Businesses must plan tax payments early. Susan Franks, a senior tax advocate at Chartered Accountants Australia and New Zealand (CA ANZ), pointed out that four core tax changes in 2020 may “get lost on busy business owners.” If you don’t have your ducks in a row and haven’t complied with single touch payroll in Australia or educated your team on modern processes – you might not be setting yourself up for success.
TPRS Even for Non-Main Business
The Australian Tax Office (ATO) created the taxable payment reporting systems (TPRS) to address Australia’s black economy. The TPRS initially applied to the building and construction industry. In 2020, the Australia Tax Office (ATO) extended it to the cleaning and courier industries. The tax office also extended the system to the road freight, security, investigation, surveillance and information technology industries.
One of the tax changes happening this year is that businesses providing road freight, security, investigation, surveillance and information technology services will need file their reports by 28 August 2020. Even if a company only does a percentage of work related to the above-mentioned services, the ATO still requires it to submit a report. The system also requires companies to report if it hires a contract to perform the above-mentioned services. This is regardless of the total payment amount is itemized or combined.
More Security Through myGovID
Another one of the tax changes this year is myGovID and Relationship Authorisation Manager (RAM) replacing AUSkey and Manage ABN Connections at the end of March 2020. After March 31, tax and BAS agents will no longer be able to access online services.
To obtain a myGovID, tax practitioners need to establish their identity by submitting two of the following: driver’s license, passport, birth certificate, or Medicare card. The ATO said is working on an exception process for employees of firms who cannot provide the required identity documents, including offshore workers, non-residents working in Australia, and Australians without the proper documentation.
RAM allows users to manage relationships and authorisations across government online services. Businesses can link their Australian business number (ABN) to their myGovID using the RAM.
Faster Payment Time via E-Invoicing
Starting 2020, the Australian government will be using e-invoicing to transact with suppliers. E-invoicing aims to speed up payment time and reduce costs. Alongside the roll-out of e-invoicing, the government said it will begin paying businesses late payment interest.
The new rules on invoicing will currently apply to procurement contracts with the government, but finance minister Mathias Cormann is encouraging the private sector to follow suit. The ATO said e-invoicing will further reduce the average payment time of 37 days and allows businesses to save $22. The Australian economy foresees savings of $28 billion over 10 years with the use of e-invoicing, Ms Franks said.
Transparency With STP Reporting
Single touch payroll (STP) was passed last year to improve transparency and ease the burden of employers and individuals who are sending information to multiple government agencies. The system synchorises the sending of payroll information, including wages, salary payments, and superannuations to the ATO, with their payment time.
Companies who have not yet transitioned to the STP reporting have until July 1 to do so.
Employers with one to four employees have until 28 February 2020 to apply for the quarterly reporting concession. After this date, only those micro employers with extenuating circumstances will be considered. Exemptions for closely held payees, like family members working in the business, also end in July. The full penalty for small businesses will come into effect from 1 July 2020.
Tips to Prepare Ahead
Getting on top of tax obligations saves the business owner stress, time, and money because tax affects cash flow. Taxes are necessary and unavoidable. Because tax payments involve shelling out money, being unprepared can either drain your cash flow or result to you incurring penalties for late payments. It is thus never too early to organise tax payments.
- Be on top of due dates.
- Understand cash flow.
- Set business accounting software right.
- Understand different types of taxes.
- Create separate bank accounts to save money for GST and income tax.
- Know the right professionals to contact for tax services.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.