What’s the Difference Between PAYGI and PAYGW?

Many people new to running a business and employing people are unsure about the difference between PAYGI and PAYGW. They are not the same thing!

PAYG stands for ‘pay as you go’. This is the means the ATO uses to obtain tax payments from both employees and business owners. Paying tax ‘as you go’ throughout the year means you don’t have to pay it all in one lump sum at the end of the tax year.

PAYG Withholding for Employees Income Tax

PAYG withholding refers to the income tax an employer withholds from employees’ gross wages to meet their personal income tax liabilities. Employers are required to remit the employees’ withheld tax to the ATO each month or quarter, with the business activity statement (BAS) or the monthly instalment activity statement (IAS).

PAYG withholding applies to payments employers make to employees, directors, office holders and labour-hire workers. PAYG can also be withheld from non-employees: contractors with a voluntary withholding agreement, some payments to foreign residents and payments to suppliers where an ABN has not been quoted.

PAYG Instalments for Business Income Tax

If you run your own business, you’ll need to plan for income tax payments once you make more than the taxable threshold. PAYG instalments allow you to pay an amount towards an expected tax bill. Amounts are based on business or investment income from the previous tax year. Once you complete your tax return, the amounts already paid are offset against the total amount of tax due. You will then receive either a bill for extra tax or if you have paid too much, you will receive a refund.

Usually, when you start in business, you don’t pay any tax instalments until you have completed the first year’s tax return. However, if you’re new to business, you can voluntarily enter into the PAYG instalment system to start contributing towards your next tax bill. This is worth considering if you have done better than expected in your first year!

You can pay PAYG instalments by using the ATO determined amount based on information in the last tax return (instalment amount) or using the ATO defined percentage rate applied to your income (instalment rate). The first method is the simplest; however, if your income varies a lot from one quarter to another, it may be better to use the instalment rate so you know you have put aside the correct amount based on your actual income.

PAYG Planning for Cash Flow

If you’re new to business or considering employing people soon, you’ll need to plan for PAYG instalments and possibly PAYG withholding so you can meet your ATO tax reporting and paying obligations. Planning ahead means you’ll never be caught short with cash flow difficulties.

Talk to us to learn more about income tax responsibilities as an employer and business owner.


Single Touch Payroll Phase 2 Starts in 2022

All employers have to report payments made to employees and closely held payees to the ATO using Single Touch Payroll reporting from July 2021.

Single Touch Payroll (STP) Phase 2 was initially planned for 1 July 2021 to align with the mandatory reporting for all employers, but it has been postponed to 1 January 2022. The ATO will allow employers until 31 March 2022 to start reporting if they don’t have an STP reporting solution in place yet. Some payroll software providers already have deferrals in place to allow a longer time for the transition to Phase 2 reporting.

The planned STP expansion has been extended because of COVID-19 impacts on business and accounting and payroll software providers.

STP Phase 2 will require additional information to be reported with each STP pay event.

Accounting and payroll software products will be upgraded to include broader reporting parameters and categories in line with the ATO requirements for Phase 2.

The Phase 2 expansion will allow employers to report information to multiple government agencies in the STP report. Standardised categorisation of income components will make it easier for employees to interact with Services Australia.

The changes will also include detailed income types, lump-sum payments, itemised allowances, child support and the ability to lodge tax file number declarations from within STP reporting. Employment separation certificates upon the termination of employment will no longer be needed, as Phase 2 reporting will include the reason an employee ceased employment.

If you’d like to review your payroll software and systems before STP Phase 2 starts, talk to us today.

Otherwise, there is nothing you need to change right now – we’ll keep you updated when the implementation is closer.


How are cryptocurrency transactions taxed in Australia?

TL;DR

  • Tax treatment can have a large impact on your investment returns.
  • Keep accurate records – exchanges used, wallet addresses, transaction type.
  • Tracking your portfolio closely is a good idea.
  • Either ordinary income tax (traders) or capital gains tax (investors) will apply to your crypto, unless they are “personal use assets”.
  • Most likely you are into crypto to make gains, so personal use is unlikely (unless you are using DOGE to buy Telsa merchandise).
  • Be aware the ATO has a data matching program in relation to crypto.
  • Keep up to date and get in touch if you have any questions or need help tracking your portfolio.

In Detail

Whether you are currently involved in cryptocurrency investment, or considering buying cryptocurrency, it’s vital to explore the tax implications. 

While taxes will vary according to your circumstances, and it’s important to seek professional advice, there are some basic tenets you can start with.

Getting started

No matter how you intend to use your cryptocurrency, you must keep accurate records of your buying and selling.

Your records must include:

  • transaction date
  • details of crypto exchanges and wallets used 
  • the value of fiat dollars (e.g. AUD) transferred to invest in crypto
  • the type of transaction and details of the other party, for example, staking on an exchange or DeFi protocol

Tax responsibilities

In Australia, cryptocurrency transactions can be subject to both income and capital gains taxes. 

If you are a frequent trader of crypto or run a crypto based business, you may be taxed on income basis – i.e., taxed on your trading profits and losses.

If you are a long-term investor, you are more likely to be subject to capital gains taxes. In this scenario, each cryptocurrency is treated as a separate asset for Capital Gains Tax (CGT).

A Capital Gains Tax event occurs when you ‘dispose’ of your cryptocurrency. 

A disposal may occur where you:

  • sell or gift cryptocurrency
  • trade or exchange cryptocurrency
  • convert cryptocurrency to fiat currency
  • purchase goods or services with cryptocurrency
  • use your cryptocurrency to provide liquidity to DeFi liquidity pools

If you have transacted with a foreign cryptocurrency exchange you may also have tax responsibilities in another country. It is recommended you conduct your own research before using a particular exchange.

Personal asset use

Personal use assets are not generally subject to tax on transactions. 

Your cryptocurrency use may be regarded as a personal asset if it is kept or used to purchase personal items. This means that capital gains/losses that arise may be disregarded. 

For example, buying cryptocurrency specifically to purchase an item that can be paid for using cryptocurrency could be considered personal asset use.

It would generally be difficult to treat crypto as a personal use asset where you are ‘hodling’ or trading regularly. One example of personal use may be using DOGE coin to buy Tesla merchandise.

Data matching

You should assume that the ATO has some data in relation to your crypto transactions for the 2021 to 2023 income tax years. 

The ATO has provided notice of its intent to undertake data matching on crypto transactions for these years.

Therefore, it is important to ensure you calculate gains and losses accurately in the event the ATO reviews your tax return.

Keeping up to date

Cryptocurrency is a rapidly evolving area. The ATO has a guide, including examples and links for additional information to help you.

Get in touch. We can explain the ATO’s rules and regulations for your investments and provide guidance for your situation.


Are you considering an SMSF? Here’s what you need to know.

It’s always a good idea to think about your retirement. Many people in Australia use a Super Fund to manage their retirement savings. But some people opt to do something a little different, and set up a self-managed super fund (SMSF).

What is an SMSF?

At a basic level, setting up an SMSF means creating a trust which has either individual or corporate trustees. These trustees manage the fund assets, and look after legal compliance, including auditing and reporting obligations.

For people who are prepared to look after the legal and financial elements of running a fund, entering into an SMSF can mean more control over how funds are invested, over fees paid and over what insurance is taken out.

What is an SMSF for?

Any SMSF must have the same purpose. That is, to provide retirement benefits for fund members and their dependants. Any decisions made by trustees must be in line with this aim. Using the funds of an SMSF for anything else isn’t just unethical but is actually illegal.

An SMSF isn’t for:

  • Early access to superannuation
  • Investing in art or collectible for decorative purposes or personal use.
  • Buying holiday homes.

Read more about starting an SMSF

Becoming a trustee

One of the main differences between an SMSF and other types of funds, is that in an SMSF the members are also the trustees and assume the compliance risk. If the SMSF is found to have breached the law, the trustees or the director, can be personally fined.

In addition, if there are disputes between the members, the ATO will not become involved. If the situation is serious enough, mediation or court may be an avenue but these routes will be at the members’ expense.

Understandably, the decision to become a trustee is a major one and needs careful consideration and professional consultation.

Updates to SMSF fund structures

Changes on 1 July 2021 mean that SMSFs can now have a maximum of six members, an increase from four. It’s important to note that as an SMSF is a type of trust, the number of trustees may still be restricted to less than six by existing state and territory laws. As always, it’s a good idea to seek professional advice before structuring your fund.

Learn more from the ATO

We recommend you speak to our advisor, Chris Bloxham, to help you determine whether a self managed super fund might be right for you.


Can Your Business Claim the Loss Carry Back Tax Offset?

As part of the Federal Budget 2020-21, the government announced a loss carry back measure to encourage new investment and work with the temporary asset expensing measures also announced at the budget.

The new law started on 1 January 2021.

Eligible corporate entities that previously had an income tax liability in a relevant year, and have subsequent losses, can claim a refundable tax offset up to the amount of their previous liability.

The measure allows significant tax losses, which may then be carried back to generate cash refunds for eligible businesses.

Who is Eligible?

  • Your business must be a company, corporate limited partnership or a public trading trust in the income year you want to claim the offset.
  • The business must have had an aggregated turnover of less than $5 billion.
  • The entity had an income tax liability for financial years 2019, 2020 or 2021.
  • The entity subsequently made a loss in financial years 2020, 2021 or 2022.
  • Your business is up to date with tax return lodgement obligations for the last five years.

There are specific guidelines about eligibility, integrity, and tax offset calculation. We can talk to you about whether you can use the loss carry back measure to benefit your business.

You can only claim the tax loss once, in either the 2021 or 2022 financial year, so it’s important to get advice about how and when to apply this measure for your business. To claim the tax offset, the ATO must be notified before lodging the company tax return that year.

Speak to the team at Solve Accounting and we’ll check your eligibility.


The value of cashflow forecasting during a crisis

Projecting your cashflow pipeline forwards during a crisis is vital.

To be able to navigate the future path of your cashflow, you need to start forecasting – so you can map out your financial position over the coming months and can take the appropriate action to safeguard your cash position.

Plus, when you have access to detailed forecasts you can scenario-plan, search for cost-savings and look for strategies that will preserve your cashflow position.

Forecasting your future cash pipeline

Remaining in control of the cash coming into (and going out of) the business is the real focus, so you can accurately predict your financial position and can resolve any issues.

Key ways to get more from your forecasting

  • Run regular forecasts – The financial landscape is changing on a daily basis at present. A cashflow forecast is not a document that remains static. Variables and external drivers are literally changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.
  • Use the latest cashflow forecasting apps – cashflow forecasting apps, like Fluidly, Float, or Futrli, integrate with your Xero accounts, giving a drilled-down view of how your cash inflows and outflows will pan out over the coming months – information that will inform and justify the decisions you make during these extremely challenging times.
  • Explore the right revenue streams – most sectors will have seen their face-to-face sales drop to absolute zero since quarantine restrictions came into place. To overcome this, there’s a real imperative to explore revenue streams and new opportunities for income. An example of this is coffee shops that now sell roasted beans online (this will depend on lockdown restrictions). The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses.
  • Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cashflow. Pare back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. Negotiating cheaper rates with suppliers, if possible, will also help.
  • Review your staffing needs – now’s not the time to make anyone redundant, but you can look at ways to reduce the costs of staffing and resourcing. Reducing working hours or redeploying staff in different roles are all options that reduce payroll costs, while also looking after your staff’s welfare.
  • Run a variety of scenarios – changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Many of these will be in a long-term plan when restrictions ease. Scenario-planning lets you answer questions and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months.
  • Look at various ways to access funding – if forecasts show a giant cashflow hole coming up, you’re going to need additional funding to get through this crisis. We can assist your business to investigate funding opportunities from grants, banks, loan providers, alternative lenders and crowd-sourcing funders.

Talk to us about setting up cashflow forecasting

Forecasting is an important step to give you the business intelligence to support your decision making.

Get in touch to improve your control over cashflow.


Changes to Company Tax Rates – Less Tax?

Some companies are eligible for lower tax rates. We’ll always apply the tax law for your benefit when we prepare your company tax return.

Company tax rates apply to companies, corporate unit trusts and public trading trusts considered to be base rate entities.

Base Rate Entities

Base rate entities have an aggregated turnover of less than $50 million and have 80% or less of their assessable income as passive income. This replaces the requirement to carry on a business.

Base rate passive income includes income types such as corporate distributions, royalties, rent, interest income and more.

Base rate entities noticed a tax reduction from 30% down to 27.5% in the 2020 financial year. This rate further reduces to 26% in the current financial year 2021 and will drop to 25% from 2022.

For companies that don’t meet the criteria for being a base rate entity, the full company tax rate of 30% applies.

Is your business eligible for lower rates?

Now is the perfect time to get in touch and talk to us about tax planning. For many businesses, last year’s financial performance is unusual, and therefore your expected tax amount may be different than usual.

Planning ahead of the end of the financial year will benefit your business as we can project your tax liability based on your actual financials up to now. You can let us know your questions and aspirations, and together we can consider effective tax and business strategies. We’ll look at payroll, assets, director fees, potential trust distributions, current year performance and your goals for 2022 and beyond.


Understanding the Basics of Capital Gains Tax

A capital gain (or loss) occurs when an asset is sold. The difference between the purchase price and the sale price is the gain or loss. Capital gains tax (CGT) applies to money you have made from selling an eligible asset.

Capital gains tax events occur when an asset is sold, or other triggers arise, such as the loss, theft, or destruction of an asset, or creating contractual or other rights to an asset.

Not all assets are subject to CGT. Common exemptions include the main residence or family home, granny flats, cars and motorcycles, personal use assets such as boats, furniture, household items or loans to family and friends. Many types of lump sum payments are also not subject to CGT, and business sales may also be exempt depending on the circumstances.

Most property is subject to CGT, including land, commercial premises, rental properties, holiday houses and hobby farms. CGT also applies to shares, investments, cryptocurrency, many collectables, foreign currency and intangible assets.

Visit the ATO for a list of CGT assets and exemptions here.

There are special rules for some specific situations, for example, inheriting assets, relationship breakdown, foreign residents, insurance or compensation payments.

How is the Tax Calculated?

Tax is calculated on the net gain of an asset sale. Tax is payable on the difference between the purchase price and sale price, less any discount allowed.

The type of CGT event affects how and when capital gains tax is calculated. For example, if an asset is destroyed in an accident, the CGT event occurs when the insurance payout is received.

Good record keeping is key to working out capital gains tax accurately. Make sure you keep all documents related to asset purchases, including contracts, expenses valuations and disposal.

CGT is calculated at the time of completing your individual, business or self-managed super fund tax return and is included in the income tax assessment.

Talk to us to ensure you’re claiming all you’re entitled to and not paying more tax than you should. We’ll make sure you’re receiving any exemptions, discounts or small business concessions allowed.


New Employees? Find out about Stapled Super Funds

From 1st November, if you have any new employees start work with you and they don’t nominate a specific superannuation fund, you may need to request their ‘stapled super fund’ details from the ATO.

As your accountant, we can help you with this.

Choosing a super fund

Most employees are eligible to choose a super fund when starting a new job. However, sometimes an employee might not make a choice. For example, they might omit to complete the form, or they might not know the details of their existing fund or whether they actually have one. This situation could leave the employer at risk of not meeting their superannuation guarantee obligations and incurring penalties.

Employers can request an employee’s ‘stapled fund’ (a fund linked to an individual) details from the ATO, starting from 1st November 2021.

What employers need to do from 1st November – 3 steps

  1. Offer eligible employees and contractors a choice – When a new employee starts work, they can either specify a fund or decide to go with your default fund. Either way, you have an obligation to offer them a choice and pay super contributions into their chosen fund.
  2. If no choice is taken, request details of stapled fund from the ATO – If the employee doesn’t make a choice. You can lodge a request for details of their stapled fund through ATO online services. You will need to provide the employee’s TFN and personal details.
  3. Pay super contributions into the stapled fund – Where the ATO provides details of a stapled fund you must pay super guarantee contributions into it.

Talk to us about super choice and stapled funds

Essentially, you must take all steps you can to allow employees choice of super fund. But in cases where all avenues are exhausted you can use your default fund.

As your accountant, we can lodge ATO requests for stapled funds on your behalf, including bulk requests where there are 100 or more new employees.

Get in touch – we’re happy to help!


Company Director? You'll need a Director Identification Number

The government has initiated a new system that attaches a unique identifying number to an individual who is a company director. If you are a company director you will need a director identification number. You can apply for a director ID from November 2021.

What is a Director Identification Number?

A director has one number permanently attached to them, and this is used for identification purposes for any or all companies they are a director of. The new Australian Business Registry Services (ABRS) will administer the director ID register, which will gradually integrate all government business registers into one easily accessible register with greater security. The director ID numbers will mean better transparency of appointed directors of companies but also increased privacy protections.

What Do You Need To Do?

When you must apply for your director ID depends on the date you become a director.

  • Existing directors have until November 2022 to register for a director ID number.
  • New directors appointed between 1 November 2021 and 4 April 2022 must apply within 28 days of being appointed as a director.
  • New directors appointed from 5 April 2022 must obtain a director ID number before a director appointment.
  • Prospective directors can apply for a director ID up to 12 months ahead of the appointment.

Application Process

The easiest and fastest way to apply is online via ABRS.

  • You’ll need a myGovID account to apply for your director ID number online. This creates an authenticated digital identity you can use when accessing government services online.
  • Apply through Australian Business Registry Services, (ABRS). You’ll need proof of identity documents such as tax file number, ATO notice of assessment or bank details.
  • You’ll then need to complete the application process from the ABRS webpage, which will link your myGovID account to the application. If the application is verified successfully, you’ll receive your director ID straight away.

Directors – you will have to complete this process yourself as you must verify your identity as part of the application – nobody else can apply on your behalf.

You can also apply via paper form or telephone.

What Next?

Start gathering your identification documents now in preparation for applying in November. Set up your myGovID, if you haven’t already, and take note of when you need to get your ID number. There’s no reason not to get your ID number now – be proactive! This is also a great time to update your ABN details and ASIC details.

Talk to us if you’d like to know more about director ID numbers and company director obligations. We can you help you through the process.