eInvoicing is a new way to securely send and receive invoices between businesses via a secure global public network known as Peppol. The Australian Peppol Authority is the ATO. eInvoicing, despite being a popular and efficient method of transacting, is not mandatory.
A buyer and a supplier must both be registered with Peppol in order to use eInvoicing. This is done via your accounting software (if it offers eInvoicing functionality). Larger businesses may need to use alternative options in order to connect to the network.
Why eInvoicing?
eInvoicing is secure and time-efficient. It removes the need for using email or snail mail as methods of sending invoices and therefore, is more secure. It also removes the need to key in invoice data when an invoice is received and/or scan and attach PDF copies of the invoice. Data entry error is also heavily reduced when using eInvoicing due to little or no keying in of details required. When an invoice is received via eInvoicing, you would simply go through your normal approval process and then prepare to pay the invoice when ready. The below image is from the Institute of Certified Bookkeepers and explains the difference between the current invoicing process you probably use now, and the eInvoicing process which is much simpler.
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How do I know if my supplier or customer is eInvoicing-enabled?
When you or your supplier becomes eInvoice-enabled, you will be listed in the Peppol Directory. You can search the directory to see if your contact can receive or send eInvoices.
How do I know if my software product is eInvoicing-ready?
All software products that offer eInvoicing functionality are listed in this register on the ATO website. Some products are accounting packages and some offer online web portals for eInvoicing.
Below are 3 of the most popular online accounting packages which are eInvoicing-ready now. Each software link below will assist you to get started using eInvoicing and explain the process specific to that software. It’s important to note that MYOB and Xero do not charge anything extra to use eInvoicing which is excellent! Reckon has monthly packages including eInvoicing.
Not ready to commit to eInvoicing? Need more information?
eInvoicing is relatively new, although large companies and government departments have been using it for quite some time now. Small businesses are slowly engaging in this new method, with the uptake increasing continually. It is understandable that you may not be ready to make the jump to eInvoicing or even require it at this stage in your business development. If you would like to do some further research before moving forward, here are some useful links:
Here is a reminder that access to paid family and domestic violence leave for employees of non-small business employers (employers with 15 or more employees) began on 1st February 2023 (and 1st August 2023 for small business employers). The leave is for 10 days for any full, part-time or casual employees and is not pro-rated. Read more about this new leave type in our previous blog here.
Something important to call out in relation to paying this leave is the information that is prohibited from being included on the employee’s payslip.
Employers must not include:
A statement that an amount paid to an employee is a payment in respect of the employee’s entitlement to paid family and domestic violence leave
A statement that a period of leave taken by the employee has been taken as a period of paid family and domestic violence leave
The balance of an employee’s entitlement to paid family and domestic violence leave
The reason for not including this information is that if a perpetrator of violence gains access to the employee’s payslip and sees that this type of leave has been taken, this may pose a significant risk to the employee.
When setting up this type of leave in the payroll system, it is important to give it a generic name that does not reference the words “Family and Domestic Violence Leave”. In fact, not calling it “leave” at all is best practice. Given the payment is for an employee’s full rate of pay for the hours he/she would have worked if they weren’t on leave, then simply producing a payslip that shows “gross” pay, is recommended. In the back end of the payroll setup, details can be added noting what the payments actually are, and leave entitlement balances can be recorded but not included on the payslip (simply uncheck that box in the employee’s payroll setup (software-dependent)).
Precluding statements about this type of leave on an affected employee’s payslip is now part of the Fair Work Legislation Amendment Regulations 2022. Employers must take note and ensure that their payroll systems are set up correctly to reflect these amendments. Failing to do so may/will put affected employees at significant risk. If you are an employer, make sure you action this now (or by August 2023 if you are a small employer).
The way new employees are onboarded is changing. Currently, employers ask new employees to provide a Tax File Number Declaration form, a Super Choice form, and also other personal information required in order to set them up in their payroll systems.
While this process is fairly straightforward, often employers find themselves chasing new employees for the data and at times, needing to confirm details that may or may not be correct (usually not correct in my experience!). This process can therefore be very time-consuming and tedious for employers, not to mention that the room for error is very high. It is also not a great deal of fun for new employees either!
This is an all-in-one onboarding form that new employees access from their myGov accounts. The form will provide both the ATO and the employer with all of the information required to set up new employees in one easy action.
Importantly,this form will replace several forms. These include the Tax File Number Declaration, the Super Choice form, the Variation to Tax Withholding Declaration, the Variation to Medicare Levy Declaration, etc. Employees can also use it to update their tax circumstances, for example, if:
their residency status has changed
they no longer have a government study and training loan
they are claiming the tax-free threshold from a different employer.
This change to employee onboarding will reduce the administrative burden for employers and increase process efficiencies. It will also reduce data recording errors which are very common when obtaining personal details from new staff members.
How the new onboarding process works
Firstly, the employer needs to provide his/her ABN to the new employees.
After submitting the form, the details will be sent straight to the ATO removing the requirement for employers to send completed TFN Declarations separately. It’s important to note that the changes to Single Touch Payroll Phase 2 have also made this possible i.e. every time a pay run is reported via STP 2, employees’ tax information is sent to the ATO. Although this step can now be removed from the onboarding process, employers must continue to receive completed TFN Declarations from new employees and retain them as part of the employees’ records.
Once the form is submitted, the employee will print the form and give it to the employer who will use the information to set up the employee in the payroll system.
It’s important to note that the downloadable version of the TFN declaration form will be removed by the end of2022.
The ATO is therefore requiring new employees to be onboarded using the new above process going forward. This is a new process that both employers and employees need to understand and adopt. It has benefits in terms of efficiency and data security and in my opinion, is the way forward.
Employees (full-time, part-time, and casual), will soon be able to access 10 days of paid family and domestic violence leave in a 12-month period.
This will replace the current 5 days of unpaid leave available to affected employees.
Employees will be entitled to the full 10 days upfront, meaning they won’t have to accumulate it over time. The leave won’t accumulate from year to year if it isn’t used. The leave will renew every year on an employee’s work anniversary.
The new leave entitlement will be available from:
1 February 2023, for employees of non-small business employers (employers with 15 or more employees on 1 February 2023)
1 August 2023, for employees of small business employers (employers with less than 15 employees on 1 February 2023
Reasons for requiring this type of leave could include:
making arrangements for their safety, or the safety of a close relative (including relocation)
attending court hearings
accessing police services
attending counselling
attending appointments with medical, financial or legal professionals
An employer can ask for evidence from an employee when the leave is applied for. Types of evidence can include:
documents issued by police
documents issues by court
family violence support service documents or
statutory declaration
Employees will continue to be entitled to 5 days of unpaid family and domestic violence leave until they can access the new paid entitlement.
Reporting paid Family and Domestic Violence Leave on payslips has very specific rules – read our blog here to find out more!
What you can do to help yourself and/or your business
During the past 2 years of the COVID-19 pandemic, the ATO deliberately halted tax and super debt collection in order to assist businesses and taxpayers affected by the pandemic’s consequences.
But now they are back on the bandwagon. Debt collection has recommenced!
The ATO is clear that if you engage with them as soon as possible, they will try to work with you to help you manage your debts. However, and I quote:
So the message is don’t hide under a rock. The debt won’t disappear and the ATO will chase you to recover it. Instead, contact the ATO immediately and work with them to resolve the issues. They can’t help you if you don’t communicate with them. Your tax or BAS agent can do this on your behalf if you would prefer not to call the ATO yourself.
It is important to note that from July 2022, any tax refunds or credits will be automatically applied to any tax/super debt you may have, meaning that you may not receive any refund or a smaller refund than expected.
The ATO has various avenues of help for businesses or taxpayers experiencing tax/super debt stress. Some of these are listed below:
Applications for a Director ID will close on 30th November 2022. Have you got yours yet? If not, why not? Is it because you lack the confidence to use a computer or smartphone or the technology required? Have you been told that you need to have a myGovID to apply for a Director ID and don’t know how to get one or even what it is? Never fear, there are other ways to apply for a Director ID and these are explained below.
What is a Director ID? Just quickly, before we go on, for those not in the know, a Director ID is a unique number identifier that identifies you as being a company director to government authorities, shareholders, employees, consumers, creditors, external administrators, and regulators. The reason behind obtaining a Director ID is to prevent the use of false or fraudulent director identities i.e. director identity fraud. Read more information about the Director ID here.
So, when you visit the Director ID information page via the Australian Business Registry Services (ABRS) to learn about how to apply for the ID number, it will immediately begin by explaining that you need to have a myGovID account. A myGovID account is a digital identity that helps you prove who you are online by participating government online services. This is a good thing to have but if you aren’t ready to go down that road or can’t for some reason, you can actually apply for a Director ID by phone or by sending in a paper application – yep, that’s right, you can do it old school style! Read on to find out how!
Apply by Phone
To apply by phone, have the below data at hand, then call 13 62 50. Wait for the automated system to ask you to make a selection from the following and select option 1. Tell the operator that you wish to apply for a Director ID number. Supply the operator with the below data and when he gives you the ID number, record it. A copy will also be sent to you by mail or email – your choice.
Documents Required:
your tax file number (TFN)
your full name
your date of birth
your residential address as held by the ATO
two Australian identity documents – one primary and one secondary
Primary documents
Australian full birth certificate
Australian passport
Australian citizenship certificate or extract from a Register of Citizenship by Descent
ImmiCard
Visa (if you are using a foreign passport but are still in Australia)
Secondary documents
Medicare card
Australian driver’s licence or learner’s permit
Apply by Paper
To make an application via a paper form, you will need to call the ABRS on the same phone number as above i.e. 13 62 50,and ask for the form to be mailed to you. In addition to completing the form, you will also need to send certified copies of:
one primary and 2 secondary identity documents, or
2 primary and one secondary identity document.
Primary documents
Australian full birth certificate (extracts and commemorative certificates are not acceptable)
Australian passport (including passports that have expired in the past 3 years)
Australian citizenship certificate or extract from a Register of Citizenship by Descent
Foreign passport
Secondary documents
Medicare card
Australian driver’s licence or Australian learner’s permit. This must show your photo, licence card number and signature, and the address on the card must match the details on your application.
If you have changed your name, you must provide another document showing the change, such as a
marriage certificate
deed poll
change of name certificate.
Certifying your Documents
Copies of documents you provide to support your application must be certified as true and correct copies of the original document by an authorised certifier. To certify your documents:
photocopy them
ensure the copy and any photograph is clear and identifiable
take the copies and originals to an authorised certifier.
Authorised certifiers
The following people can certify copies of your original identity documents as true and correct:
Barrister
Solicitor
Medical practitioner
Judge
Justice of the Peace (JP)
Minister of religion (who is authorised to celebrate marriage)
Police officer
Bank, building society or credit union officer with at least 5 years of service
Sheriff’s officer
Commissioner of Declarations (in Queensland only).
A certifier should never witness documents:
for their family, business, clients, employer or any other person where it could create a real or perceived conflict of interest
connected with matters in which they have an actual or perceived personal or financial interest.
So there you have it – you can apply for a Director ID without having to set up a myGovID account. Of the two old-school methods above, I think phoning is the easier option as long as you have all of the documents and information in front of you before you call.
PS – I’m not against getting a myGovID account and in fact, I do advise that you try to get one eventually. However, I do recognise that not everyone is tech-savvy or has a smartphone, or if they do, may not be sure how to navigate it – it is certainly a learning curve and not that easy for some. Luckily, the government understands this too and is providing alternative options to those who may require more time to transition to the digital world.
As part of the set-up for STP Phase 2, employees must be labelled correctly as per a category of taxpayer (e.g. Regular, Actor, Senior or Pensioner & Horticulturist or Shearer) etc) and an additional layer known as an income type from the list below:
SAW (salary and wages)
CHP (closely held payees)
WHM (working holiday makers)
FEI (foreign employment income)
IAA (inbound assignees to Australia)
SWP (seasonal worker programs)
JPD (joint petroleum development area)
VOL (voluntary agreement)
LAB (labour hire)
OSP (other specified payments)
Most of the above income types are self-explanatory, with the exception of “closely held payees” (CHP). The CHP income type is tripping people up because they assume a payee who is a CHP should automatically be given the CHP income type. While this appears to be a logical choice, a CHP may have either an income type of SAW or CHP, depending on the entity’s situation. So how do you know when to choose one over the other? Below is my explanation of this issue.
Payroll finalisation will occur later than 14th July
Choosing either CHP or SAW Income Type
If the above reporting concessions are not being used by the entity and finalisation will occur by 14th July along with other arms-length employees, you may choose the income type CHP or SAW for your closely held payees.
I hope this has clarified the confusion around when to choose CHP as an income type for a payee who is a CHP.
If you are in the process of setting up your payroll for STP Phase 2, the ATO has a number of resources available. See also here for further ATO resources. It is worth checking them out to ensure that your setup is correct. Remember, STP Phase 2 will see a large proportion of payroll data shared with Services Australia on behalf of your employees. Services Australia will use this information as the basis for calculating future payments to your employees, should they be receiving them. For this reason, as well as ensuring employees’ wages are taxed properly, it is very important to ensure that your STP Phase 2 reporting is accurate and correct.
This excerpt is taken from the ATO website via this link.
Have you taken on new employees? Did you know they can complete a TFN declaration through ATO online services?
This is an easy way for them to provide both you and us with the information we need. If your new employee has a myGov account linked to the ATO, they can:
access ATO online services
go to the ‘Employment’ menu
select ‘New employment’ and complete the form.
This sends the TFN declaration details straight to us so you don’t have to. Your employee will need your ABN to complete the form. Once they’ve submitted the form, they need to print it and give you the summary of their tax details so you can input the data into your system.
You may be able to link your payroll software to the online commencement forms. But check first with your software provider if they offer this service.
You can also use the New employment form to collect a range of information. Despite its name, you can also use this form instead of the:
Withholding declaration form
Medicare levy variation declaration form
Superannuation standard choice form.
Your employees can use the New employment form to update their tax circumstances with you, for example, if:
their residency status has changed
they no longer have a government study and training loan
they are claiming the tax-free threshold from a different employer.
You can continue to use your current processes, including providing a paper TFN declaration where employees can’t create a myGov account or don’t have access to the internet.
STP Phase 2 is in full swing. It began on 1st January 2022 but various accounting software have not been ready until recently. This means many employers are only just now learning about, and setting up their payroll systems, to comply with STP 2 requirements.
Unfortunately, as it is still relatively new, some employers are making errors when reporting via STP Phase 2. Recently, the ATO published a list of those mistakes it is seeing. I am highlighting them here so you can be sure to avoid them when you start to report via STP Phase 2.
Common STP Phase 2 Mistakes List
Breaking the continuity of year-to-date amounts from STP 1 reporting. Unless you are using the replacing IDs methodfor transitioning to STP 2, you need to ensure that you maintain the STP 1 data that you have already reported. Your accounting solution will help you manage this and you should contact your provider if you require assistance with this issue.
Selecting “not reportable to the ATO” when setting up pay codes/categories. Most payments to employees need to be reported except for:
1. Travel allowance below the ATO’s reasonable amounts
2. Overtime meal allowance below the ATO’s reasonable amount
3. Reimbursements
4. Post-tax deductions except for those you need to separately identify.
Omitting a cessation date and reason. When an employee leaves your business, you need to report the date he finished and the reason why he left. Your accounting solution will include these fields to complete upon termination. The ATO will share this information with Services Australia which means you will no longer need to complete a separation certificate for that employee.
Some income types you report for employees will also include a special country code. If you are required to report a country code, you must report the code relevant to that employee. Some employers are incorrectly reporting a “NA” country code, thinking that it means “not applicable”. It actually means “Namibia”. So if you use NA in your reporting, you are telling the ATO that your employee is either working:
1. Overseas in Namibia or,
2. Is in Australia and they are from Namibia.
Allowances. All allowances must be reported separately using one of 8 specific allowance categories. You must not simply report an allowance to the “Other Allowance” category (allowance type OD). You must report allowances using their appropriate category because each category is treated differently for tax, super and social security purposes. Only report an amount as Allowance type OD if it’s an allowance that does not belong in one of the 8 specific allowance categories.
Treating reportable super contributions (RESC) and salary sacrifice as the same thing. These are 2 different things and need to be reported correctly. Check out this ATO video which explains how to report these payments via STP 2.
Here is the link to the ATO webpage which provides more in-depth information about the STP 2 reporting mistakes listed above, including several helpful videos.
There is a lot of information available to you if you just want to understand what a Taxable Payments Annual Report (TPAR) is and why you may need to lodge one. In short, if your business is primarily in one of the below industries and has made payments to contractors in the previous financial year, then a TPAR will need to be prepared and lodged.
So, as I said, there is a lot of information you can Google about TPAR in general, but not a whole lot about how to prepare the report from a bookkeeping point of view. Some software will have you believe that you just select a few boxes here and there and then submit the report to the ATO. Voila! Done. Easy. Well, it is easy if you didn’t actually pay contractors in a given year, but if you did, there are a few steps you need to take to ensure your report is true and correct. In this blog, I will share my process for preparing the TPAR for my clients. I hope this helps you if you are feeling a bit lost as to the “how” behind the “what”!
How to prepare your TPAR in 6 easy steps
1. Make a list of contractors
Before you can prepare the TPAR, especially if this is the first time you have done this, you should make a list of all of the contractors you have paid during the financial year. Now move on to step 2.
2. Check contractor Details
The TPAR requires that you report various personal details about your contractors including the full name of the contact person, business name, business address, email address, phone number and the ABN. Before you begin preparing the TPAR, go through your contractor list and make sure these details have been added to their contact cards.
3. Ensure contractors are selected to be part of the TPAR
In your software, each contact card will have a checkbox to select if the contractor needs to be reported on the TPAR. Go through each contractor’s contact card and ensure this is selected if required.
4. Print out the TPAR and check the details
Find the TPAR in your software. At this point, it is only a draft report. Print it out and review each transaction – check that all transactions should be included. Remember, only invoices for labour and materials or just labour, need to be included. Invoices for materials-only do not need to be included. Materials-only invoices will need to be manually removed but clicking into the transaction and deselecting the checkbox for TPAR. If you have made any changes to the draft TPAR, then print out the updated version and move on to step 4!
5. Ensure the TPAR agrees with your profit and loss data
This is where some bookkeeping comes in! Not everyone knows that you need to make sure the total amount quoted in the TPAR agrees with the data reported on your profit and loss. This is called reconciliation. If you don’t do this step, your TPAR may be incorrect, so it’s pretty important! The TPAR only includes payments you made to contractors within a financial year – unpaid invoices are not included. Therefore, in order to perform this reconciliation, you need to print out the profit and loss in cash mode. Now, depending on how many transactions there are, you can either compare the two reports by eye or if you need to, you can export the profit and loss data to a spreadsheet to help you compare the calculations. Note, that the profit and loss data required will be where you recorded your contractor payments. This may be an expense account or a cost of sales account, depending on how your chart of accounts is set up.
Now, you need to ensure that the total amount showing in your TPAR, less the GST, agrees with the profit and loss data. If your initial setup was correct, these two reports should agree. If they don’t, there may be a couple of reasons why. Here are some things to check:
1) Make sure that all contractor transactions in the TPAR also appear in the P&L and vice versa. This may involve checking that those particular transactions have the TPAR checkbox selected or that you have a contractor’s contact card selected for TPAR. 2) If you have included some materials-only transactions in either the P&L data or TPAR, you must remove them. 3) You may also find that some transactions have been coded to other expense accounts and are therefore not included in the P&L data you initially exported or printed. Find those transactions and add them to your exported data.
When you are satisfied that the two reports agree, then print out a final TPAR and save it as a PDF for your records.
6. Lodge the TPAR
Depending on the software you are using, you may be able to lodge the TPAR within the software itself. If not, you will have to download a TPAR file and lodge it with the ATO using Online Services and/or your myGov account. Find more details here about how to lodge via ATO Online Services. Keep a record of the lodgement receipt you will receive from the ATO with your TPAR from your software.
Remember, if you do not have any contractor payments to report, you need to report a Non Lodgement Advice form. See my blog here for more information.
So that’s all there is to it, but as you can see, lodging the TPAR does require some background work. You can’t just click a button and lodge it because you need to ensure the figures and the data are correct. I hope this blog has helped you in the run-up to the TPAR lodgement due date which is August 28th each year. If you need help preparing your TPAR, please don’t hesitate to get in touch with me and I’ll see if I can assist you.
