Training Session 14 05 02 2021 Payroll 2 Payroll tax 15

Quiddity Reception

26 Jun 202104:59

Summary

TLDRThe video script discusses payroll tax, a state-specific tax levied on employers, highlighting its monthly calculation and the importance of timely payment by the 7th of each month. It also touches on the impact of COVID-19 on tax thresholds and the necessity to stay updated with state revenue offices. The script further explains Fringe Benefits Tax (FBT), which targets non-cash benefits provided to employees, emphasizing its complexity and the highest marginal tax rate applied. The speaker stresses the importance of accurate FBT calculations and staying informed about tax changes.

Takeaways

📊 Payroll tax is a state-specific tax levied on employers, with varying rates depending on the state.
🗓 Payroll tax is calculated on a monthly basis and must be paid by the seventh of each month.
💻 There is usually an online portal for uploading payroll information and making the tax payment.
🔑 Payroll tax includes payments for wages, superannuation, and any applicable fringe benefits tax (FBT).
💡 FBT is a tax on non-cash benefits provided to employees, such as gym memberships or school fees, meant to deter employers from avoiding regular payroll taxes.
🔄 The threshold for FBT has recently changed due to the impact of COVID-19, with adjustments in different regions.
📈 FBT is taxed at the highest marginal rate, which can be as high as 47%, to discourage employers from offering such benefits.
🔍 It's important to verify information and check state-specific websites for the most current tax regulations, especially with changes due to COVID-19.
🚫 FBT can apply to a wide range of benefits, including meals, parking, and even company cars, making it complex and requiring careful accounting.
🛠 For smaller clients, FBT may not be a concern, but for larger clients, it's crucial to be aware of different coding methods and FBT calculation approaches.
📚 Training on FBT will be provided when necessary, ensuring that individuals are equipped with the knowledge to handle FBT-related tasks.

Q & A

What is the nature of payroll tax according to the transcript?
-Payroll tax is a state-by-state tax levied against employers, varying in rate depending on the state. It is calculated on a monthly basis and must be paid by the seventh of each month.
How is payroll tax typically handled in practice?
-Payroll tax is usually calculated and paid through an online portal where all the necessary information is uploaded and the amount due is paid on wages, superannuation, and any applicable fringe benefits tax.
What is the significance of the threshold mentioned in the context of payroll tax?
-The threshold, which is subject to change, determines the amount of wages below which payroll tax may not be applicable. As of the transcript's information, it was recently changed to 1.2 million due to the impact of COVID-19.
What is the importance of checking the Office of State Revenue website?
-Checking the OSR website is crucial to stay updated on any changes in payroll tax regulations, ensuring that calculations and payments are accurate and up-to-date.
What is Fringe Benefits Tax (FBT) and why was it introduced?
-Fringe Benefits Tax is a tax on non-cash benefits provided to employees, introduced to prevent employers from avoiding pay-as-you-go tax and superannuation by offering employment benefits instead of salary.
How is the tax on fringe benefits calculated?
-Fringe benefits are taxed at the highest marginal rate, which means they are 'grossed up' to the value they would have if the employee had received the money as salary and then paid tax on it.
What are some examples of fringe benefits mentioned in the transcript?
-Examples include paying for an employee's wife's gym membership, children's school fees, or providing free parking within a certain distance from the workplace.
Why is it important to be cautious with FBT calculations?
-FBT calculations are complex and can be high risk; therefore, it's important to verify information and not rely solely on outdated notes or assumptions to avoid errors.
How can one stay informed about changes in tax regulations due to events like the coronavirus pandemic?
-By regularly visiting state tax websites and scanning for updates, one can keep abreast of changes in tax regulations and initiatives that may affect payroll and fringe benefits tax.
What advice is given for handling tax calculations when there is uncertainty or risk?
-The advice given is to always check the latest information on the relevant tax authority's website before proceeding with calculations, especially when dealing with high-risk tax areas.
What is the implication for smaller clients regarding FBT?
-For smaller clients, FBT may not be relevant or necessary to worry about, but it's important to be aware of it in case it becomes applicable in the future or for larger clients.

Outlines

00:00

💼 Payroll Tax and Its Calculation

The script discusses the concept of payroll tax, which varies by state and is levied against employers. It is calculated monthly and must be paid by the 7th of each month. The process involves using an online portal to upload information and make payments related to wages, superannuation, and fringe benefits tax. The speaker mentions a recent change in the threshold for payroll tax due to the COVID-19 pandemic, emphasizing the importance of staying updated with the latest information from state revenue offices to ensure accuracy in tax calculations.

🚫 Fringe Benefits Tax and Its Implications

This paragraph delves into fringe benefits tax (FBT), which was introduced to discourage employers from avoiding pay-as-you-go tax and superannuation by providing non-cash benefits to employees. FBT applies to payments or benefits given to employees or their relatives, which are considered taxable at the highest marginal rate. The speaker explains that even small benefits, such as gym memberships or school fees, are subject to FBT and must be grossed up before being paid out. The complexity of FBT is highlighted with examples like business meals and parking provisions, which can be considered fringe benefits. The speaker advises that tax accountants typically handle FBT but warns that in some cases, clients may require different coding methods, which should be known and applied when necessary.

Mindmap

Keywords

💡Payroll Tax

Payroll tax is a state-specific tax levied on employers based on the wages they pay to their employees. It is a crucial part of the video's theme as it discusses the responsibility of employers to calculate and pay this tax on a monthly basis. The script mentions that the rate of payroll tax varies by state and must be paid by the seventh of each month, highlighting its importance in the financial operations of a business.

💡State Revenue

State revenue refers to the income collected by a state government from various sources, including payroll taxes. In the context of the video, it is mentioned that employers must pay payroll taxes to the state, which is an essential part of state revenue. The script emphasizes the importance of checking the official state revenue office website for accurate and up-to-date information on tax rates and regulations.

💡Calculation

Calculation in this video refers to the process of determining the amount of payroll tax that needs to be paid by an employer. It is central to the script's theme as it discusses the necessity for employers to accurately calculate this tax based on the wages they pay. The script provides an example of the calculation process, which must be done monthly and paid by a specific deadline.

💡Superannuation

Superannuation is a retirement benefit system in Australia where employers are required to pay a percentage of an employee's wages into a fund for their retirement. The script touches on superannuation as part of the payroll tax discussion, indicating that employers must also consider superannuation payments when calculating their payroll tax obligations.

💡Fringe Benefits Tax (FBT)

Fringe Benefits Tax is a tax levied on non-cash benefits provided by an employer to an employee. The script introduces FBT as a complex aspect of taxation that can arise when employers provide benefits such as gym memberships or school fees for employees. It is related to the main theme as it adds another layer of tax responsibility for employers and is part of the broader discussion on tax obligations.

💡Threshold

In the context of the video, a threshold refers to a limit or amount above which certain tax obligations or regulations apply. The script mentions a specific threshold of 1.2 million, which has recently changed due to the impact of COVID-19. This threshold is important for understanding when an employer must start considering FBT implications.

💡Grossing Up

Grossing up is the process of calculating the pre-tax amount that would be needed to yield a certain net amount after tax. In the script, it is mentioned in relation to FBT, where benefits provided to employees are grossed up at the highest marginal tax rate to determine the tax payable. This concept is essential for understanding how FBT is calculated and its impact on employer costs.

💡High Marginal Rate

The high marginal rate refers to the highest tax rate applied to additional income earned above a certain threshold. In the video, it is used to illustrate how FBT is calculated by applying this rate to benefits provided to employees, which can significantly increase the tax burden on employers offering such benefits.

💡Tax Deductible

Tax deductible expenses are those that can be subtracted from an individual's or a company's taxable income, thereby reducing the amount of tax owed. The script mentions that certain employee benefits, like meals or parking, may be tax deductible under specific conditions, which is an important consideration for both employees and employers in managing tax liabilities.

💡Tax Accountants

Tax accountants are professionals who specialize in tax-related matters, including the calculation and filing of taxes. The script suggests that tax accountants often handle complex tax issues like FBT, but in some cases, smaller clients or specific situations may require different handling, which could involve the person managing payroll taxes having a basic understanding of these concepts.

💡Coding

In the context of the video, coding refers to the process of categorizing financial transactions in a company's accounting system. The script mentions that depending on the client and the tax method being used, different coding may be required for transactions, especially when dealing with FBT. This is an important aspect of managing a company's financial records accurately.

Highlights

Payroll tax is a state-by-state tax levied against the employer with varying rates.

Payroll tax must be calculated monthly and paid by the 7th of each month.

A portal is used to upload payroll tax information and make payments.

Payroll tax also covers wages, superannuation, and fringe benefits tax.

Fringe benefits tax (FBT) was introduced to prevent employers from avoiding pay-as-you-go tax and superannuation.

FBT applies to any payments that benefit an employee or their close relatives.

FBT is taxed at the highest marginal rate of 47%.

Benefits provided by employers, such as gym memberships or school fees, are considered payroll under FBT.

FBT requires grossing up the benefit amount before tax payment.

Employers are discouraged from offering certain benefits due to the high FBT rate.

Tax accountants usually handle FBT calculations, but in some cases, clients may require different coding methods.

For smaller clients, FBT may not be a concern, but for larger clients, awareness of different coding methods is important.

Staying updated on tax changes and initiatives is crucial, especially during times of crisis like the COVID-19 pandemic.

State websites provide valuable information on tax changes and updates.

It's important to verify information from official sources rather than relying solely on notes or outdated information.

Training on FBT and payroll tax will be provided when necessary.

The FBT threshold has recently changed due to the impact of COVID-19.

In Australia, the FBT threshold has decreased to around 5%, down from 5.45% previously.