Employment measures
Expanded use of STP payroll data for payroll tax purposes
In the lead-up to the 2022-23 Federal Budget, it was announced that Single Touch Payroll (STP) data will be shared with State and Territory Governments on an ongoing basis to enable the pre-filling of payroll tax returns. The Federal Government anticipates this move will improve lodgment accuracy, reduce compliance costs and save time for approximately 170,000 businesses with payroll tax reporting obligations.
Trials are currently in progress for a number of State and Territory Governments in relation to the use of STP data, and the Federal Government is on track to complete its IT system implementation by late 2023.
There is currently no indication as to whether this announcement will necessitate the final steps in full harmonisation of State and Territory payroll tax legislation, or indeed alignment of the taxable wages base with assessable salary or wages. This announcement and the proposed reform within does provide a genuine opportunity for meaningful simplification of compliance.
Absent that, employers will still need to be able to attest to the accuracy of the information being lodged with the State and Territory Revenue Offices. If the Revenue Offices are using STP data as the source of truth, that creates a new challenge for payroll tax compliance functions and overall governance, particularly where the lodged values differ.
Smarter reporting of taxable payments
The Treasurer also announced in the lead-up to the Federal Budget that businesses required to lodge with the Australian Taxation Office (ATO) a taxable payments annual report (TPAR) will be able to opt into automatic reporting supported by new software. The adoption of technology to support business to undertake what often can be quite an onerous compliance task will be welcomed.
As part of the taxable payments reporting system (TPRS), many businesses and government entities currently are required to lodge a TPAR with the ATO to report payments made to contractors or subcontractors for providing the following services: building and construction, cleaning, road freight, courier, security, investigation, surveillance or information technology services.
The new software, which will allow for the relevant contractor information to be reported to the ATO at the same time as business activity statements, is expected to be ready for implementation by 1 January 2024. Businesses that opt into automatic reporting will no longer be required to prepare their TPAR annually.
More support for apprentices or trainees
The Prime Minister announced an extension of the Boosting Apprenticeship Commencements and Completing Apprenticeship Commencements wage subsidies, which provides employers with wage subsidy support for eligible new apprentices, with enrolments now extended to 30 June 2022 (i.e. extended beyond the current deadline of 31 March 2022).
Specifically, any employer who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
- 50 per cent of the eligible Australian apprentice’s wages in the first year, capped at a maximum payment value of AUD 7,000 per quarter per eligible apprentice
- 10 per cent of the eligible Australian apprentice’s wages in the second year, capped at a maximum payment value of AUD 1,500 per quarter per apprentice, and
- 5 per cent of the eligible Australian apprentice’s wages in the third year, capped at a maximum payment value of AUD 750 per quarter per Australian apprentice.
Tax deductibility of COVID-19 test expenses
By way of reminder, as previously announced, the costs of taking a COVID-19 test to attend a place of work are tax deductible for individuals from 1 July 2021. This will ensure fringe benefits tax (FBT) will not be incurred by businesses where COVID-19 tests are provided to employees through the operation of the otherwise deductible rule.
As there is limited information announced to date, together with the absence of enacted or draft legislation, employers will need to make a judgement call on whether to exclude such benefits from their FBT returns for the year ending 31 March 2022, or to include and later amend once legislation is passed. If employers take the former position, they will also need to ensure record keeping requirements are met, which may include employer or employee declarations.
Reminder - SG rate set to increase
While not a measure from this year’s Federal Budget, it is also worth mentioning that the superannuation guarantee (SG) rate is scheduled to increase on 1 July 2022 from 10 per cent to 10.5 per cent. This is in accordance with previously legislated phased-in increases that commenced from 1 July last year and which continue to increase over the next three years to 12 per cent applicable from 1 July 2025.
Furthermore, last year’s Budget measure to remove the current $450 per month minimum salary or wages threshold that resulted in low income employees not receiving any SG support has been enacted and will apply to salary payments from 1 July 2022.
Employers should start planning how these SG increases will be implemented and communicated to employees.
Expanding access to employee share schemes
The 2022-23 Federal Budget did not include any substantive changes to the tax framework applicable to employee share schemes, but substantial enhancements were announced to the legal framework for unlisted company equity incentivisation in Australia.
Currently, groups that wish to grant equity incentives beyond a select pool of participants (e.g. senior management and staff that are sophisticated/wholesale investors) will rely on ASIC Class Order 14/1001. This relief instrument includes many problematic conditions, most notably the $5,000 limit on the value of grants that can be made to participants in a 12 month period.
The 2022-23 Federal Budget outlines a new legal regulatory framework for workforce equity incentivisation that rightly focuses on the actual dollar investment made by participants. Where the participant pays nothing for the equity incentives (e.g. a performance right), the regulation of the offers is minimal. Where payment is required (e.g. for a share or an option with an exercise price) and other disclosure exemptions do not apply, the relevant offers will be subject to streamlined disclosure requirements (similar to those currently contained in ASIC Class Order 14/1001) provided the outlay is or will be equal to or less than $30,000 per year (or equal to or less than $150,000 over five years for unexercised options).
Notably, these thresholds are increased by an amount equal to 70 per cent of the dividends and cash bonuses payable to the participant in the relevant year(s). By facilitating the delivery of bonuses and dividends in the form of equity, companies should benefit from the ‘flywheel’ effect of retaining cash and increase workforce incentivisation. We query whether the tax regime will be adjusted to make this attractive for companies. Finally, if a participant is not required to make an outlay until a liquidity event where they can then immediately sell their equity for a profit (e.g. the cash funding requirement coincides with the opportunity to make a profit), then there is no limit on the amount of equity that can be offered through this regime.
Based on our interactions with Treasury over the last 12 months (in particular on their consultation papers and two iterations of draft legislation published in August and December 2021), we anticipate other important technical issues with the current regime will be addressed when the legislation is released (including the scope of who can be a participant for the purposes of these provisions, reflecting the more diverse employment and contracting methods available to companies and their teams in today’s world).
