Monthly Archives: September 2016

A number of very important changes have recently been made by the Fair Work Commission to annual leave entitlements for employees covered by the Fair Work Act 2009. It is now critical for you to familiarise yourself with these changes because:

• the changes are already in full legal effect
• non-compliance may result in prosecution and penalties, and
• existing annual leave policies and procedures may now need to be updated

The key changes are explained in detail for you below:

Cashing Out Annual Leave

For the first time, all Modern Award-covered employees are now able to cash-out a portion of their accrued annual leave. However, cashing-out is subject to four very strict rules which must always be followed:

1. Employees can only cash out a maximum of two weeks’ annual leave every 12 months
2. An employee must always have a remaining balance of at least 4 weeks after the cashing-out has been processed
3. Each agreement to cash-out annual leave must be recorded in writing, and
4. The amount paid to the employee must be no less than the amount they would have received had the leave been taken

All Employers should also note:

• Employees under 18 years of age will also need their parent / guardian to sign the cashing-out agreement, and
• Employers remain strictly prohibited from coercing or misleading employees into cashing-out their accrued annual leave.
• A small number of Modern Awards are still subject to variation to permit cashing-out of annual leave. Always check the applicable Award carefully.

Employees who are not covered by either a Modern Award or an Enterprise Agreement remain free to cash-out annual leave, subject to the separate rules imposed by section 94 of the Fair Work Act 2009. These rules are the same as those listed above, except that there is no restriction on the amount of annual leave which can be cashed-out in each 12 month period.

Excessive Annual Leave

Many business find it difficult to effectively manage unwieldy annual leave balances. Fortunately, these latest changes by the Fair Work Commission now make it much easier to direct employees to take annual leave and thereby reduce – or eliminate – excessive leave balances. Firstly, it’s important to note the definition of ‘excessive leave’:

• If the employee is not a Shiftworker: 8 weeks’ annual leave
• If the employee is a Shiftworker: 10 weeks’ annual leave

Most – but not all – Modern Awards now contain a ‘model directed leave term’. This new clause will allow your business to direct an employee to take annual leave. As is the case with cashing-out of annual leave, very strict rules apply:

1. The employee and employer must firstly meet with one another and discuss ways of reducing the excessive leave balance. If they’re unable to reach agreement on when or how annual leave should be taken, your business can then direct the employee to take some of their annual leave. This is referred to as ‘directed annual leave’.
2. The directed annual leave period must begin:
   • no earlier than 8 weeks, and
   • no later than 1 year from the date the annual leave direction is issued by your client
3. The directed annual leave period must be at least one week long, and
4. The employee must have at least six weeks of annual leave left after the directed leave period has been completed
5. The Employer’s direction must not be inconsistent with any leave arrangements already in place. This includes any annual leave policies or procedures which apply in their workplace
6. An employee may subsequently request annual leave despite the employer’s prior direction for it to be taken. If this happens, the employer must disregard their previous direction when considering the employee’s new annual leave request, and

If an employee has had an excessive leave balance for more than 6 months and the employer has not issued a direction for the leave to be taken, the employee can unilaterally take some of their leave. In this situation the same rules as mentioned above for employer-directed leave will also apply.

Leave in Advance

Most Modern Awards now expressly allow employers to provide their employees with annual leave in advance of that leave having been accrued by the employee. Importantly, the new ‘model clause’ also expressly allows employers to deduct any subsequent ‘annual leave debt’ from the employee’s final pay if their employment ends before their accrued annual leave has returned to a positive balance. The following rules apply to annual leave provided in advance of accrual:

1. The mutual agreement must be recorded in writing
2. The agreement must confirm the amount of leave in advance being provided, the date when that period of leave will commence
3. The agreement must be signed by both the employer and the employee, as well as the employee’s parent or guardian if they’re under 18 years of age, and
4. A copy of the agreement must be kept in the employee’s records

Payment of Annual Leave

A number of Modern Awards have historically required employees to be paid their full wage or salary in-full and up-front when then begin a period of annual leave. Most Modern Awards imposing this obligation have now been amended to allow employees who are paid via EFT to continue receiving their wage or salary payments ‘as usual’ during their period of annual leave.

Wouldn’t it be great if GST applied equally to all goods and services? Here are some examples of where the rules are different.

Taxis Drivers, Chauffers and other ‘Ride-Sourcing’ Providers
If you provide “ride sourcing or sharing services” (taxi etc) then you MUST register for GST. No $75k threshold – you are in!
ATO – Ride Sourcing and GST
Pre-Establishment Costs (before the company exists)
Any costs that a person incurs before setting up the legal company may include GST. You can claim that GST back (in the company) after registering the company for GST once it is registered.
ATO – Special Rules for Pre-Establishment Costs

Second Hand Goods
Perhaps it’s not fair to call it warped because to me it sort of makes sense. If you buy second hand goods to then on-sell, you can (in effect) claim back GST on the purchase even if the person you bought them off didn’t charge you GST.
ATO – Second Hand Goods

Grants
If you are registered for GST and another entity is registered for GST and they “grant” you funds then there is no GST on that transaction if you do not supply anything to the giver.
ATO – Grants and Sponsorship

Insurance Settlements
If you are able to claim GST credits for the item of insurance you are now being paid for, i.e., it was all related to your GST turnover business activities, and you have informed the insurer that you are able to claim GST credits THEN you DO NOT have to pay GST on the amount of the insurance settlement
ATO – Insurance Settlements

Car Insurance Settlements/Payments
It depends on who the insurer pays and whether the insurer has a contract with the repairer. Generally, no GST is claimable for payments the insurer makes directly to the repairer when they have a contract with that provider, as the policy holder has not made any payment. BUT if the insurer pays a provider on your behalf, then you can claim GST.
ATO – Car Insurance Settlements

GST Groups
If your entities are in a GST group then transactions between them do not have GST on them
ATO – GST Groups

Non-profit Sub-Entities
A non-profit entity can have one set of GST registrations and set up a GST sub-entity which is NOT treated the same for GST. That is, the sub-entity might choose not to be registered and therefore NOT charge GST.
ATO – NFP Sub-Entities

Concessional GST for Commercial Accomodation
If an individual stays 28 days or more in eligible commercial accommodation, they pay 5% GST instead of 10%.
ATO – GST and Property

Restaurant Tips
Voluntary tips do not attract GST if the tips are passed on to the staff…if they are not paid to the staff, then GST must be declared. Non-voluntary tips do attract GST.
ATO – GST and Restaurant Tips

Water and Bread Sold in Restaurant or Venue
Water and bread are normally GST free items, but if sold in a restaurant they attract GST. In fact all food that is normally GST free attracts GST if it is consumed in the place of purchase. BUT if the place of sale is a not-for-profit entity involved in fundraising or similar activities, GST does not need to be charged.
ATO – GST and Food

GST Free Food Delivered
Similarly, retail food that is normally GST free if it is delivered with prepared food, attracts GST. The whole supply is considered to be catering and therefore the whole order attracts GST. This does not apply to wholesale deliveries, where mixed supply may be delivered.
ATO – GST and Food

Voluntary Withholding for Contractors
If the contractor is registered for GST, then whether they charge GST or not is governed by whether or not the paying business is entitled to a GST credit. If the business IS entitled to a GST credit then the contractor should NOT charge GST.
ATO – PAYGW Voluntary Agreements

Property Bought Before GST
If you are selling property that was bought before 1 July 2000, GST applies, even though it didn’t when you bought it. What’s more, there are two different methods you can choose between in calculating the GST amount.
ATO – Margin Scheme

Expenses On-Charged to Client or Reimbursed
Financial supplies, property water and rates are generally GST free, but may have GST added if another entity pays for these services. Office supplies, contractors, materials and travel costs may already have GST in the price, and may have GST added again on top if it is deemed that a service has been supplied. BUT is it a reimbursement or is it an oncost? Have you paid for something on behalf of another (reimbursement), or have you provided a service, (oncost)? Often the decision will come down to the agreement between the parties.
ATO – Principal and Agent

Agents Charging for Performing Artists
Even though a performing artist may engage an agent to bill on their behalf, the artist is still the entity who is making the supply to the end user and can therefore charge and claim GST if registered, assuming the supply is not subject to PAYG withholding. If PAYG withholding applies then GST does not apply. BUT the name on and ABN on the tax invoice to the customer can be either the agent’s or the artist’s.
ATO – Performing Artists

Simplified Accounting Method
The simplified accounting method (SAM) for food retailers is meant to be simple…but we’re not so sure. There are five methods to choose from, based on an average percentage, “snapshot” sample of business, or standardised percentages (“business norms”). But you have to know whether you are a “reseller” or a “converter” or both. What’s more, the SAM can only be used for the food part of the business, so if the business has other aspects to it then GST must be calculated as usual; SAM does not apply. Whichever method you choose, you must stick to it for a year, so if it turns out you pay more GST too bad.
ATO – Simplified Accounting Methods for Food Retailers