What to do if you’re hiring a ‘working holiday maker’?

Any employer can hire a working holiday maker, especially when they need labour for a short period. Working holiday makers will hold a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462).

If your new employee has ticked the box on their TFN declaration that they’re a working holiday maker there are three important steps you need to take:

Step 1: Register as an employer of working holiday makers
Make sure you fill out the Working holiday maker employer registration form online before making your first payment to them. You will need your:

  • ABN/WPN
  • entity type
  • contact details

Step 2: Check their visa is valid
The best way to confirm their visa is through the Visa Entitlement Verification Online (VEVO) service. Your employee can do this for you online, or via the myVEVO app, and send you an email verifying their details.

Step 3: Apply correct amounts for tax and super
You must withhold 15% from every dollar your working holiday maker earns up to $37,000. For amounts above this use the tax table for working holiday makers. Working holiday makers are not eligible for the tax-free threshold. If they do not provide you with their TFN then you will need to withhold tax at the top rate of 45%.

You also need to pay eligible super contributions as you normally would – they can claim these back when they leave Australia.

Should I use ‘cash’ or ‘accrual’ accounting to report my GST?

The main difference between cash and accrual (non-cash) accounting is timing.

If you record revenue or expenses when you pay and receive money, you’re using cash-basis accounting. This is the simplest method and is suitable for most smaller businesses who handle cash transactions. It can only be used if your aggregated turnover is less than $10 million, or if you use cash accounting for income tax.

If you wait until you raise or receive an invoice to record revenue or expenses, then you’re using accrual accounting. This can be a far more powerful tool for managing a business and is suitable for businesses that don’t get paid straight away.

Pros and Cons

Benefits of cash accounting

  • It’s simple and shows how much money you have on hand, making it easier to manage cash flow.
  • It’s an easier option for calculating GST.

Disadvantages of cash accounting

  • It doesn’t accurately show your profitability – you might look profitable simply because you haven’t paid your bills.
  • It not as useful when making management decisions, as it only shows a day-to-day view of your finances.

Benefits of accrual accounting

  • It gives you an accurate picture of your business performance and finances, allowing you to make more informed management decisions.
  • Using this method can be more successful when pitching for long-term finance.
  • You can claim GST upfront on unpaid expenses upfront.

Disadvantages of accrual accounting

  • It’s more work because you have to watch invoices, not just your bank account.
  • You may have to pay tax on income before the customer has actually paid you.

Hybrid methods

It is possible to use a hybrid accounting system. For example, you could base big financial decisions such as loan applications on accrual accounting but use cash-basis accounting to simplify some elements of your tax.

However, there are lots of rules around who can and can’t do this, so please speak to us to find out what applies to you. You’ll also likely need smart accounting software that can switch between cash-basis and accrual-basis as needed.

Statement by a Supplier – What to do if your supplier doesn’t quote an ABN

Do you have suppliers who don’t have or provide you with their ABN? In this scenario, you are required to withhold 47% from their payment and send the withheld amount to the ATO.

However, some suppliers are not required to quote an ABN and can use a Statement by a Supplier to justify why payment should not be withheld.

Individuals or businesses can use this form when any of the following apply:

  • they are not carrying on an enterprise in Australia
  • they are an individual under 18 years and the payment does not exceed $350 per week
  • the payment does not exceed $75, excluding any goods and services tax (GST)
  • the supply that the payment relates to is wholly input taxed
  • they are an individual, and a written statement is provided to the payer to the effect that the supply is either:
    • made in the course or furtherance of an activity done as a private recreational pursuit or hobby, or
    • wholly of a private or domestic nature
  • they are an individual or a partnership without a reasonable expectation of profit or gain
  • the whole of the payment is exempt income.

However, if you have reasonable grounds to believe that the statement from your supplier is false or misleading, you are still required to withhold the full 47% from the supplier’s payment.

If your supplier is operating a business or is entitled to register for an ABN, they cannot use the Statement by a Supplier form.

Get in touch if you have any ‘Statement by a Supplier’ questions or read more on the ATO website.

What is TPAR and how does it affect you?

A Taxable Payments Annual Report (TPAR) tells the ATO about contractor payments for services. This includes subcontractors, consultants and independent contractors who could be either sole traders (individuals), companies, partnerships or trusts.

You may be required to lodge TPAR by 28 August if your business provides:

  • building and construction services
  • cleaning services for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • courier services for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • road freight services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • information technology (IT) services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • security, investigation or surveillance services for contractor payments from 1 July 2019 (first report due by 28 August 2020)

The contractor details you need to report include:

  • their ABN
  • their name and address
  • the gross amount you paid to them for the financial year (including any GST)

The ATO uses this information to identify contractors who haven’t met their tax obligations.

If your business supplies a mix of services, you should work out the percentage of payments received from any of the above services.

If your total contractor payments are 10% or more of your GST turnover (or if you are primarily in the building and construction industry) – you must lodge a TPAR.

Remember that all businesses have a GST turnover, regardless of whether or not you are registered for GST.

Additionally, if you are a government entity you may also need to use a TPAR to report grants paid.

If you are not sure whether you need to report you can contact us or visit the ATO website.

What does the minimum wage increase from 1 July mean for employers?

This month saw a 3% increase to the national minimum wage and the modern award minimum wages, lifting it to $19.49 per hour. This is slightly below last year’s increase of 3.5%, due to a recent dip in the economy.

The 3% increase applies to any employee who gets their pay rate from:

  • the national minimum wage, or
  • a modern award.

All employers should ensure that employees who fall into one of these two categories are paid in accordance with the new minimum wage, which takes effect from their first full pay period on or after 1 July 2019.

If an employee receives an all-inclusive salary, beware that the increase may affect the lawfulness of that salary if it is no longer adequate to compensate them for their award entitlements.

This recent wage increase will also flow onto other areas such as loadings, penalties, allowances and overtime payments.

Note that the current casual loadings for modern awards and award/agreement free employees will remain at 25%.

$30,000 instant asset write-off

Are you thinking of purchasing assets for your business?

In a recent move, the government has increased the instant asset write-off from $25,000 to $30,000 for businesses with a turnover of less than $50 million.

This means if you purchase an asset (new or second hand) costing less than $30,000 and it is used or installed ready for use from 7:30pm AEDT on 2 April 2019, you can claim a deduction for the business portion up until the cut off on 30 June 2020.

However, different thresholds apply for assets purchased before that date:

  • From 29 January 2019 until before 7.30pm AEDT on 2 April 2019, the threshold is $25,000
  • Before 29 January 2019, the threshold is $20,000.

You may purchase and claim a deduction for multiple assets provided each asset is under the relevant threshold.

Assets costing $30,000 each or more can’t be immediately deducted, but you can continue to deduct them over time using the small business pool.

When claiming business expenses, ensure it is at the GST exclusive rate if you are registered for GST, not the GST inclusive rate.

If you have any questions about writing off business assets then just get in touch.

Single Touch Payroll

On February 12, the government passed legislation that requires even the smallest of employers to electronically file each pay run with the ATO using Single Touch Payroll (STP), starting from 1 July this year.

What you need to know

If you’re reporting through STP you no longer need to:

  • Provide payment summaries to your employees for amounts reported and finalised through STP — employees will get an ‘income statement’ through myGov instead.
  • Lodge a payment summary annual report to the ATO for amounts reported through STP, as long as you complete the finalisation declaration by the due date.
  • You have until 31 July to finalise your employees’ STP information by making a finalisation declaration through your STP-enabled solution.

What to tell your employees

When claiming business expenses, ensure it is at the GST exclusive rate if you are registered for GST, not the GST inclusive rate.

At the end of the tax year, they receive an income statement in their ATO online services account (through myGov) for the amounts you have reported through STP.

If they use a registered agent to lodge their income tax return, their agent will be able to access all their STP information.

When their income statement is tax ready they’ll get a notification in their myGov Inbox, although they should wait for this to occur before they lodge their tax return.

You can learn more about Single Touch Payroll on the ATO website.

Work out what business expenses you can claim

Did you know that the Australian Tax Office (ATO) is set to focus on small business tax returns this year, in order to crack down on the misreporting of income and expenses?

Make sure you know exactly what type of business expenses you can claim by following these three golden rules.

  1. The expense must have been for your business – not for private use.
  2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
  3. Make sure you have the right records to prove your business expenses.

Tips for claiming business expenses

When filing your tax return, do not include expenses such as private rent, fines, travel, food, or renovations of a private residence as part of your business expense.

When it comes to upgrading your accounting software, ensure the business and private expense codes are correct, as you must apportion the cost of the software if you also used it for other purposes.

When claiming business expenses, ensure it is at the GST exclusive rate if you are registered for GST, not the GST inclusive rate.

If you operate your small business as a company or trust, paying private expenses from these accounts may have other tax implications such as fringe benefits tax and shareholder loans.

If you’re not sure what to claim, call us on 0407 236 103. We look forward to hearing from you!

The “Dos” and “Don’ts” of claiming expenses

Did you know? 

The Australian Taxation Office (ATO) has very specific rules for claiming a deduction for expenses. 

“The Dos”

On this webpage,the ATO shares what it calls ‘the three golden rules for claiming your business expenses’. We call them the “Dos”. They are: 

  1. ‘The money must have been spent for your business (not a private expense’). 
  2. ‘If it is for a mix of business and private use, only claim the portion that is related to your business’. 
  3. ‘You must have records to prove it’. 

CCBB&P can help you to set up automated processes which will allow you to easily document these expenses. It is much more efficient to use software to help you, instead of finding yourself going through a mountain of fading receipts at the end of the financial year! Let us help you get some time back. 

“The Don’ts” 

Remember, some things cannot be claimed, as highlighted hereby the ATO. One area that many small businesses need to be careful of, is trying to claim ‘expenses’ for things that are actually defined as entertainment. We recommend that you take a look at this article, and some of the ‘entertainment’ examples that the ATO provides, including: 

  • ‘staff social functions’
  • ‘business lunches with clients’ 
  • ‘product release functions’ 
  • ‘golf days’ 
  • ‘gym memberships’ 
  • ‘sporting club memberships’ 
  • ‘reward and recognition functions’. 

You may actually need to pay fringe benefits tax for these examples, so take a look at the details on the connected webpages if it is relevant to you. We are happy to discuss how we can help you to efficiently comply with these requirements.

We look forward to hearing from you! 

CCBB&P Staff Profile – Mez Bradford

Mez has been a valued member of our team at CCBB&P since June 2018. Mez has a Certificate IV in Bookkeeping, and is fantastic at organising books for existing businesses. Do you have messy books? Mez specialises in creating clean slates!

Prior to joining the team, Mez worked in the pharmacy, fitness and construction industries. She therefore has a great understanding of a number of different business types and how effective bookkeeping can help each of them.