RECENT GST amendments have stung employees on salary packages, according to CPA Australia.
RECENT GST amendments have stung employees on salary packages, according to CPA Australia.
People whose salary package includes such things as car running costs are likely to lose at least $300-$400 a year because the high cost of administering all the paperwork will outweigh the potential tax benefit.
“Many employers who filled out their first BAS on November 11 had no idea their employees should have been collecting tax invoices when they purchased petrol since July 1,” said CPA Australia tax spokesperson Paul Hockridge.
“While in the old tax system a photocopy of a credit card statement was all that was needed, most credit card statements are not sufficient under the current ruling – a tax invoice is needed.”
Mr Hockridge said that in the case of petrol, for instance, the salary packager needs to collect a tax invoice for each tank of petrol for the employer to claim an input tax credit and reimburse their employee. Also, the tax invoice may be a separate document to the cash receipt, so the purchaser may need to specifically request a tax invoice from the service station.
“Salary packaging will still be worth continuing, but this unnecessary red tape will cause either the potential loss of hundreds of dollars for salary packagers, or an administrative headache for employers if they choose to take on the burden for the sake of their employees.”
In an attempt to alleviate the problem, the ATO issued a recent ruling that allows the use of a corporate credit card statement instead of a tax invoice.
However, Mr Hockridge says this is not the solution.
“Widespread issuing of corporate cards is unfeasible and it can be risky for employers,” he said. “Instead, CPA Australia has called on the ATO to make a simple ruling that would extend the eligibility to cover all credit card statements.”
Mr Hockridge says the problem is exacerbated by recent amendments to Division 111 of the GST Act, which compels employers to pay more Fringe Benefits Tax (FBT) on benefits provided to employees.
“To claim a GST input tax credit to help offset the FBT, employers will need to collect and process a myriad of tax invoices, often to claim input tax credits of only $2 or $3 a time. The so called $50 rule, under which tax invoices are not required, is of no practical help because employers still need something of substance to rely on when completing their Business Activity Statements.
“The result of the recent amendments is that employers will have to pay more FBT but they will only get the offsetting input tax credits if they spend more than the credits are worth collecting lots of silly pieces of paper.
“This would have added considerably to the time required to complete the Business Activity Statements on November 11”
People whose salary package includes such things as car running costs are likely to lose at least $300-$400 a year because the high cost of administering all the paperwork will outweigh the potential tax benefit.
“Many employers who filled out their first BAS on November 11 had no idea their employees should have been collecting tax invoices when they purchased petrol since July 1,” said CPA Australia tax spokesperson Paul Hockridge.
“While in the old tax system a photocopy of a credit card statement was all that was needed, most credit card statements are not sufficient under the current ruling – a tax invoice is needed.”
Mr Hockridge said that in the case of petrol, for instance, the salary packager needs to collect a tax invoice for each tank of petrol for the employer to claim an input tax credit and reimburse their employee. Also, the tax invoice may be a separate document to the cash receipt, so the purchaser may need to specifically request a tax invoice from the service station.
“Salary packaging will still be worth continuing, but this unnecessary red tape will cause either the potential loss of hundreds of dollars for salary packagers, or an administrative headache for employers if they choose to take on the burden for the sake of their employees.”
In an attempt to alleviate the problem, the ATO issued a recent ruling that allows the use of a corporate credit card statement instead of a tax invoice.
However, Mr Hockridge says this is not the solution.
“Widespread issuing of corporate cards is unfeasible and it can be risky for employers,” he said. “Instead, CPA Australia has called on the ATO to make a simple ruling that would extend the eligibility to cover all credit card statements.”
Mr Hockridge says the problem is exacerbated by recent amendments to Division 111 of the GST Act, which compels employers to pay more Fringe Benefits Tax (FBT) on benefits provided to employees.
“To claim a GST input tax credit to help offset the FBT, employers will need to collect and process a myriad of tax invoices, often to claim input tax credits of only $2 or $3 a time. The so called $50 rule, under which tax invoices are not required, is of no practical help because employers still need something of substance to rely on when completing their Business Activity Statements.
“The result of the recent amendments is that employers will have to pay more FBT but they will only get the offsetting input tax credits if they spend more than the credits are worth collecting lots of silly pieces of paper.
“This would have added considerably to the time required to complete the Business Activity Statements on November 11”
