flow on affects for workers compensation and payroll tax where applicable. The additional superannuation could also push a business above the payroll tax threshold for the first time and this needs to be monitored and managed.
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.
The due date for making the 2021/22 finalisation declaration for arms-length employees is Thursday 14 July 2022. If you do not finalise by this date, the ATO says you should do this as soon as possible to ensure your employees can access their information to complete their 2022 income tax return.
The finalisation due date for those with a mixture of closely held payees and arms-length employees is Friday 30 September 2022 for closely held payees and Thursday 14 July 2022 for arms- length employees. Small employers (19 or fewer payees) who only have closely held payees will need to complete the finalisation by the employee’s income tax return due date.
Taxable payments annual report (TPAR)
Businesses that operate in the following industries need to lodge the annual TPAR by Monday 29 August 2022:
- 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.
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 4.85% on Australia wide wages that exceed the current threshold of $1.2 million.
The due date for the 2021/22 payroll tax annual reconciliation for employers registered in New South Wales is Thursday 28 July 2022. Employers registered in other States or Territories should check with their local Revenue office on the due date to lodge the annual reconciliation.
Note some employers may be entitled to a reduction in their payroll tax when lodging the 2021/22 annual reconciliation. For example in NSW, a 50% reduction in payroll tax can be claimed in certain situations for employers impacted by COVID-19.
Other EOFY procedures
- Ensure that your records are compliant with the ATO. The ATO requires businesses to keep records for at least five years. Records can be kept in paper or electronic format.
- Ensure that BAS lodgements and super guarantee (SG) contributions are accurate and up-to-date.
- Where your business is behind on its tax and BAS payments, payment arrangements should be entered into with the ATO and complied with. Note the ATO has new powers whereby they can report outstanding business tax debts of at least $100,0000 to credit reporting agencies.
- Where your business carries stock, the stocktake of inventory should have been completed by 30 June 2022. Any unders/overs of stock quantities and spoilage identified from the stocktake process should be adjusted in the stock module as at 30 June 2022 to ensure it is reflected in the 2021/22 accounts.
- Where your business has substantial plant & equipment, the stocktake of fixed assets should have been completed by 30 June 2022. Any adjustments required to the assets register identified in this stocktake including description, location, quantity and damage/obsolescence needs to be recorded in the assets module as at 30 June 2022 to ensure it is reflected in the 2021/22 accounts.
- Review the balance sheet and profit & loss statement and ensure that that the figures are properly reconciled (e.g. salary & wages agrees in the P & L agrees to the payroll module) and material differences to the prior year can be properly explained.
