Insolvency Network Update June 2019
Jun 19 2019
Single Touch Payroll
On 1 July 2019, Single Touch Payroll (“STP”) will apply to all employers. STP is real time reporting by employers to the Australian Taxation Office (“ATO”) and requires employers to report payments such as salaries and wages, pay as you go (“PAYG”) withholding and superannuation information directly from their payroll software to the ATO at the same time they pay their employees.
Employers with 20 or more employees have already had to comply with STP for the 2019 financial year. Employers who report through STP will not be required to provide their employees with a payment summary for information that is reported and finalised through STP. Employees may now access their end of year tax and super information (now called an income statement) by logging on to their ATO online account on the Australian Government website www.my.gov.au (myGOv).
An employee’s income statement will detail their year to date salary and wages, the tax which has been withheld and the reported amounts of their employer superannuation contributions. The income statement will be displayed as Year to date during the financial year, Not tax ready on 1 July and Tax ready once the employer has submitted the finalisation declaration by 14 July each year.
The introduction of STP will arm the ATO with the amounts of a company’s unpaid PAYG and Superannuation Guarantee Charge (“SGC”) liabilities. Previously, the ATO would have only been aware of a liability for PAYG or SGC from a company’s Business Activity Statement (“BAS”) and or SGC statement.
Further, there is no longer an obligation for employers to report member contributions to superannuation funds. The superannuation funds will now report directly to the ATO detailing the member contributions received from employers.
The automatic reporting of withholding liabilities may lead to an increase in Director Penalty Notices (“DPN”) being issued to directors by the ATO as it will now be aware of any unpaid amounts and will no longer need to wait for BAS or SGC statement lodgements or estimates to be made to determine unpaid amounts.
Directors should now be well aware that the Deputy Commissioner of Taxation (“DCT”) has the power to recover penalties from a director personally, where the company has failed to meet its PAYG or SGC liabilities by their respective due dates.
The STP changes have given the ATO new powers to recover SGC amounts including:-
New directions power which allows the ATO to give written direction to an employer to pay an amount of SGC for a particular quarter;
New offence for not complying with the DCT’s direction to pay an SGC amount before the specified due date; and,
New power for the ATO to direct an employer who has failed to comply with their SGC obligations to undertake a specified course of education.
The ATO is also able to share information with an employee about the failure, or suspected failure of their employer, to comply with their SGC obligations, and any action taken by the ATO.
A DPN issued by the ATO is either a ‘lockdown’ or ‘non-lockdown’ DPN. A non-lockdown DPN is issued in the circumstances where the unpaid liability has been reported to the ATO by the due date. To avoid personal liability, the non-lockdown DPN requires that, within 21 days, the director:
Pays the outstanding liability,
Comes to a payment arrangement with the ATO,
Appoints a voluntary administrator, or
Appoints a liquidator.
Directors previously had three months after the due date for payment of outstanding PAYG tax and/or superannuation to avoid a lockdown DPN in relation to SGC amounts, if the company pays the relevant due amount, places the company into voluntary administration or liquidation by this date.
A DPN will now lockdown on the day that the unpaid SGC amount is due being one month and 28 days after the end of the quarter (previously being three months after the due date for reporting or payment) meaning that a director upon receipt of such a DPN is unable to avoid personal liability unless the debt is paid in full or an agreement to pay has been entered into in writing with the ATO. A lockdown DPN still applies to unpaid PAYG withholding amounts unreported and unpaid three months after the due date has expired.
The most common liabilities we see on insolvency appointments are unpaid PAYG and SGC liabilities. In some circumstances, the liabilities have been unpaid and unreported to the ATO for several years. The introduction of STP for all employers will provide the mechanism for the ATO, employees and superannuation funds to be aware of a company’s liability for PAYG withholding and SGC far quicker than previously, which will enable earlier recovery action to be commenced.