PAYG W1 Income & ATO Prefilled amounts do not match

I'm preparing our July IAS and have come across a difference with the amount prefilled in W1 on the ATO portal and the amount I calculate from my figures in RA. The difference is identical to the Fares and Travel allowance amount paid to our employees.

Up to now I have been using the Withholding for Allowances information from the ATO, which states that for "Award transport payments that are deductible transport expenses - these should not be included in gross payment and not included in PAYGW for gross income type".

With STP2, I mapped the allowance to "Transport - Payments for the cost of transport for business related travel not traceable to a historical award in force on 29 October 1986. Which is Other allowances (OD with the description T1)."

In my payroll item setup, it all appears correct. There is no PAYG ticked. When I lodge my STP reporting file all the figures seem correct. As before the implementation of STP2, the F&T amount was included in the total STP figure, but then separated as an allowance in the details area of the portal.

So now I'm not sure if what I have been doing in the past should continue, and I need to change the ATO pre-filled figure at W1 every time I lodge a IAS or BAS; or things have changed and I should include the F&T allowance in W1. There doesn't appear to be any updated Withholding for Allowances information on the ATO website.

Can anyone confirm what is correct? Thanks

Comments

Acctd4

Hi @JudyA

There's 2 points to be aware of here 😊

That ATO "Withholding for Allowances" info that you've quoted doesn't appear to be updated for STP2 as - with the exception of Allowance - Travel Time - ordinary working hours - none of the Travel/Transport allowances are just linked to Gross Payments anymore 😬

With so many new disaggregation categories for STP2, it's important to identify the exact purpose of an Allowance in order to assure it's reported correctly as if it's included in an employee's overall gross income, the employee is likely going to be taxed on it when they do their tax return so if you've not been taxing it, this could result in a tax bill for them at EOFY.

Have a look at the detailed STP2 mapping spreadsheet here which also lists what Tax Category Type each one should be linked to in Reckon Accounts/Hosted:

ATO STP2 Pymt Types List w-Reckon Mapping Tax Tracking List.xlsx

The automatic prefill is very new! Therefore, in some cases, it can be incomplete &/or inaccurate so the ATO (& Reckon) are recommended you go by your source data (within your payroll software itself) & if necessary, edit W1 &/or W2 to correctly match this

JudyA

Thanks very much for taking the time to reply Shaz.

I think my issue is that I may have chosen the wrong mapping code. Pretty much it boils down to item 45 or 46 in your spreadsheet. I have gone with 46, because our award (the Building and Construction General On-site Award 2020) only goes back to 2009. Thus, I didn’t think the allowance fitted into category 45, which needs to link back to an award in place in 1986! That’s if I’m reading it correctly.

If I do pick item 45, then perhaps the ATO will treat it differently and not include it in the gross, but I don’t want to change it if it’s not correct.

As for whether it should be taxed or not, I believe I’ve set up this allowance correctly based on the ATO’s information in the Withholding for Allowances Tables 3a & b. It is an award transport payment that is a deductible transport expense. And so, the ATO says that is should not have tax withheld, and it should not be included in gross payments but should be shown on the old payment summary as a separate allowance. It was my understanding STP 1 & 2 didn’t change how payroll items are taxed, just how they are reported.

And because it is an award transport payment, I think maybe I should be mapping it to Award Transport Payments, not Other Allowances (OD-T1). Are you able to shed any light on the meaning behind the 1986 reference from the ATO?

Kris_Williams

I discovered today that because one weekly STP in July hadn’t been submitted, and despite the next week being submitted successfully, the prefill on ATO differed by that amount, and so I just changed it

Acctd4

Hi @JudyA

Yes, I agree - If it relates to the Award Transport Allowance then it should be mapped to that specific one. This Allowance is a specific daily amount that has its own additional employee deduction claim method option (in addition to the log book & cents p/km methods)

HOWEVER, I always tax ALL assessable allowances, regardless of the ATO specifications for some not requiring this. The ATO's reasoning is that employees can claim a deduction against some allowances, thereby offsetting the tax payable on it. BUT - as a senior tax consultant for the last 20 yrs - employers don't actually know what employees can legally claim or not & too often, employees end up with a tax bill because of this.

eg A plumber employee receives a untaxed travel allowance of $ $50 p/day which has been paid for every pay during the FY, amounting to $ 13,000 ($ 50 p/day x 5 days x 52 wks). Employee goes on holiday during the FY, taking 8 weeks off & also takes 3 weeks sick leave. In the absence of a log book, their allowable claim will only be the kms - that they have actually travelled - between job sites/during the course of their work day. Travel between home & their main employment location (eg office) is NOT deductible & there will be no kms to claim during any weeks they weren't working. If their allowable travelled kms amount to 100km p/wk, at 0.85c p/km (the new ATO rate for the current FY) for 39 wks (52 wks less 2 wks public holidays less the 11 wks they took off), they will only be claiming $ 3,315 leaving an untaxed shortfall of $ 9,685! That employee is going to get a nasty shock at tax time 😖

JudyA

Thanks again Shaz.

A Google search has revealed that the award was around in 1986, so I'm going to change the mapping on this allowance to the award transport allowance and do an update event for the pays since the start of this FY.

It will be interesting to see when I complete the August IAS if the ATO prefilled amount in W1 matches what I have.

I've spoken to my accountant again regarding the taxing of the allowance and we have decided to continue to follow the ATO's guidance and keep everything the same. I have never had any of our employees tell me they have had a tax bill because of this. I also treat the F&T paid on RDO's differently - it is taxed; and our guys don't received F&T on any other sort of leave.

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