The new financial year has just commenced which means businesses should now be focusing on their 2022/23 EOFY tax reporting obligations, plus other EOFY procedures.
Prefilling of wages and PAYG withholding on activity statements
From 1 July 2023, the ATO will prefill W1 (Gross wages) and W2 (PAYG Withholding) on activity statements completed via ATO Online Services.
Where your business lodges all wages information by Single Touch Payroll (STP) prior to the date that the activity statement has been created, this key information should be correctly prefilled.
There may be additional payments that should be recorded under W1 that have not been reported via STP prior to the date the activity statement is created. Accordingly businesses may need to update/edit the amounts that the ATO have prefilled to ensure the activity statement is correct.
Note, the ATO may prefill and create the online activity statement prior to all STP lodgements for the month or quarter being completed. Businesses should not rely on the information that is prefilled and its always best to compare the amounts to your accounting records before lodging the activity statement.
Super guarantee (SG) rate increased to 11% from 1 July 2023
On 1 July 2023, the SG rate increased from 10.5% to 11%. 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 11% will need to be applied for all salary and wages that are paid on and after 1 July 2023, even if some or all of the pay period it relates to is before 1 July 2023.
That means that if the pay period ends before 30 June 2023, but the pay date falls on or after 1 July 2023, the 11% 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.
This change 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 2022/23 finalisation declaration for arms-length employees is Friday 14 July 2023. 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 2023 income tax return.
The finalisation due date for businesses with a mixture of closely held payees and arms-length employees is Monday 2 October 2023 for closely held payees and Friday 14 July 2023 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 28 August 2023:
- Building & construction services
- Cleaning services
- Road freight and courier 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 for the 2022/23 year 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 2022/23 payroll tax annual reconciliation for employers registered in New South Wales is Friday 28 July 2023. Employers registered in other States or Territories should check with their local Revenue office for the due date to lodge their annual reconciliation.
120% deduction for skills and training & technology investment
The small business skills and training boost and the technology investment boost became law on 23 June 2023. Click here for further information.
Businesses with an aggregated turnover of less than $50 million are entitled to an additional 20% deduction for eligible expenditure on training employees and adopting digital technology.
Businesses need to correctly label relevant expenses and asset purchases on the balance sheet so that all training and digital technology expenses can be easily identified by your accountant when completing the year end accounts and tax return.
Note the skills and training boost only applies to training costs incurred for employees, therefore training costs referable to contractors, sole traders and partners in partnerships are not included in this additional 20% deduction.
Importantly, there is a requirement for the training to be provided by a Registered Training Organisation (RTO) in order to claim the skills & training boost. These are generally providers of nationally recognised training that have been registered by the Australian Skills Quality Authority.
By law, an RTO must display their government-issued RTO number, as well as the nationally recognised training logo in various places, such as their website and on all training material (e.g. certificates, brochures, etc.).
Therefore unless you see this number on training courses provided to employees, the 20% bonus tax deduction won’t apply.
Other EOFY procedures
The following is not an exhaustive list of procedures that should also be undertaken at year-end:
- 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. Check if the recently announced lodgement amnesty applies to any outstanding BAS and tax lodgements.
- Where your business is behind on its tax and BAS payments, a payment arrangement 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 2023. Any unders/overs of stock quantities and spoilage identified from the stocktake process should be adjusted in the stock module as at 30 June 2023 to ensure it is reflected in the 2022/23 accounts.
- Where your business has substantial plant & equipment, the stocktake of fixed assets should have been completed by 30 June 2023. 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 2023 to ensure it is reflected in the 2022/23 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 in income and expenses to the prior year can be properly explained.
- Review current finance facilities and insurance policies with the objective of negotiating better deals.
- Review business goals and objectives and plan cash flow for the upcoming year.
