New legislation means small businesses need to get their houses in order: BDO

Thursday 13 April, 2017 | By: Darrell Giles | Tags: single touch payroll, joint employer, franchisors, tax office

The unfortunate news of George Calombaris’ restaurants underpaying staff $2.6 million is a timely reminder for business to improve systems and processes especially in light of impending introduction of Single Touch Payroll (STPR) legislation that comes into force next year.

There is also proposed “joint employer” legislation targeted at franchisors and group employers that will make them liable for payments (as well as  mispayments) of their franchisee or group operations, said Jason Daniels, partner at leading accounting and professional services firm, BDO.

The Masterchef judge blamed an accounting error and promised to pay back the 162 staff immediately.

“Calombaris has done an excellent job of being proactive in undertaking their own review as soon as they became aware of the issue.  He has been proactive in managing this issue with both his staff and the public,” Mr Daniels said.

“Many businesses in similar situations have had their brands and reputations tarnished after payroll issues have been exposed through ATO or Fair Work investigations and leaked by staff to the press.  Undertaking their own review and then owning the solution with their staff and the public is very positive.”

From 1 July 2018, businesses that employ more than 20 people will be required to comply with the Australian Government’s Single Touch Payroll Reporting (STPR) requirements, which is being championed by the Australian Taxation Office (ATO).

The change means the Australian Government will be collecting payroll data in real time and it will be shared by all relevant Australian Government Agencies.  As an employee receives a pay slip, that information, including tax and superannuation payments, will also be electronically transmitted to the government at the same time.

Mr Daniels explains why the changes to payroll reporting are so important and why business needs to take notice now before legislation comes into force:

“The move to STPR sets a new standard for payroll reporting in Australia,” he said.

“Most businesses will be used sending PAYGW Summaries to the ATO and staff at year end, but now the ATO will have access to real-time transactional data.

“This then means their compliance activities will be completed in real time, which we think will begin to change the way they engage with taxpayers when issues do arise.

“For example, that data can then be cross referenced to a staff member’s superannuation fund for example to make sure that payments are being made correctly.

“The proposed ‘joint employer’ legislation that relates directly to franchisors and group employers that hasn’t had much airtime means that the Bill will introduce new provisions to hold franchisors and holding companies responsible for contraventions of the Fair Work Act, if they knew or could reasonably have been expected to have known the contraventions would occur in their business networks and failed to take reasonable steps to manage the risk.

“Under the framework outlined above, I don’t think this latest Calombaris case will be the last.  Businesses (including franchisor networks) need to get their houses in order quickly and seek some professional advice so that they are not falling below the line and exposing themselves to significant financial risk in light of this new and proposed legislation around paying employees.”

 

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