Financial Management Practice Manual
Chapter 10
Taxation Management
Guidance Template
Office of Health Statutory Agencies – Queensland Health
Financial Management Practice Manual - Guidance Template
Chapter 10 – Taxation Management
233
Document control sheet
Contact for enquiries and proposed changes
If you have any questions regarding this document or if you have a suggestion for
improvements, please contact:
Office of Health Statutory Agencies
Email:
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Telephone:
3234 1128
Version history
Version no.
Date
Changed by
Nature of amendment
1.0
July 12
Jesse Lee
Final draft
1.1
October 12
James Ronan
Financial Policy Review
1.2
October 12
Deborah
McLaughlin
Final
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Contents
10
Taxation Management ............................................................................. 236
10.1
Fringe Benefits Tax (FBT) .......................................................................... 237
10.2
Pay As You Go (PAYG) ............................................................................. 238
10.2.1
10.2.2
10.2.3
10.2.4
10.2.5
Tax File Number (TFN) Declarations .................................................................................. 239
Withholding Declarations .................................................................................................... 239
PAYG Withholding Variation ............................................................................................. 240
Child Support ....................................................................................................................... 240
Payment Summaries............................................................................................................. 240
10.3
Non-Wages Withholdings .......................................................................... 241
10.3.1
10.3.2
10.3.3
Definition ............................................................................................................................. 241
Process ................................................................................................................................. 241
Due Dates ............................................................................................................................. 242
10.4
Payroll Tax ................................................................................................. 242
10.4.1
10.4.2
Rates..................................................................................................................................... 243
Process ................................................................................................................................. 243
10.5
Goods and Services Tax (GST) ................................................................. 243
10.5.1
10.5.2
Reporting of GST in the Annual Financial Statements........................................................ 244
GST in Practice for Purchases ............................................................................................. 245
10.6
Duty ........................................................................................................... 245
10.7
Excise ........................................................................................................ 246
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Taxation Management
Taxation management is a key component of any business. Foundations must ensure they are
compliant with all relevant State and Commonwealth taxation requirements.
It is recommended that Foundations seek advice from a qualified taxation expert when developing the
taxation management component of this Manual. Failure to comply with taxation requirements could
result in significant criminal charges against the Foundation.
Refer to the Australian Taxation Office (ATO) for further information regarding relevant taxation
legislation and requirements for the Foundation. Specifically, guidance can be sought from the ATO’s
Tax Basics for Non-Profit Organisations.
Foundations must comply with the Financial Accountability Handbook (see Volume 3, Information
Sheet 3.11 – Taxation Compliance Systems) and the Financial Management Tools (see Information
Sheet 3.11 – Taxation Compliance and Information Sheet 4.1 - Monitoring/Assessment of Internal
Controls).
TIP:
Some taxation management practices and procedures are covered throughout this Manual.
–
Provide an outline of the taxation management practices of the Foundation.
–
What is the purpose of taxation management? How does taxation management benefit
the Foundation?
–
What are the objectives and principles of the Foundation’s taxation management system?
–
How is taxation management achieved? Who is responsible?
–
Describe how the Foundation’s taxation management practices meet the legislated
requirements.
–
What types of tax liabilities are required to be managed by the Foundation? For example:
o
Fringe Benefits Tax (FBT)
o
Business Activity Statements (BAS)
o
Payroll Tax (PRT).
–
Describe how the internal controls (refer to Chapter 2) of the Foundation support proper
and effective taxation management.
–
How often are the taxation management systems and practices of the Foundation
reviewed? Who is responsible for this? How is it undertaken?
–
How is the taxation management system used to assist and report on the Foundation’s
financial position throughout the year?
–
How does the Foundation ensure proper and effective records are kept for taxation
management purposes (see Chapter 3)?
–
How does the Foundation ensure its taxation related financial records are safeguarded
and that only authorised staff have access? How does this comply with the Foundation’s
security and specific controls (see Chapter 2)?
–
How does the Foundation go about requesting taxation advice? Who is responsible or
this?
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10.1 Fringe Benefits Tax (FBT)
Refer to the Australian Taxation Office for further information regarding relevant taxation legislation
and requirements, in particular, the Fringe Benefits Tax Assessment Act 1986 (Commonwealth).
Fringe Benefits Tax (FBT) is levied on employers in relation to fringe benefits provided to
employees and their associates in respect of their employment (i.e. there must be an
employer / employee relationship).
A fringe benefit includes any rights, privileges, services or facilities not subject to personal
income tax.
–
Is the Foundation eligible for any FBT exemptions?
–
How does the Foundation manage the requirements for FBT liabilities?
–
What are the objectives and principles of managing the Foundation’s FBT requirements?
–
How is the management of the Foundation’s FBT requirements undertaken? Who is
responsible?
–
What types of fringe benefits may be provided to the Foundation’s employees? For
example:
o
Home garaging of a work/pool car
o
Private use of a work car
o
Private e-toll.
–
Describe how the Foundation’s FBT management complies with Australian Tax Office
requirements?
–
Describe how the FBT management practices are developed and maintained.
–
How often does the Foundation review its FBT management practices? Who is
responsible for this?
–
Describe the links between the Foundation’s FBT management practices, financial
records management practices (see Chapter 3) and financial reporting requirements (see
Chapter 4).
–
Who can create or amend FBT management practices? Can this be delegated? If so, is
this delegation of authority recorded in the Financial Delegations Register (see Chapter
2)?
–
How does the Foundation determine if a fringe benefit is taxable or exempt? Who is
responsible for this?
–
How does the Foundation ensure there is appropriate segregation of duties for FBT
management practices?
–
How does the Foundation manage the FBT requirements that relate to salary sacrifice
fringe benefits? Who is responsible for this?
–
How does the Foundation manage FBT requirements for an employee compared to a
consultant or contractor?
–
How do the Foundation’s record management principles apply to FBT related
documents?
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–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s FBT management practices?
10.2 Pay As You Go (PAYG) Withholding
The Pay As You Go (PAYG) system commenced on 1 July 2000 and is a part of A New Tax System
(Business Tax Reform).
Foundations are required to comply with the relevant sections of the A New Tax System (Pay As You
Go) Act 1999 (Cwth).
Refer to the Australian Taxation Office for further information regarding relevant taxation requirements
for the Foundation, for example, PAYG withholding obligations in relation to withholding amounts (of
certain payments) and remitting to the Australian Tax Office.
Commonwealth income tax deductions from regular gross income payments to individuals are referred
to as Pay-As-You-Go (PAYG) tax.
TIP:
Practices for deductions from wages and salaries are also covered in Chapter 6.
–
How does the Foundation manage its Pay As You Go (PAYG) Withholding requirements?
–
What are the objectives and principles of managing the Foundation’s PAYG Withholding
requirements?
–
How is the management of the Foundation’s PAYG Withholding requirements
undertaken? Who is responsible?
–
How does the Foundation manage its PAYG Withholding requirements for:
o
Temporary staff from employment agencies
o
Contractors and/or consultants.
–
Describe how the Foundation’s PAYG Withholding management complies with Australian
Tax Office requirements?
–
Describe how the Foundation’s PAYG Withholding tax management practices are
developed and maintained. Who is responsible for this?
–
How does the Foundation ensure correct PAYG Withholdings are calculated for staff
salary and wage payments?
–
How does the Foundation ensure that the ‘Tax File Number Declaration’ and ‘Withholding
Declaration’ are applied to current withholding schedules issued by Australian Tax Office
when determining the correct PAYG tax withholdings?
–
Does the Foundation include allowances when determining the correct PAYG tax
withholdings from staff salary and wage payments?
–
What deductions from salary and wages attract PAYG withholdings? For example:
o
Normal salary or wages
o
Overtime and penalty rate payments
o
Arrears in annual leave or long service leave or sick leave
o
Bonuses and commissions
o
Unused annual or long service leave
o
Most allowances.
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–
How does the Foundation manage the different PAYG Withholding tax rates that apply to
leave loading, unused leave payments and lump sum termination payments?
–
How do the Foundation’s record management principles apply to PAYG Withholding
related documents?
–
Describe the links between the Foundation’s PAYG Withholding tax management
practices, financial records management practices (see Chapter 3) and financial reporting
requirements (see Chapter 4).
–
How often does the Foundation review its PAYG Withholding tax management practices?
Who is responsible for this?
–
Who can create or amend the Foundation’s PAYG Withholding tax management
practices? Can this be delegated? If so, is this delegation of authority recorded in the
Financial Delegations Register (see Chapter 2)?
–
How does the Foundation ensure there is appropriate segregation of duties for its PAYG
Withholding tax management practices?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s PAYG tax management
practices?
10.2.1
Tax File Number (TFN) Declarations
Tax File Number declarations are completed by an employee to allow a Foundation to determine the
correct amount to withhold from payments for taxation purposes.
Refer to the Australian Taxation Office for further information regarding TFN declarations and other
relevant taxation requirements for the Foundation.
–
Does the Foundation require new employees to submit an Employee Tax File Number
(TFN) declaration for all forms of employment?
–
What is the timeframe for new employees to submit their TFN Declaration form? For
example, 28 days from commencing employment.
–
How does the Foundation ensure that PAYG tax withholdings of 46.5% are applied to
staff salary and wage payments when a TFN Declaration form has not been supplied?
–
How does the Foundation manage and store staff TFN Declaration records?
–
How does the Foundation ensure its TFN Declaration management practices comply with
the requirements set out by the Australian Tax Office?
10.2.2
Withholding Declarations
Refer to the Australian Taxation Office for further information regarding withholding declarations and
other relevant taxation requirements for the Foundation.
–
When does the Foundation require staff to complete a withholding declaration? For
example:
o
HELP (HECS – Study Asset) debt is extinguished or commenced
o
Financial Supplement Debt exists or extinguished
o
Variation to dependent spouse, overseas forces or special tax offset
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–
o
Inclusion of Senior Australian tax offset
o
To request an increase in PAYG instalments.
How does the Foundation ensure all withholdings are calculated correctly in accordance
with the withholding schedules from the Australian Tax Office?
10.2.3
PAYG Withholding Variation
PAYG Withholding Variation is completed by an employee where he/she wants to vary the amount or
rate of PAYG withheld from payments or to advise of their obligation to repay HELP or Financial
Supplement debts.
Refer to the Australian Taxation Office for further information regarding PAYG withholding variations
and other relevant taxation requirements for the Foundation.
–
How does the Foundation manage a PAYG withholding variation for employees?
–
How does the Foundation ensure that all PAYG withholding variations are updated
annually? (PAYG withholding variations expire 30 June each year.)
–
How does the Foundation manage and store staff PAYG withholding variation records?
10.2.4
Child Support
Refer to the Australian Taxation Office and Child Support Agency for further information regarding
child support deductions from employee salaries and wages.
The Australian Tax Office administers the Child Support Agency (CSA). The CSA will advise
if any deductions are to be made on behalf of an employee. The amount to be deducted is
usually for a fixed sum, spread over a specified period. CSA directions must be followed.
The employee cannot countermand the order. The deductions must continue until the CSA
withdraws the order.
An employee must be informed of any deductions made. Other personnel must not be made
privy to the fact that deductions are required to be made.
10.2.5
Payment Summaries
Refer to the Australian Taxation Office for further information regarding payment summaries and other
relevant taxation requirements for the Foundation.
–
How does the Foundation manage its obligation to provide payment summaries to every
employee to whom wages or salaries have been paid?
–
What is the timeframe for the Foundation to provide payment summaries? For example,
summaries must be issued on or before 14 July in the following year.
–
How does the Foundation provide payment summaries to staff who have left the
Foundation? For example, payment summaries for exited staff are issued on or before 14
July in the following year, or within 14 days from the date of request.
–
How does the Foundation ensure that payment summaries are issued in duplicate? For
example, one copy for the employee and the other to the Australian Taxation Office.
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10.3 Non-Wages Withholdings
Refer to the Australian Taxation Office for further information regarding relevant taxation requirements
for the Foundation.
This Section applies to payments other than salaries, wages and associated items:



That are the subject of a voluntary agreement whereby the payee seeks to have tax
withheld at the point of payment
To a supplier who has not quoted an Australian Business Number
Under a labour hire agreement.
10.3.1
Definition
ABN means the Australian Business Number which became operational on 1 July 2000. It is
issued by the Australian Taxation Office.
PAYG means the Pay-As-You-Go system where the payer withholds tax from payments in
accordance with Australian Taxation Law.
Payment means the total payment under a contract irrespective of whether it is paid by
normal process or as a set off. Salaries and wages, and other payments subject to pay-asyou-go instalments are excluded, as are payments to a tax-exempt body.
10.3.2
Process
–
How does the Foundation manage the taxation requirements for non-wages
withholdings?
–
What are the objectives and principles of the requirements for managing non-wages
withholdings?
–
How is the management of the Foundation’s non-wages withholdings undertaken? Who
is responsible?
–
How does the Foundation ensure that withholding tax is deducted from payment of an
invoice in relation to supply, which includes GST, where the ABN is not supplied?
–
How does the Foundation manage non-wages withholdings if a payee has not provided a
valid ABN? For example, a 46.5% withholding is deducted from the gross payment.
–
How does the Foundation manage a request by a payee that tax is deducted at a higher
rate than required? Is this request required in writing?
–
Describe the links between the Foundation’s non-wages withholdings management
practices, financial records management practices (see Chapter 3) and financial reporting
requirements (see Chapter 4).
–
Describe how the Foundation’s non-wages withholdings management practices are
developed and maintained.
–
How often does the Foundation review its non-wages withholdings practices? Who is
responsible for this?
–
Who can create or amend the non-wages withholdings management practices? Can this
be delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
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–
How does the Foundation ensure there is appropriate segregation of duties for its nonwages withholdings management practices?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s non-wages withholdings
practices?
10.3.3
Due Dates
At the end of the financial year, withholding payment summaries must be fully completed and
distributed as follows:


Payee’s copy must be posted or delivered by 14 July
Original must be posted or delivered to the Australian Taxation Office by 14 August.
Completed Payee Declaration forms must be posted or delivered to the Australian Taxation
Office within 28 days of receipt.
10.4 Payroll Tax
Foundations must verify if they are exempt from the requirements under the Payroll Tax Act 1971. If
exemptions have been granted, this section does not apply. If a Foundation is not exempt, the
requirements under the Act must be complied with.
Refer to the Office of State Revenue for further information regarding Payroll Tax requirements
relevant to the Foundation.
Payroll tax is a self assessed State tax levied on employers by the Office of State Revenue.
The Office of State Revenue should be contacted for current payroll tax rates and guidance
on inclusions, exclusions and thresholds for the following:






Salaries and wages
Leave and allowances
Benefits
Payments
Other types of wages
Non Queensland employment.
In general, payments that do not attract payroll tax are:




Salaries/wages paid to employees while on compulsory Australian Defence Force
Reserve leave
Salaries/wages paid to employees while volunteering for
o Rural fire brigade in accordance with Fire and Rescue Service Act 1990
o State Emergency Service in accordance with Disaster Management Act 2003
o Functions as an honorary ambulance officer under the Ambulance Service Act
1991
Travelling/accommodation and living-away-from-home allowances, where those
allowances do not exceed prescribed daily rates
Reimbursements of expenses incurred personally by officers in carrying out official
duties
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


Payments made to a person who is an apprentice or trainee under the Vocational
Education, Training and Employment Act 2000
Payments to employees under the Commonwealth parental leave scheme
Workers’ compensation payments.
10.4.1
Rates
Refer to the Office of State Revenue for further information regarding Payroll tax rates.
The payroll tax rate is 4.75% as a percentage of taxable wages, payable to the Office of
State Revenue.
10.4.2
Process
–
How does the Foundation manage the requirements for payroll tax?
–
What are the objectives and principles of managing the Foundation’s payroll tax
requirements?
–
How is the management of the Foundation’s payroll tax requirements undertaken? Who
is responsible?
–
Describe how the Foundation ensures its payroll tax management practices comply with
the legislated requirements.
–
Describe how the Foundation’s payroll tax management practices are developed and
maintained.
–
How often does the Foundation review its payroll tax management practices? Who is
responsible for this?
–
Describe the links between the Foundation’s payroll tax management practices, financial
records management practices (see Chapter 3) and financial reporting requirements (see
Chapter 4).
–
Who can create or amend the Foundation’s payroll tax management practices? Can this
be delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
–
How does the Foundation ensure there is appropriate segregation of duties for its payroll
tax management practices?
–
How does the Foundation ensure that provisional remittances are made to the Office of
State Revenue on or before the seventh day of each month, and an annual return is
lodged by 21 July?
–
How are payments made to the Office of State Revenue? Are they by cheque, electronic
transfer or cash?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s payroll tax management
practices?
10.5 Goods and Services Tax (GST)
Foundations are required to comply with the relevant sections of the A New Tax System (Goods and
Services Tax) Act 1999 (Commonwealth).
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Refer to the Australian Taxation Office for further information regarding relevant taxation requirements
for the Foundation. For example, GST concessions – Tax basics for non-profit organisations, Activity
statements.
A New Tax System (Goods and Services Tax) Act 1999 was introduced on 1 July 2000. The
Goods and Services Tax (GST) will apply at 10% on many goods and services purchased
and sold.
–
Is the Foundation eligible for a GST concession?
–
How does the Foundation manage the requirements for Goods and Services Tax (GST)?
–
What are the objectives and principles of managing the Foundation’s GST requirements?
–
How is management of the Foundation’s GST requirements undertaken? Who is
responsible?
–
Who is responsible for preparing business activity statements? What is the process?
–
Describe how the Foundation’s GST management complies with Australian Tax Office
requirements.
–
Describe how the Foundation’s GST management practices are developed and
maintained.
–
How often does the Foundation review its GST management practices? Who is
responsible for this?
–
Describe the links between the Foundation’s GST management practices, financial
records management practices (see Chapter 3) and financial reporting requirements (see
Chapter 4).
–
Who can create or amend the Foundation’s GST management practices? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
–
How does the Foundation ensure there is appropriate segregation of duties for its GST
management practices?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s payroll tax management
practices?
10.5.1
Reporting of GST in the Annual Financial Statements
Foundations must comply with the Australian Accounting Interpretations, in particular Interpretation
1031 - Accounting for the Goods and Services Tax (GST) of the Australian Accounting Standards
Board when managing the reporting requirements in relation to GST.
Foundations are also required to comply with requirements outlined in the Financial Reporting
Requirements for Queensland Government agencies document produced by Queensland Treasury.
Interpretation 1031 - Accounting for the Goods and Services Tax (GST) states that:



Revenues, expenses and assets are to be recognised net of the GST, except where
GST is not recoverable from the ATO
Receivables and payables are recognised inclusive of GST
Cash flows are to be included in the cash flow statements on a gross basis.
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The Financial Reporting Requirements for Queensland Government Agencies states
preference for the “four line” method of GST cash flow disclosure, comprising of GST:




Paid to the ATO
Input tax credits received
Paid to suppliers
Received from customers.
–
How does the Foundation ensure its reporting of GST in its annual financial statements
complies with the interpretations by the Australian Accounting Standards Board and the
requirements set out in the Financial Reporting Requirements for Queensland
Government Agencies? Who is responsible for this?
–
How is the reporting of GST in annual financial reports undertaken? Who is responsible?
–
Describe the links between the reporting of GST in annual financial reports, the
Foundation’s financial records management practices (see Chapter 3) and financial
reporting requirements (see Chapter 4).
–
Describe how the Foundation’s GST reporting practices are developed and maintained.
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the reporting of GST in annual financial reports?
10.5.2
GST in Practice for Purchases
–
How does the Foundation ensure invoices for taxable goods are verified as tax compliant
invoices before they are processed?
–
What procedures are in place to ensure the Foundation holds a compliant tax invoice at
the time of claiming an input tax credit on its Business Activity Statement?
–
How does the Foundation manage an invoice that is non-compliant for tax purposes? For
example, are they referred to the supplier for correction (unless the goods or services are
input-taxed or GST-free)?
10.6 Duty
Foundations are required to comply with the Duties Act 2001. For assistance, Foundations may also
refer to the Acts Interpretation Act 1954 if required.
Refer to the Office of State Revenue for further information regarding Duty payment requirements. For
example, eligibility for a duty exemptions and concessions.
–
Is the Foundation eligible for an exemption or concession on Duties?
–
How does the Foundation manage its Duty requirements?
–
What are the objectives and principles of managing the Foundation’s Duty requirements?
–
How is management of the Foundation’s Duty requirements undertaken? Who is
responsible?
–
Describe how the Foundation’s Duty management complies with Office of State Revenue
requirements?
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–
Describe how the Foundation’s Duty management practices are developed and
maintained. Who is responsible for this?
–
How do the Foundation’s record management principles apply to Duty related
documents?
–
Describe the links between the Foundation’s Duty management practices, financial
records management practices (see Chapter 3) and financial reporting requirements (see
Chapter 4).
–
How often does the Foundation review its Duty management practices? Who is
responsible for this?
–
Who can create or amend the Foundation’s Duty management practices? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
–
How does the Foundation ensure there is appropriate segregation of duties for its Duty
management practices?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s Duty management practices?
10.7 Excise
TIP:
Use this section to outline the Foundation’s policies and procedures for any other relevant
taxes, e.g. excise, if the Foundation is involved or engaged in the handling and distribution of
any undenatured and denatured spirits.
Foundations are required to comply with relevant sections of the Excise Tariff Act 1921 (Cwth).
Refer to the Australian Taxation Office for further information regarding relevant taxation requirements
for the Foundation.
–
How does the Foundation manage its Excise requirements?
–
What are the objectives and principles of managing the Foundation’s Excise
requirements?
–
How is management of the Foundation’s Excise requirements undertaken? Who is
responsible?
–
Describe how the Foundation’s Excise management complies with Australian Taxation
Office requirements?
–
Describe how the Foundation’s Excise management practices are developed and
maintained. Who is responsible for this?
–
How do the Foundation’s record management principles apply to Excise related
documents?
–
Describe the links between the Foundation’s Excise management practices, financial
records management practices (see Chapter 3) and financial reporting requirements (see
Chapter 4).
–
How often does the Foundation review its Excise management practices? Who is
responsible for this?
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–
Who can create or amend the Foundation’s Excise management practices? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
–
How does the Foundation ensure there is appropriate segregation of duties for its Excise
management practices?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the Foundation’s Excise management practices?
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