This paradigm shift for Victorian non-profit private schools mandates proactive measures in establishing processes and templates, upskilling staff, and addressing potential challenges, ensuring a seamless transition into compliance with payroll tax obligations. While other jurisdictions have not announced any similar changes, the Victorian legislation paves the way for other jurisdictions to follow suit. 

Starting from 1 July 2024, Victorian non-profit private schools with an income per student exceeding $15,000 will be subject to payroll tax. Employers must assess their own liability for payroll tax, regularly submit returns and make payments, typically monthly, to the Victorian SRO.

While navigating these changes seem supposedly straightforward, there is a good reason the SRO is one of the most active agencies with their data matching and compliance programs. Schools need to ensure that processes are well designed, to avoid common errors, minimising manual input and intervention and align with other submissions to other Government authorities (e.g. workers compensation, trainees and STP). This will also prevent overburdening existing employees with another time-consuming monthly process.

How to prepare for payroll tax changes

At a high level, schools newly subject to payroll tax will need to take steps before the obligations begin, including:

1. register for payroll tax and PTX express
2. review internal systems, processes and data to address risk areas such as:
   • treatment of pay codes | ensure that pay codes are set up correctly to accurately disclose taxable wages in the required categories, including salaries, commissions, leave, allowances, superannuation, and more
   • treatment of contractors | the relevant contract provisions extend payroll tax obligations to all service-based arrangements, with taxpayers needing to assess each non-employee worker against a series of 8 exclusions
   • grouping | The payroll tax grouping provisions can be complex, and if caught can result in the reduction of available payroll tax thresholds
   • data matching and investigation risks | it is not sufficient to get the taxable wage amount correct. Schools should ensure that disclosures align with other submissions to minimise the risk of investigation.
3. understand their systems and available data and developing a robust monthly process, including:
   • a process and documentation for data extraction and review
   • a working template for calculations
   • a review and lodgement process and controls
   • documentation of important payroll tax positions, process and methodology.
4. maintain ongoing processes for compliance with changing law and regular testing of existing processes.

How SW can help

As this is uncharted territory for many schools, our SW payroll tax experts are offering a comprehensive package to assist school finance teams get up and running with their payroll tax processes. This package includes:

• understanding the payroll systems and data, as well as the process for engaging contractors.
• working with the team to get detailed descriptions of pay codes and determine payroll tax positions (including recommendations to restructure pay codes if needed).
• designing an Excel-based model (e.g. using PowerQuery/PowerPivot) in conjunction with the school for monthly and annual payroll tax reconciliations.  This template is designed to source information from raw data files (e.g. payroll reports) and produce the required breakdown for payroll tax returns with minimal manual manipulation.
• documentation of methodology and positions (including a matrix of pay codes, descriptions and payroll tax positions).
• payroll tax training for staff members including use of the model.
• assistance with the preparation of the first payroll tax return and ad hoc support for 6 months for queries that arise after handover process
• review of the first annual payroll tax reconciliation.

We offer complementary initial discussions for us to understand the school systems and processes as well as data sources as well as highlight discuss any risk areas.

Contributors

Zainab Ayub

The post Victorian private schools navigate new payroll tax norms appeared first on SW Accountants & Advisors.

Education providers are adapting to digital delivery of courses, international student enrolment fluctuations and navigating funding – whether through fees, government grants or investments. At SW, we have a deep understanding of these challenges and potential opportunities.

Our education accountants & advisors have 50 years’ experience in providing advisory, audit and tax services to leading universities, TAFEs and private schools. We work with 35 of the 43 education institutions in Australia which has helped us to benchmark best practice in the sector, and the advice we offer goes beyond cost control and compliance.

Beyond our core services, we work with clients to identify genuine, value-driven efficiencies and process improvements as well as providing commercial and practical advice. We look to assist clients to develop strategies that drive organisational value and revenue growth.

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Fringe Benefits Tax

Fringe Benefits Tax (FBT) is a complex area when dealing with tax exempt organisations, such as schools.

In particular, entertainment can be a challenging area to work with as:

• the minor and infrequent benefits exemption is not available to tax exempt organisations; and
• the on-premises exemption is not available to tax exempt organisations.

Most organisations have documented policies and procedures in place for internal use that provides guidance on what constitutes entertainment for FBT purposes. ShineWing Australia’s employment tax team has assisted many tax exempt organisations including education institutions with preparation and implementation of internal policies and procedures on FBT.

A ‘FBT manual’ is an easy to access guide that:

• provides a general guidance on FBT benefits
• sets out the school’s position on FBT
• sets out whether the expenditure itself is allowable under the school’s policies (regardless of FBT)
• acts a repository of various forms and declarations.

Payroll tax and superannuation review

The introduction of single touch payroll means that the ATO have real-time visibility and transparency over the data organisations are reporting. The ATO are able to pick up on errors more easily and a similar level or internal controls are expected from employers.

Payroll tax audits and superannuation reviews are also rising due to single touch payroll. Various data sets lodged across sectors are being examined by the State Revenue Offices and any anomalies are flagged promptly. Payroll tax payments to contractors have always been a complex issue and a favourite one for ATO and State Revenue Offices. Data matching identifies contractor engagements and highlights impacted employers to tax authorities for further investigation.

ShineWing Australia’s data analytics capabilities will prove invaluable in situations like these to help quickly work through large amounts of data, including arrangements between principles and contractors. Our payroll tax experts can help to identify any potential risks that may cause an issue in a payroll tax audit.

GST governance

In a changing environment, it is more critical than ever to manage indirect taxes, with a focus on reducing risk and managing processes efficiently. In a digitalised environment, the increased prevalence of GST means keeping pace with the changes in GST rules can be difficult.

ShineWing Australia can provide expertise and processes that help to:

• reduce the risk of non-compliance
• reduce adverse impacts on cash-flow
• avoid penalties from tax authorities and large tax debts by identifying risks prior to any compliance activity by the ATO.

ShineWing Australia’s GST team has assisted many organisations with GST governance procedures including data analytics, policy and procedure review.

Get in touch

Do any of these matters affect you? Reach out to one of our experts below for more information on how to navigate these tax issues for your organisation.

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