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Warning: This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
Workforce education news - Issue 6/2011
Workforce education news - Issue 6/2011
Welcome to the sixth edition of Workforce education news for 2011.
Workforce education news is a free email newsletter we issue regularly to employers and professional associations. It contains updates about tax and superannuation entitlements and obligations that may affect you, your employees and members of your association.
Feel free to pass the newsletter on to your employees and members as it contains information that may interest them.
To update or cancel your subscription, or to provide feedback email us at wensubscription@ato.gov.au
Some advice for employers
The ATO is checking that employers are treating their workers correctly for tax and super purposes. Our field officers continue to find employers who:
- deliberately try to avoid their responsibilities by incorrectly treating their employees as contractors, or
- are pressured by employees to incorrectly engage them as contractors.
Whatever the reason for an invalid contracting arrangement, employers may face penalties for failing to comply with their employer obligations. These may include:
- penalties for failing to withhold under pay as you go, and
- interest from the date the amount should have been withheld and paid to the ATO.
We are also finding that some employers are not paying super guarantee contributions for their workers. Employers who do not meet the super guarantee requirements will pay the super guarantee charge. Unlike super guarantee contributions, the charge is not tax deductible.
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Employers can use our Employee/contractor decision tool to understand whether individual workers are employees or contractors in order to comply with Commonwealth tax and super obligations.
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The ATO has some useful calculators and information to help employers understand and meet their super obligations.
Working out how much to pay
Employers must use ordinary time earnings to calculate the minimum super contributions required for their eligible employees. This ensures all eligible employees are treated the same way for super guarantee purposes.
Ordinary time earnings are generally what your employees earn for their ordinary hours of work including:
- over-award payments
- commissions
- shift loading
- bonuses
- allowances.
Generally, payments for work performed outside an employee's ordinary hours of work are not ordinary time earnings.
As an employer, it is important you understand all your super obligations.
Common mistakes we see employers make include:
- paying insufficient super contributions for eligible employees
- missing the quarterly cut-off dates (28 October, 28 January, 28 April, 28 July)
- not understanding that, in some circumstances, super should be paid for contractors even if the contractor quotes an Australian business number
- not keeping accurate records
- not passing on an employee's tax file number to their super fund
- not lodging a Superannuation guarantee charge statement if they have not paid their employees' super to the fund by the due date, or do not pay the correct amount.
Passing on an employee's tax file number
You must provide your employee's tax file number to their super fund within 14 days of receiving it.
If you do not, that employee's super contributions will be subject to extra tax and may not be accepted by the super fund. You may also be penalised.
Super for contractors
You need to pay super contributions for contractors employed under a contract that is wholly or principally for the contractor's labour, even if the contractor quotes an Australian business number.
A new financial year is a good time to look at your super contributions. Something like a pay rise may mean you end up paying extra tax on your super contributions.
Employer super guarantee contributions and salary sacrifice amounts are concessional contributions. Depending on your age and the amount contributed, you may go over the concessional contributions cap and have to pay extra tax.
Age
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Concessional contributions cap for 2011-12
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Excess tax we will charge
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If you are under 50 years of age
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You will pay extra tax if your concessional contributions are more than $25,000
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31.5% of the excess
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If you are 50 years of age and over
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You will pay extra tax if your concessional contributions are more than $50,000
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31.5% of the excess
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Whether you prepare your tax return yourself using e-tax, or use a registered tax agent, the pre-filling service can help you get it right and make tax time less stressful.
The pre-filling service provides you with information the ATO already has regarding your income and expenses to assist you in preparing your tax return. This will reduce your chances of:
- omitting relevant amounts, or
- being audited because our records do not match up with your tax return.
The pre-filling service in e-tax downloads into the tax return the information sent to us by your employer, government agencies and investment bodies, such as banks and share registries. This information is updated as new information is received and is generally available to pre-fill within a couple of days of the ATO receiving it. The best part is most of this information has already been sent to the ATO and is already available for you to download into e-tax.
Another benefit of pre-filling is that it is handy if you are missing some records and need to fill in the gaps. So why not give it a try?
Remember the information is downloaded directly into the relevant sections of the return for you to review, compare against your own records and if required you can alter the information in the tax return. It remains your responsibility to check that the information is accurate and complete before you submit your return.
View how pre-filling works in our online e-tax demonstration. Better yet, check out pre-filling for yourself, download e-tax and follow the instructions.
Do not pay more tax than you need to
As an employee, there are things you need to know to meet your tax obligations and claim your entitlements correctly.
Income
Even if you did not receive a payment summary, you need to include your total income from all of your jobs on your tax return. It does not matter if you worked full-time, part-time or on a casual basis. Income includes:
- salary and wages
- commissions
- bonuses
- tips
- gratuities
- jury attendance fees
- income from sickness and accident insurance policies
- income from Centrelink
- investment income from bank deposits and shares.
Work-related expenses
You may be entitled to claim a deduction for some eligible work-related expenses. These can include expenses such as:
- car expenses, including fuel costs and maintenance
- travel costs
- clothing expenses
- education expenses
- union fees
- home computer and phone expenses
- tools and equipment expenses
- journals and trade magazines.
Record keeping
You do not need receipts if your work-related expenses are $300 or less, but you must be able to show the deduction relates to your income and how you calculated the amount you claimed.
If you claim more than $300 for work-related expenses, you need to keep written records as evidence of the whole amount not just the amount over $300. The $300 does not include claims for car, meal allowance, award transport payments allowance and travel allowance expenses.
We accept a wide range of documents as written records of your claim, for example:
- paper or electronic copies of documents, such as invoices, receipts or delivery notes
- statements from financial institutions, such as credit card statements
- BPAY receipt numbers
- payment summaries
- warranty documents.
To find previous issues of Workforce education news, visit our website at www.ato.gov.au/wen
Last Modified: Thursday, 15 September 2011
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