Navigating the evolving landscape of employment taxes

insight featured image
The employment taxes landscape in Australia is constantly evolving. There has been increased focus from the Australian Taxation Office (ATO) and State Revenue Offices (SRO), leading to a rise in employment tax compliance audits.

Over the past two years the SRO has been more active in this space, especially in Victoria, New South Wales and Queensland. The rise in the SRO’s data matching efforts has led to an increased amount of employment tax compliance audits, addressing issues like incorrect grouping and underreporting of wage components. In the lead up to Christmas, we also saw the ATO ramp up their efforts to ensure governance around employers meeting their employment tax obligations.

Over the past few months the ATO has increased their activity on their Random Enquiry Program (REP), and SRO Victoria released an alert encouraging employers to voluntarily report any underpayment of wages.

Additionally, we have seen reporting from Fair Work Australia on the underpayment of wages (i.e., Wage Theft). This can simply be triggered by the misinterpretation of the Enterprise Agreements and Awards or a payroll processing error due to system inefficiencies. A simple error can lead to a large amount of back payments having to be made and reputational damage. Unpaid wages also mean extra employment tax obligations, which is an additional cost.

ATO Random Enquiry Program

The purpose of the REP is to audit the entire employment tax obligations of a business for a set review period – typically a single financial year. There has been focus on Pay-As-You-Go (PAYG) withholding, Superannuation Guarantee and Fringe Benefits Tax (FBT) obligations. Businesses who are audited are typically selected by the ATO on a random basis, regardless of size or turnover.

The ATO will typically request several documents to substantiate that a business is meeting their employment tax obligations. As such, this is a timely reminder for businesses to ensure their records are accurate, and that they are confident PAYG withholding, Superannuation Guarantee and FBT obligations were met during a particular financial year.

Monday, February 26, 2024
12:00 PM - 1:00 PM (AEDT)
Employment solutions: Fringe Benefits Tax
Hear the latest insights into Fringe Benefits Tax (FBT), shedding light on the most recent updates, noteworthy developments, crucial issues, potential pitfalls, and practical tips.

Victorian Payroll Tax Audit increased focus

The Victorian State Revenue Office has recently announced an increased focus on payroll tax audits for businesses who may have under disclosed wage payments in applicable payroll tax returns. The State Revenue Office is therefore actively encouraging self-reviews by businesses, for them to self-disclose any potential underpayments by way of a Voluntary Disclosure. Submission of Voluntary Disclosures to notify the State Revenue Office of wage under disclosures prior to a payroll tax audit being enacted can result in reduced penalty interest and tax rates being applied.

The significance for your business

  • By voluntarily disclosing any underpayments with both the SRO and ATO, there is a possibility of requesting reduced penalties and interest for non-compliance.
  • For Significant Global Entities, where a company fails to lodge the required obligations, the penalty can be as high as AUD$782,500 (not including other added interest and penalty costs that will apply).
  • Director penalties may apply where a company director may become personally liable for the company’s unpaid amount of PAYG withholding and Superannuation. The ATO will issue a Director Penalty Notice to recover these unpaid amounts.
  • Reputational risk to the organisation.

When looking at tax governance, it’s important to include employment taxes as part of this process. Businesses can start off with an employment tax health check to help identify any compliance errors or process improvements. This will help with making any voluntary disclosures if there are errors and omissions and identify process improvements from a go forward basis.

We’re here to help

Should you wish to discuss any of the above further, please reach out to any of our Employment Solutions Team.  

Learn more about how our Employment tax services can help you
Learn more about how our Employment tax services can help you
Visit our Employment tax page

Subscribe to receive our publications

Subscribe now to be kept up-to-date with timely and relevant insights, unique to the nature of your business, your areas of interest and the industry in which you operate.