Tax Free Payments for Employees PAYG

Discussion in 'Accounting & Tax' started by Mike A, 12th Mar, 2020.

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  1. Mike A

    Mike A Accountant Business Member

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    Thats right.

    The government has just announced tax free payments between $2k and $25k paid to employers with less than $50m turnover based on 50% of the PAYGW Amout in the BAS/IAS from 1 January 2020 to 30 June 2020.
     
  2. Jasper

    Jasper Well-Known Member

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    Any tips on the best way to use this?

    I was thinking of increasing my salary now (and getting 50% discount on my current tax rate of 38%) rather than accumulating the profit to distribute via trust at June 30 (again, to myself at 38%).

    I am probably on the wrong track

     
  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    If you are self employed the test is whether there is a small business or its PSI ( I assume PSI wont be eligible but hey ?) . Assuming its a small business there is no employee upper limit earnings test. Just a small / medium business turnover test.

    Paying withholding PAYG from a trust may not mean its correct. Are you a beneficiary or a employee ? And can the trustee even engage you as a employee ? (eg you are also the trustee)Suddenly becomeing a employee may trigger a escalated risk of review. This same issue can affect partners in a partnership.

    what is a employee ?

    "salary or wages" means salary, wages, commission, bonuses or allowances paid (whether at piece-work rates or otherwise) to an eligible person as such, and, without limiting the generality of the foregoing, includes any payments that are covered by Subdivision BA of Division 1AA of Part III of this Act or Division 52, 53 or 55 of the Income Tax Assessments Act 1997, any payments of amounts to which section 26AC of this Act or section 15-3 of the Income Tax Assessment Act 1997 applies, any payments of amounts that are assessable retirement amounts for the purposes of this definition, eligible termination payments and any payments made:

    (a) under a contract that is wholly or principally for the labour of the person to whom the payments are made, …


    I raised this issue today and believe STP data could also act to catch out employers who seek to overstate their gross and withholding reporting if its differs from STP. (Yes I was looking at how to game the system)

    I have attached a info sheet from the Govt on this one.
     

    Attached Files:

    Last edited: 13th Mar, 2020
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    You wont get any 50% discount. The trust gets a tax free amount for 50% of withholding tax deducted from salary paid to employees in a 6 month period. Assuming withholding isnt 100% of the earnings this means at a 50% discount the likely salary needs to be 150K to get 25K.
     
  5. Jasper

    Jasper Well-Known Member

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    It's a real business in construction industry. My partner does the work and I do the accounts and books. We draw a salary every month. At the end of most Financial years, there's $50-80k still sitting in the company (which has a trust structure) so it has to be distributed to us as beneficiaries. I'm thinking it makes more sense to start paying it out now as salary.
     
  6. Jasper

    Jasper Well-Known Member

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    Sorry, I have no idea what this means. Anything I can read up on? Thanks
     
  7. danielcannan

    danielcannan Active Member

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    EDITED: - As an example:

    Your trust is the employer, it has PAYG withholding of $10,000 on its March BAS.

    The trust will be eligible for a $5000 refund.
     
    Last edited: 13th Mar, 2020
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    A trust may or may not be your employer. That may need advice.
    The TRUST if it is a employer may be eligible for a tax free incentive NOT the employee.
     
  9. jafeica

    jafeica Well-Known Member

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    Ditto
     
  10. Jasper

    Jasper Well-Known Member

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    Yep, that's what I understood from the examples on treasury website. With how our wages currently stand, our PAYG is approx $14k per BAS quarter. So 14k x 50% x 2 more BAS this fin. year = $14k.