The end of the financial year (EOFY) is an important time for businesses as they need to focus on their various tax reporting obligations and other EOFY procedures including:
Super guarantee (SG) rate increased to 11.5% from 1 July 2024
On 1 July 2024, the SG rate increased from 11% to 11.5%. 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 services are provided. The rate of 11.5% will need to be applied for all salary and wages that are paid on and after 1 July 2024, even if some or all of the pay period it relates to is before 1 July 2024.
That means that if the pay period ends before 30 June 2024, but the pay date falls on or after 1 July 2024, the 11.5% 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.
This change will have flow on effects 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.
Meeting super guarantee obligations for the June 2024 quarter
Employers need to meet their SG obligations for the June 2024 quarter by 28 July 2024. This generally means that the fund must receive the contributions by 28 July 2024.
A failure to pay an employee’s SG in full, on time or to the right fund means the employer is:
- required to lodge an SG statement by the 28thday of the second month following the end of the quarter (in the case of the June 2024 quarter, this is 28 August 2024); and
- liable for the SG charge.
The penalties on employers for failing to meet their SG obligations are extremely harsh, including non-deductibility, interest and possible personal liability of directors where a company has not met its obligations. Employers must ensure they pay their employees’ superannuation correctly and on time to avoid these outcomes.
Recording reportable employer superannuation contributions & fringe benefits on employees income statements
It’s important that reportable superannuation contributions and fringe benefits provided are correctly recorded on employees income statements. An employer is required to report certain fringe benefits such as car and expense benefits on an employee’s income statement where the taxable value of these benefits exceeds $2,000 per employee. The taxable value of the benefit is then grossed up by 1.8868.
Reportable employer superannuation contributions are contributions that exceed the superannuation guarantee level (e.g. salary sacrifice contributions).
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 2023/24 finalisation declaration for arms-length employees is Monday 15 July 2024. 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 2024 income tax return.
The finalisation due date for businesses with a mixture of closely held payees and arms-length employees is Monday 30 September 2024 for closely held payees and Monday 15 July 2024 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 Wednesday 28 August 2024:
- 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 Australian 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, and different rules apply on whether certain payments to contractors are deemed to be wages for payroll tax purposes.
For example businesses (including related entities) that operate in New South Wales are for the 2023/24 year liable for payroll tax at the rate of 5.45% on Australia wide wages that exceed the current threshold of $1.2 million.
The due date for the 2023/24 payroll tax annual reconciliation for employers registered in New South Wales is Monday 29 July 2024. Employers registered in other States or Territories should check with their local Revenue office for the due date to lodge their annual reconciliation.
Other complexities that commonly arise include grouping of associated and commonly controlled businesses (noting that a payroll tax group can claim the threshold only once) and having employees in multiple States or Territories (the relevant thresholds are apportioned so that an employer effectively receives one threshold).
This means, for example, that a business previously only having employees based in New South Wales and already paying payroll tax which then employs someone in Victoria will have a payroll tax liability in that State even though its Victorian wages may be well below the Victorian payroll tax threshold. This is the case even if the employee works remotely for a business that operates only in New South Wales but the employee is physically located in Victoria when they perform their employment duties.
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;
- 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 2024. Any unders/overs of stock quantities and spoilage identified from the stocktake process should be adjusted in the stock module as at 30 June 2024 to ensure it is reflected in the 2023/24 accounts;
- Where your business has substantial plant & equipment, the stocktake of fixed assets should have been completed by 30 June 2024. 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 2024 to ensure it is reflected in the 2023/24 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; and
- Review business goals and objectives and plan cash flow for the upcoming year.
