When should you apply the 2017 Tax Table Upgrade (2017 R2)

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Hi all,

We understand that there are some confusions about the latest compliance changes and how it affects users using Reckon Accounts (Desktop and Hosted). There are many people who are asking this same question:

When and why should I apply the 2017 Tax Table Upgrade (that will convert my 2017 R1 installation to 2017 R2)?

We thought we'll collate all the information and steps to make it easy for you to understand and use it in Reckon Accounts. 

In short, you must upgrade before for first pay run of the financial year to use the latest PAYG tax rates, HELP rates, Payroll Tax rates and adjusted thresholds. 

2017 R2 will produce acceptable Payment Summaries and Empdupe file for 2016/17.

You must produce Payroll Summaries and Empdupe file in 2017 R2 for financial year 2016/17 if you have:
  1. Employees who are Working Holidays Maker visa
  2. Employees who have to report Fridge Benefits (Tax Exempt)


The 2017 Tax Table Upgrade contains:
  1. PAYG Tax Tables for 2017/18 financial year
  2. Simpler BAS
  3. Working Holiday Maker option
  4. Reportable Fringe Benefits (Tax Exempt) Tax Tracking Type
  5. Victorian State Payroll Tax Threshold increase to $625,000
  6. Payment Summary Format v5.3.0
  7. EMPDUPE Format v12.0.1
  8. Fix for Webmail issue in RA 2017 R1

1. PAYG Tax Tables for 2017/18 financial year:

Although the Federal Budget had no overall major PAYG changes, HELP and SFSS areindexed to CPI and so their thresholds have been adjusted. As a result, new PAYG tax tablesapply to Reckon Accounts. 

More Info: https://www.ato.gov.au/Rates/Tax-tables/ 


2. Simpler BAS reporting:

As per ATO's website:
From 1 July 2017, Simpler BAS is the default reporting method for small businesses with a GST turnover of less than $10 million. They have less GST information to report on their BAS.

Small businesses only need to report:
  • G1 Total sales
  • 1A GST on sales
  • 1B GST on purchases
The following GST information is no longer required:
  • G2 Export sales
  • G3 GST-free sales
  • G10 Capital purchases
  • G11 Non-capital purchases
More Info: https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/Goods-and-services-tax-(GST)/Simp....


How it works in RA:

Simpler BAS option can be found under BAS form > Config > GST Configuration




NOTE: Simpler BAS will be enabled by default after applying the 2017 Tax Table Update. 



3. Working Holiday Maker:

The confusion starts here. ATO made a big change on how the tax works for Working Holiday makers. The changes were:
From 1 January 2017 visitors on working holiday visas will be subject to the following PAYGW scales for annual incomes of:
  • 15% (“backpacker tax”) for gross income between $1 – $37,000
  • 32.5% (normal Non-Resident tax) for gross income of $37,001 +
Non-Residents who do not possess a “working holiday visa” are subject to the Non-Resident tax rate for all income.

Please note that these levels are subject to change and users should consult with their Accountants on prevailing definitions of non-resident, working holiday visa, rates and thresholds. 


How it works in RA:

Reckon Accounts does not have a specialised backpacker tax code.

For employees who have already worked for you from 1/7/16 to 31/12/2016, the ATO requires you to terminate them under this employee record and create a new employee record for use from 1/1/2017. You will issue this employee with 2 Payment Summaries for the financial year 2016/17. 

In Reckon Accounts, you can't produce 2 PAYG Summaries per employees. To overcome this, you will have to create a new employee with a slightly different name (add a full stop "." in the middle name for example) since RA uses the "Name" field as the primary identifier.

The tax rates are to be added manually into the Employee's card and have to be changed manually when the employee has crossed the $37, 001 threshold.


Workaround

Tax settings are configured in the Employee Record: 
  1. Employee Centre > right click Employee > Edit employee
  2. Change tabs to Payroll and Compensation Info
  3. Taxes button

Where employee is earning a total of less than $37,000 per annum:
  1. For the Tax field, select 8-No TaxC
  2. In the Tax% field, enter 15%
  3. Click OK

When a worker earns more than $37,000 in the financial year, the tax on additional income will increase to – 32.5%. You will need to manually monitor the total financial year to date you have paid the employee and when this level is reached, change the Tax% field to 32.5%. 


To terminate an employee under the current employee record:
  1. Complete the last pay for calendar 2016;
  2. In the Employee Centre, right click the employee and select Terminate Employee
  3. Termination Type: Involuntary
  4. Termination Reason: Other
  5. Last Day worked: 31/12/2016
  6. Release Date: 31/12/2016
  7. Click Next
For Additional Details:
  1. Recommend Re-hire: Yes
  2. Redundancy Paid: No
  3. Redundancy Description: Leave blank
  4. Notes: Legislative requirement - re-categorisation of foreign visitors on working holiday visas (“backpackers tax”)
  5. Click Next
  6. For Confirmation: click Finish.
  7. If you have more backpacker employees, click on Terminate another employee and repeat these steps. Otherwise, click on Close.
  8. In the Employee list, right click the old entry and select Make Employee Inactive 
Create a new employee record for this employee
  1. In the Employee Centre, click on New Employee button
  2. Select No to “Would you like assistance adding this employee to Reckon Accounts”
  3. Enter the Name slightly differently – eg If the original Name was Theis B Larsen enter it as – Theis B Larsen, or Theis B. Larsen
  4. Re-enter other details.

If you have employees who are on Working Holidays Maker visa, you will have to apply the 2017 Tax Table Upgrade (2017 R2) to be able to produce correct PAYG Summaries and Empdupe file. Please ensure you don't process any pays from 2016/17 financial year in 2017 R2. If you don't have this type of Employees, you don't have to apply the 2017 Tax Table Upgrade to produce PAYG Summaries. You can even use RA 2016 R2 to produce PAYG Summaries and lodge Empdupe.
To show this employee correctly on PAYG Summaries and Empdupe, these enhancements are available in 2017 R2:

A new ‘Working Holiday Maker’ option within the Employee Taxes Window





The Working Holiday Maker column can be added to the Employee Contact report to show which employees have been selected as Working Holiday Makers




There is a new Gross Payments Type field on the Payment Summary (and within the EMPDUPEFormat).This field will display H for Working Holiday Makers and S for all other Employees. 





4. Reportable Fringe Benefits (Tax Exempt) Tax Tracking Type 

Some Employers are exempt from paying Fringe Benefits Tax (e.g. Hospitals, Ambulance Services), thisis now reportable on the Payment Summaries. To allow users to enter this we have added a new TaxTracking Type. 





There is a new field on the Payment Summary (and EMPDUPE) – is the Employer exempt from FBTunder Section 57A of the FBTAA 1986, the new Reportable Fringe Benefits (Tax Exempt) tax trackingtype will select the Yes field, the Reportable Fringe Benefits tax tracking will select the No field. 



If you have Employees are exempt from paying Fringe Benefits Tax, you will have to upgrade to 2017 R2 to be able to produce correct PAYG Summaries and Empdupe file. Please ensure you don't process any pays from 2016/17 financial year in 2017 R2. If you don't have this type of Employees, you don't have to upgrade to 2017 R2 to produce PAYG Summaries. You can even use RA 2016 R2 to produce PAYG Summaries and lodge Empdupe.


5. Victorian State Payroll Tax Threshold increase to $625,000 

The Victorian Payroll Tax Threshold has increased to $625,000


6. Payment Summary Format v5.3.0 

As per above screenshot, the new updates of WHM and Fringe Benefits sections are part of the new format of PAYG Summary.


7. EMPDUPE Format v12.0.1 

As per above screenshot, the new updates of WHM and Fringe Benefits sections are included the new format of the exported Empdupe file that you need to lodge to ATO.


8. Fix for Webmail issue in RA 2017 R1

The upgrade includes a fix for an issue when emailing a batch of Pay slips to Employees usingWebmail. 
KB: http://kb.reckon.com.au/issue_view.asp?ID=5540



Resources:
http://downloads.reckon.com.au/Install_and_Upgrade_Guide_for_Reckon_Accounts_Desktop_2017_Tax_Update....
http://downloads.reckon.com.au/RAH2017_R2Upgrade_Guide.pdf
https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/Goods-and-services-tax-(GST)/Simp....
https://www.ato.gov.au/Rates/Tax-tables/ 
https://community.reckon.com/reckon/topics/reckon-accounts-2017-tax-update-avdudahkwt62h
http://kb.reckon.com.au/issue_view.asp?ID=5540
http://kb.reckon.com.au/issue_view.asp?ID=5510


We hope the above will help you clear any confusions. Thanks to Accredited Partner John Peppas for his contribution to this article. 

We really hope that this will help you with your EOFY processes. 


Thanks & Regards,
John
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John G, Information Support Analyst

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Posted 1 year ago

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