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How to process and report voluntary withholding

AmandaArdern

We have a contractor that has a 20% voluntary withholding agreement. At the moment I have been processing his bills like this:

Contractor (Expense) $1000.00
Voluntary Witholding Payable (Liability) -$200.00
Total Bill Payable to him $800.00

Then at the end of the period I have been manually adding the amounts to their respective W1 and W2 figures for lodgement with the ATO.

Obviously with the STP coming in I am not going to be able to do it that way. How do I process it so that the information is lodged with the ATO with STP?

Thanks
Mandy

Comments

Charley

Set him up as an employee

Payroll item = contractor > point to :Contractor Expense"

PAYG 20%

AmandaArdern

I was thinking of doing it that way but doesn't the Voluntary Withholding Tax need a separate code?and he also needs a Business and Personal Services Income Payment Summary at the end of the year instead of an Individual Non Business Payment Summary.

I don't know how to setup another type of federal tax and I don't know if I can do the Business and Personal Services Income Payment Summary from Reckon.

Thanks
Mandy

Kwikbooks (Professional Partner)

Hi Amanda

I presume you are in the building industry and you mean the subcontractor needs a TPAR at the end of the year.

Create an new tax item & code VWH @ -20% (voluntary Withholding) create new tax liability account in chart of accounts VWH or similar and track the VWH tax code to this account.

Enter the supplier bill as usual and use the VWH tax code instead of the NCG, when you set up this supplier tick the Taxable payments report box on the card. This can be turned on in preferences under tax.

THIS WILL ONLY WORK IF THEY DON'T HAVE GST AS WELL.

If they have gst then you could set up an 'item discount' called VWH and link it to the tax liability account set up for VWH and make the discount item 20%.

email me if you need help Kim@kwikbooks.com.au

PS this will go at W3 on the BAS, not W2

Adriana Van Rooyen

how does the business and personal services income payment information get transmitted via STP?

Acctd4

Hi Adriana

Currently, STP reporting of payments to Contractors under a Voluntary Withholding Arrangement is optional:

https://www.ato.gov.au/Business/Single-Touch-Payroll/In-detail/Single-Touch-Payroll-employer-reporting-guidelines/?page=5

All payees must have either a tax file number (TFN) or Australian business number (ABN) reported.
Where you report a payment and withholding to a contractor under a voluntary agreement, you must provide the contractor’s ABN. The contractor’s TFN is not required. The reporting of these payments through STP is voluntary.
Where a TFN has not been provided you must use the TFN exemption codes.
A payee may be a contractor and employee with the same payroll ID within the same financial year. If so, the TFN and ABN must be reported if payments are made under both a voluntary agreement and any other gross payment.

If the worker is deemed an “employee” (eg under a Voluntary Withholding Arrangement) as above, they will not be considered part of the TPAR scheme & it’s important not to double-up here as it will look like the worker is earning twice as much as has been reported/declared!

Therefore, I agree with Charley – For simplicity, set him up as an employee with the “Tax %” field set to 20%.

However, as the ATO requires the ABN as compulsory, you won’t be able to submit via STP anyway as there’s no field for this in Employees & the TFN field will only accept a valid 9-digit TFN.

You will need to setup a new Payroll Item that is not mapped to STP to prevent it automatically going through as such. To ensure it does not map to STP, you just need to select None in the dropdown on the Tax Tracking Type (instead of the other Payment Summary labels) during the new Payroll Item setup.

Unfortunately, RA has never been able to generate the “Business & Personal Services Income” Payment Summaries (it’s something I’ve been wanting too!) so – unless this gets updated in RA in the meantime - you will need to write out & submit a manual (paper) copy of this Payment Summary at EOFY.

Shaz Hughes Dip(Fin) ACQ NSW, MICB

Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015)

Accounted 4 Bookkeeping Services

Ballajura, WA

0422 886 003

shazinoz2@bigpond.com

www.accounted4bs.com

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