DIRECTOR ID REGIME
The government has implemented a new director ID system with the goal of eliminating the use of false and fraudulent director identities as well as reducing illegal activities like phoenix activity.
Regardless of whether they modify companies, stop being a director, or move overseas, all directors who are subject to the requirements will apply for a director ID once and keep it forever.
A director ID is required for all directors of a business, a registered Australian body, a registered foreign company, or an Aboriginal and Torres Strait Islander corporation. Directors of a corporate trustee of Self-Managed Super Funds (SMSF) are included.
If an individual was already a director on or prior to October 31, 2021, the ABRS has determined that they have until November 30, 2022, to apply, even if they become another company’s director after October 31, 2021.
If the company plans to nominate new directors, it will be crucial to make sure they understand the timelines and requirements for obtaining a director ID if they do not currently have one.
SINGLE TOUCH PAYROLL
Closely Held Payee
It is vital to remember that, as of July 1, 2021, small businesses must begin using STP for tightly held payees. Employers with 19 or fewer employees are considered small.
While there have been a few extensions in the past, no more general extensions have been allowed beyond July 1, 2021.
The ATO, on the other hand, has made it possible for small businesses to report payments to tightly held payees through STP in three ways: in real-time, quarterly, or quarterly with a reasonable approximation.
The third alternative entails reporting in a similar fashion to the above-mentioned quarterly option (i.e., a quarterly STP report), but the company would disclose estimates of reasonable year-to-date amounts paid to employees. In some aspects, this alternative is similar to the PAYG installment system, with companies facing fines if amounts paid to individuals are underreported.
Phase 2 of STP
Phase 2 reporting via STP is required to begin on January 1, 2022. Even if the customer’s payroll solution is complete, if phase 2 reporting begins before March 1, 2022, the ATO will believe the client to have been reporting on time.
In the event that a payroll solution for the customer is not Phase 2 ready, the ATO recommends that the customer’s digital service provider contact them to see if a postponement is available.
Otherwise, the client can request the ATO for a deferral if the customer needs more time before beginning Phase 2 of STP.
Disaggregation of Gross
Before phase 2 STP, the STP report contains a gross amount that may comprise a variety of payment forms and components. Phase 2 asks companies to begin reporting additional detail since some of these items are regarded differently for social security purposes.
The STP report will now discretely list the following components of the gross amount as part of phase 2 reporting:
- Paid Leave
- Salary Sacrifice
- Bonuses and Commissions
- Directors’ Fees
While some job condition information is already included in STP reporting, phase 2 will require more information. This will include information such as the employee’s last day of work and the reason for leaving, the employee’s employment status (full-time, part-time, etc.), and extra tax-related information such as whether the employee is claiming the tax-free threshold with the company.
Employees are now expected to provide more information with respect to specified sources of income. This can contain information such as whether the person is a closely held payee, an inbound assignee to Australia, or a working holidaymaker.
In some circumstances, a country code will be required to be reported. Employees who are working holiday makers or inbound assignees, for example, will need to disclose codes about their home country, but employees who are Australian residents working overseas will need to enter host country information.
Certain lump sum payments, such as lump sum W amounts, will be recorded differently (e.g., return to work payments) and lump sum E amounts (e.g., payments in arrears).
Child Support Garnishees and Child Support Deductions
Child support garnishees and child support deductions can be included, minimising the separate remittance advices requirement to the child support registrar.