More Government Stimulus This One is Huge

Great, thanks Mike.

 

That is actually the correct process. And issue a PAYG summary. Directors fees are another word to describe salary and wages. Should also be a STP matter. Super etc.

I think Directors fees goes back a long way when it avoided prescribed payments and withholding at one time and was the accountants end of year fudge. Sadly it prsists but should stop. Showing my age here !

 

I think the important thing to remember is how have i done things before.

1. You cant register for PAYWG after 12 mar 2020 and get it
2. You cant backdate your PAYG registration and get it
3. You cant change trust distributions to salary and wages unless you have a strong commercial reason to do
4. You cant increase salary and wages unless you have a strong commercial reason to do. In this climate come on
5. You cant pay bonuses if you have never have had a history of doing so and claim it

Remember it is not a free for all cash grab.

Already a group of us are gathering data on people promoting schemes and will be launching action with the TPB

 

I had an interesting interaction with the ATO yesterday on this issue of registration dates. You can backdate but its hard. This is why adding PAYGW roles isnt presently a option on tax agent online services for example. Its says - Call the ATO. I was asked a lot of details about the start date for registration as client had engaged a new staff member but not registered as early as they should or could have. ATO took some time (escalated to senior staff etc) before they agreed that the registration date was 2/3 on the date the employee was engaged and validated this as STP payroll had been lodged. There is an apparent issue with them refusing registration in such cases and the TAA assumes withholding is only permitted when registered. And withholding is mandated. The ATO can backdate registration but seem to be validly checking matters in every instance to ensure registration is permitted in arrears. Fair enough too.

The ATO didnt accept that the working Director had been engaged prior (and nor did I) and as no payment of salary were evident prior to 12/3 on STP they would only backdate on the basis of the employee not the Director. I query how a later payment of salary to the Director may work and this had heads scratching. I think the only way to avoid being overpaid (its automatic and not an application) is to ensure that $0 withholding is reflected for the Director in affected BAS periods. Contrary to the TAA. There seems to be no basis for a taxpayer to lodge a reduction or adjustment to the cashflow boost. Makes the anti avoidance somewhat complex and difficult for avoidance affected taxpayers to self - correct too.

My diary notes for this are extensive. And the call ref from the ATO.

Its Governent people. Its like the centrelink circle his week. You login to MyGov (if it works).Link Centrelink. Apply for benefits. It fails. You need a CRN. Two ways to get that. By phone or at Centrelink. The phones fail. Wait hours and get dropped when they answer. Start again. The people line up. Govt says dont congregate. But they are only doing this as the system is broken. My daughter queued at 5am to be 3rd in line to learn this process.

 

The latest visual is now up Version 3. It has been adapted by Fordhams one of the largest accounting firms in Australia and had so much feedback (over 15,000 people have responded) so hope it helps others

Michael A. posted on LinkedIn

 

Could the director of a trust or company take drawings /distributions via a loan account, then later recharacterise these as salaries/wages/directors fees?

 

This seems to fit with the intention and wording of the avoidance rule if it gives the cashflow boost or increases it.

 

Yes they could. But trusts don't have directors and you should consider whether this would qualify for govt assistance.

 

Good point Terry and does the trust even produce business income ? The avoidance date may also pose a issue if you seek to switch from trust distributions to salary and wages.

 

Discuss with your advisor. Taxbanter has advice on that very issue. The webinar cost 99 bucks so discuss with someone who has paid or had discussions with tax counsel who have given some things to consider

Or join yourself

Robyn Jacobson posted on LinkedIn

 

I have a client at the moment with complex Directors fee "arrangements".

Two are invoicing their annual fee via their trusts but are being paid in shares instead of cash. Neither of them work in the business.

One works in the business as an employee and is also invoicing through his trust for the Directors fee portion, which I'm about to tell them to put through payroll.

I am now thinking all three need to go through payroll, though am still unclear on the first two.

 

how can employees invoice through a trust.

 

Historical? Don't want to pay tax? This one I'm pretty clear on, he works day to day in the business but is also a Director, so his Directors fees need to be PAYG.

It's the non-employee Directors I'm unsure of.

 

its PSI so wont help using a trust. was involved in an ATO audit on that very issue

 

if its also payments for directors fees the entity will also have breached its PAYG obligations. id consider a voluntary disclosure.

the penalty is 100% of the shortfall !!

 

Yes agreed and I believe he's declaring it as PSI in his return.

The other two I'm not sure but they're being paid in shares, I'm dubious as to whether the company can even get a deduction for the Directors fees in this case.

 

ive seen directors paid in bitcoin instead of cash. shares would be similar. in fact even more complex as you may need to consider the employee share scheme provisions. sounds like a mess

 

It's just been done this way for many years, but I want to clean it up, and believe each Director needs to be on the payroll - can't invoice via their trust and especially the one who works in the business day to day.

Ignoring the share scheme part, is this the correct approach?

 

dont forget raising the PAYG issue with them as not sure if you are their external accountant but those penalties arent great at all

 

2020 has only recently been lodged so I can amend that return.

So PAYG for each Director - and does the company need to withhold or just report via STP? Noting no cash has been exchanged .