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.

Key takeaways

• Although there are no key tax measures introduced, direct property taxes will continue to be the source of over 50% of new revenue for the Victorian Government due to increased transaction volume and rising land values (although this is expected to be tampered by forecasted interest rate rises).
• A new Victorian Future Fund will be established to manage the fiscal impact of COVID 19. It will initially be funded from the VicRoads Modernisation joint venture and is expected to have a balance of around $10bn. Investment returns from the Fund is to be quarantined and returned to the Fund to help offset the current debt and return the Budget to surplus by 2025-2026.
• There is a clear focus in this Budget to repair the health system. Included in the Budget is more than $12bn of health-related expenditure including the training and hiring of additional healthcare workers and paramedic staff, funding for Ambulance Victoria to meet growing demand for services and investment to cut surgery waiting lists.
• The two-year Sick Pay Guarantee pilot program will receive $246m in funding to assist provision of a payment of up to five days of sick or carer’s pay at the national minimum wage for insecure work (casual employees).
• $250m provided for a one off $250 Power Saving Bonus to all Victorian households using the Victorian Energy Compare website to locate the cheapest electricity deal. The scheme will run from 1 July 2022 to 30 June 2023.
• A commitment of $111m to support Victoria’s tourism and major events.
• The Victorian Government has allocated $1.8bn to the school building project and plans to continue upgrading schools until it achieves its intended target of 100 new schooling facilities by 2026. The program includes upgrades to 65 schools including 36 special schools, building 13 new schools, additional stages at four more schools, and expanding capacity at two schools to meet enrolment demand.
• The Victorian Government also plans to invest $5bn in early three-year-old childhood education by increasing universal educational access for disadvantaged families as well as providing support to individuals from diverse backgrounds and $131m to assist students from rural areas to access four-year-old early childhood services.

For full overview of the infrastructure measures see our breakdown here.

Victorian Industry Fund to support Victorian Businesses

The Government has introduced a $120m fund to support the advancement of domestic manufacturing and other high priority sectors. Some of the initiatives to be supported by this Fund include:

• $40m to provide grants to support rapidly growing businesses
• $40m of targeted financial incentives to attract investment into Victorian businesses
• $20m for an equity investment pilot fund to attract highly innovative companies particularly in areas such as medical technology
• $7m low-carbon manufacturing grant program to help Victorian manufacturers to compete globally in the renewable energy space
• $4.5m for 300 digital jobs for manufacturing internships to help train Victorian workers in this industry. 

Significant Tax Measures

No significant new tax measures were announced in the 2022/23 Budget although there were minor amendments in relation to:

• Equalisation of gambling tax rates for electronic gaming machine operators

• Exemption from motor vehicle duty for wheelchair accessible commercial passenger vehicles that provide unbooked services.

However, as noted above, the State Taxes are to be a major source of revenue for the Victorian Government. The table below shows the annual revenue expected from State Taxes over the next 4 years.

Opportunities

The opportunity for businesses may come from the expected economic growth although this is not anticipated to be significant. Business sectors such as Medtech, pharmaceuticals and manufacturing should benefit from the increase in funding.

Did the VIC Budget measure up to expectations?

The Budget fell short of providing the required assistance to boost businesses which are facing significant uncertainties.

The Government’s commitment to repairing Victoria’s health system in needed and welcomed. However, the Government has not sought to increase property taxes to decrease the State’s debt and is instead relying on solid economic growth to repair the budget.

Please reach out to one of our experts below for assistance navigating the implications and opportunities this Budget presents for you, your business and your industry.

Contacts

Abi Chellapen

Daren McDonald

Stephen O’Flynn

The post VIC State Budget 2022/23 appeared first on SW Accountants & Advisors.

Significant measures

New infrastructure spending:

• $1.6bn for construction and development of new schools and school upgrades
• $1.6bn for construction and development of new hospitals, health facilities and related upgrades
• $2.6bn investment over 4 years in the Commonwealth Games 2026 which includes funding for building and upgrading sporting venues and related supporting infrastructure
• $991m investment in improving Victoria’s roads and rail
• $1bn to fund low interest loans for community housing agencies to deliver social and affordable housing.

Key continuing initiatives from prior Budget announcements:

• Victoria’s Big Build: an average $21.3bn a year over the budget and forward estimates, reflecting the continuation of major productivity-enhancing projects such as the North East Link, the Metro Tunnel, the West Gate Tunnel, the Melbourne Airport Rail, the Geelong Fast Rail, the Suburban Rail Loop and the removal of 85 level crossings by 2025
• $6bn Big Housing Build package – continued investment in new social and affordable homes
• Stamp duty concessions and exemptions for residential property transactions, particularly homeowners
• Victoria’s HomeBuyer Fund of $500m, expanding the HomesVic Shared Equity Initiative by contributing equity to the purchase price for eligible first home buyers
• Continued concessions to eligible BTR developments – a 50% land tax concession for up to 30 years and a full exemption from Absentee Owner Surcharge over the same period.

For all key takeaways of the Victorian State Budget 2022/23 see here.

Opportunities

• Continued focus on infrastructure spending; the 2022-23 Budget provides $22.2bn in output spending and invests $6.7bn in new and improved assets. Investment in hospitals, rail and roads, social and affordable homes will continue to provide opportunities for property sector professionals and contractors
• Wage growth and increased household income will continue to drive demand for residential housing
• Continued stamp duty concessions, coupled with the HomeBuyer Fund funding is also likely to support the demand for residential housing. These initiatives may also mitigate any settlement risk for developer
• Ongoing Build-To-Rent concessions will continue supporting new entrants into that market
• Constraints on construction labour and materials may increase demand and investment in new property technologies aimed at delivering efficiencies in output
• There are no new taxes introduced impacting property purchasers and owners.

Did the VIC Budget measure up to expectations?

There are no new tax relief measures introduced for Victorian property purchasers, developers nor landowners. The constraints on residential and non-residential construction output, such as ongoing shortages of construction materials and labour shortages are also acknowledged but not addressed by any direct Budget initiatives.

The increases in costs of construction will be driven by projected wage growth of minimum 2.75% in the construction industry. This coupled with increase in cost of construction materials, also due to shortages, will continue to increase the price of newly constructed property.

While there are tax measures aimed at providing relief to homeowners (potentially neutralised by today’s interest rate hike) there is little relief provided in the Budget for the rest of the property sector participants such as property investors and developers.

Please reach out to one of our experts below for assistance navigating the implications and opportunities this Budget presents for you, your business and your industry.

Contacts

Daren McDonald
Director, Chair of Property &
Infrastructure Industry Group
SW

Matt Birrell
Director, Tax
SW

Sejla Kadric
Director, Private Business Client Advisory
SW

The post VIC State Budget 2022/23 – Property & infrastructure appeared first on SW Accountants & Advisors.

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.

The post Schools Tax Guide appeared first on SW Accountants & Advisors.