The new financial year has arrived, bringing significant changes to Australian taxation & payroll.
The first step in remaining compliant is understanding your business’ new payroll obligations. To help in this regard, we’ve examined the latest changes and summarised them for your convenience.
Fast-track your research with this guide to the 2020 / 2021 financial year.
Individual Income Tax Rates
The good news is that individual income tax rates for the 2020 / 2021 year will remain the same as last financial year, which is as follows:
*2% Medicare Levy is included for resident individuals.
*From the 1st of July 2020, STSL tax free threshold increases from $45,881 to $46,620.
*Companies will need to register with ATO as employers of Working Holiday Makers.
The Fair Work Commission has announced a 1.75% increase to the minimum wage. The increase will apply from the first full pay period starting on or after 1 July 2020.
The national minimum wage will be $753.80 per week or $19.84 per hour. The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38-hour week for a full-time employee.
The increase of minimum wages will also apply to Modern Award, but on 3 different dates:
– Group 1 – 1 July 2020
– Group 2 – 1 November 2020
– Group 3 – 1 February 2021
Refer to this link to check which group applies to your company award to commence the new minimum wages.
Note that this may have an impact on your Australian operations, from a budgetary perspective.
Key Rates and Thresholds
1. Lump Sum D Threshold
The Lump Sum D threshold will increase to $10,989 + $5,496 for each completed year of service.
2. ETP thresholds
The ETP indexed cap is changed to $215,000 from 1 July 2020.
The Whole Income cap remains at $180,000 as this is a non-indexed figure.
3. Maximum employer super contribution cap
This will increase to $5,423.55 per quarter from 1 July 2020. (This represents an annual equivalent of $21,694.20)
4. Quarterly contribution base
For the financial year 2020 / 2021, the maximum quarterly contribution base is $57,090.
5. Overtime Meal Allowance
For the financial year 2020 / 2021, the overtime meal allowance is $31.95.
6. Cents per km – car
For the financial year 2020 / 2021, when employees use their own car for business-related travel, and they receive 72 cents per kilometre allowance to help cover the costs.
7. Payroll tax thresholds – FY 2020-2021
New South Wales (NSW)
As part of the 2020 NSW Budget, payroll tax thresholds are to rise from the current level of $900,000. For the 2020-21 financial year, the threshold will be $1,000,000 a year. Tax rate remains unchanged at 5.45%.
From 1 July 2020, The Victorian Government maintains the payroll tax-free threshold at $650,000 at 4.85%.
The rate of payroll tax for Victorian regional businesses also stays steady at a 2.02% for the tax-free threshold of $650,000 with payrolls that consist of at least 85% of regional employees.
Western Australia (WA)
From 1 July 2020, the threshold amount increases from $850,000 to $950,000 on 1 January 2020 and from $950,000 to $1 million on 1 January 2021.
The payroll tax is calculated on a tiered rate scale that gradually increases the tax rate to a maximum of 6.5% for employers, or groups of employers, with annual taxable wages in Australia of more than $100 million.
COVID-19 Payroll Tax update
**Note: ATW = Australian taxable wages, AGW = Australian Group Wages
*** Business must show they are significantly impacted by COVID-19
Note: information above sourced directly from the TAPS members update.
Increase to parental leave flexibility in Australia
Parents of children born or adopted on or after 1 July 2020 will have more flexibility in how they receive their government paid parental leave entitlements.
– a Paid Parental Leave period of up to 12 weeks which is 60 payable days
– 30 Flexible Paid Parental Leave days
Your employee can choose how and when they would like to get Parental Leave Pay and they will be able to do this from 14 September 2020.
As an employer, this will not increase the administrative load. You will process the 12 weeks period of paid parental leave as usual and the employee will get the 30 flexible paid parental leave directly from Service Australia.
As usual, your Polyglot Group payroll expert is available for any additional information you might require.
Penalty Rate Reduction
Effective 1 July 2020, employees who are covered by the Retail and Pharmacy Awards will now be entitled to lower penalty rates for hours worked on a Sunday.
For those working under the Retail Award, Sunday penalties will decrease from 165% to 150% and shift workers will see a decrease from 190% to 175%.
For those working under the Pharmacy Award, Sunday penalties will decrease from 165% to 150%.
Superannuation Guarantee Amnesty
The super guarantee (SG) amnesty is a one-off opportunity to correct past unpaid SG amounts. Employers have a six-month window, until 7 September 2020, to disclose, lodge and pay unpaid SG amounts for their employees. Employers can claim deductions and not incur administration charges or penalties during this amnesty.
It’s important that you act on this opportunity now to get your obligations up to date. If you choose not to come forward during the amnesty, the costs will be significant.
To remain eligible, you must declare and pay your SG shortfalls and interest charges. Payments made during the amnesty can be claimed as tax deductions, and payment plans can be arranged.
Applications for the amnesty close at 11.59pm on 7 September 2020. Only payments made before 11.59pm on 7 September 2020 will be tax deductible.
The ATO will continue to conduct reviews and audits to identify employers not paying their employees SG. If the ATO identifies that an employer has not been making correct SG payments before they come forward, they will not be eligible for the benefits of the amnesty. They will also be required to pay:
– SG Shortfall
– Nominal Interest (10%)
– Administration component ($20 per employee per quarter)
– Part 7 penalty (up to 200% of the SGC)
Additionally, payments of the SGC will not be tax deductible.
Victoria’s Wage Theft Legislation
Victoria has become the first state in the country to pass laws on 16 June 2020 establishing criminal penalties for employers who deliberately underpay or don’t pay their workers.
The legislation is presently anticipated to be effective from no later than 1 July 2021.
Employers who dishonestly withhold wages, superannuation or other employee entitlements, will face fines of up to $198,264 for individuals, $991,320 for companies and up to 10 years’ jail.
Offences will also capture employers who falsify employee entitlement records, such as payroll records, or who fail to keep employment records.
New record keeping offences are aimed at employers who attempt to conceal wage theft by falsifying or failing to keep records. No longer will employers be able to avoid being held accountable through deliberate dishonest record keeping practices.
The Wage Inspectorate of Victoria will be established as a new statutory authority with powers to investigate and prosecute wage theft offences.
Employers who make honest mistakes or who exercise due diligence in paying wages and other employee entitlements will not be subject to the legislation.
Processing payroll is hardly an easy feat. Not only does it require a complex understanding of surrounding regulations, but also requires in-depth knowledge on how to apply it for your particular business.
Needing help with your payroll? Looking to assure compliance? Perhaps you need to outsource your payroll to a trusted partner. If still unsure of the benefits of outsourcing your payroll, check out our FAQs on why you should.