Preparing for the end of the financial year (EOFY) can sometimes feel like a never-ending to-do list for even the most experienced of HR practitioners.

As well as preparing for BAU tax-time tasks, such as supporting business unit leaders to determine FY25 budgets and enabling them to conduct fair performance and pay reviews, HR practitioners also need to stay abreast of a host of upcoming legislative changes. Failing to do so can open your organisation up to unnecessary risk. 

The infographic below can be used as a handy checklist for HR to work through this EOFY. Plus, HRM shares some tax deductions HR practitioners can claim for their business.

Download a PDF of the checklist here.

AHRI members can access a range of useful templates, guides and more via AHRI:ASSIST. Learn about more practical member benefits here.

The post Infographic: HR’s end-of-financial-year checklist appeared first on HRM online.

The new financial year is in full swing, so now it’s time for HR professionals to undertake a policies and procedures clean up to ensure your business remains compliant.

The end of the financial year isn’t just about getting your organisation’s finances in order. While tax dominates business discussions in the lead-up to 30 June, it’s equally important to do an employment law review.

Doing nothing has the potential to have long-lasting consequences, particularly if key policies and procedures are out of date. For example, working from home conditions, social media guidelines and what constitutes a complaint continue to evolve, so it’s essential that the HR functions keeps pace.

Now that you’ve likely got your end-of-year finances in check, it’s time to move your focus on to your HR policies and procedures. This HR checklist should help to get you started (see bottom of article for an infographic summarising the article).

1. General hygiene factors

First things first, has the minimum wage increase of 5.2 per cent been passed on to staff? Don’t forget about staff covered under a Modern Award as there could be underpayment consequences later in the year.

The minimum wage bump also impacts superannuation payments. Superannuation payments themselves have also gone through a slight increase to 10.5 per cent. Have you remembered to increase super payment?

You should also review HR policies that cover ‘hot-button’ issues, including:

• Social media
• Working from home/remote working
• Workplace bullying
• Sexual harassment
• Complaints and complaint handling

Many companies are struggling with work-from-home arrangements now that lockdowns are over – just ask Elon Musk! It’s essential that businesses set working-from-home parameters and standards, including flexibility of hours. For example, sales staff should be available to take calls between normal business hours. 

2. Review employment contracts

In addition to passing on the 5.2 per cent increase to employees on the minimum wage and the modern award wage increase of 4.6 per cent, the start of the new financial year is the perfect time to review employment contracts. 

At a minimum, terms of employment, role/position descriptions and KPIs should all be reviewed.  

Pay rises linked to performance and salary reviews should also be incorporated into employment contracts in addition to confidentiality, intellectual property and restraint of trade clauses.

3. Recruitment and retention measures

Attracting and retaining key staff is a big challenge at the moment, irrespective of the sector. However, there are steps you can take to keep high-performing employees. For example:

• Do you have a bonus policy in place? If so, when was the last time it was assessed and reviewed? 
• Does your business have an incentive program? Is it in writing and clearly communicated to employees? And does it factor in unforeseen circumstances? For example, a staff member resigns, is injured or incapacitated.

Remember, bonuses and staff incentives should always be linked to agreed-upon KPIs which hopefully align with the targets of the organisation.

The start of the financial year is also a great time to update organisational charts and overhaul position descriptions – all of which can help in re-engaging employees and setting them up with new challenges and promotions.

4. Consider management training

It’s essential business leaders put aside a budget to deal with the following scenarios:

• Performance management
• Workplace bullying
• Illness or injury in the workplace
• Complaint handling
• Sexual harassment

In my experience, the majority of claims we manage on behalf of clients’ stem from managers choosing not to have difficult conversations, conducting them in a porr manner or having them too late in the game.

It is essential leaders are given the necessary tools to manage staff, including the ability to have difficult but important conversations with employees. By investing in management, you will help alleviate risk as well as retain staff.

Want to arm yourself, or your team, with the skill of acing difficult conversations? AHRI’s short course, ‘Having Difficult Conversations‘, is exactly what you need. Tickets for the August 24 intake are selling fast – don’t miss out!

5. Workforce documentation

Is your business prepared for the potential changes flagged by the new Australian Government? The definition of a casual employee and contractor is likely to change, along with sexual harassment laws, which will put the onus on employers to eliminate sexual harassment. 

It’s important that you:   

• Review and understand the likely changes
• Review wage structures 
• Review casual employment and contractor arrangements and understand what effect this may have on your business if rules change.

  

Jonathan Mamaril is a Director at NB Lawyers.

The post Conduct an EOFY sweep of your HR policies and procedures with this checklist appeared first on HRM online.

This article provides general advice and may not be relevant to your circumstances. 

The end of the financial year (EOFY) is typically a busy time even for the most organised HR professionals.

From the recent wage and superannuation increases to COVID-related deductions and working from home expenses, there’s a lot for HR to get across.

HRM has wrapped up some of the main things to keep in mind to ensure your business is as prepared for tax time as possible.

1. Wage and superannuation increases

Earlier this month, the Fair Work Commission announced a 5.2 per cent increase to the national minimum wage – a significant increase compared to the 2.5 per cent jump last year. This brings the minimum wage from $20.33 to $21.38 per hour. 

“HR professionals need to be across this, and communicate the change clearly to their management and staff,” says Mark Chapman, Director of Tax Communications at H&R Block.

“This could potentially require additional administrative time to payroll. First of all, they need to learn about the increase in the minimum wage. Then applying that to your firm’s wages is quite a lengthy, intensive process. So this could potentially require additional administrative time to payroll.”

Changes to the superannuation guarantee percentage are also set to come into effect. From 1 July 2022, the guarantee will lift from 10 to 10.5 percent, in accordance with the government’s plans to increase the guarantee by five per cent each year to reach 12 per cent by 2025.

Employers that pay their employees a super-inclusive package will need to ensure they are distributing the correct amount into each employee’s superannuation fund, as opposed to their take-home pay. Employers that pay a super-exclusive package may need to pay their staff an additional amount in superannuation.

Some employees may not be aware that they can claim a deduction for any personal contributions made into their superannuation fund, so this is worth communicating to employees as they prepare their personal taxes. 

If employees want to pursue that path, time is of the essence, says Chapman.

“We’re now less than a week and a half from the end of the financial year, so they’ll realistically need to get their payments into their superannuation account by the beginning of next week,” he says.

“In addition, they would need to complete a deduction form and get that into the superannuation organisation and get a response from the organisation by the time they lodge their tax return.”

2. COVID-19 deductions

In the thick of the pandemic, many employers made health and safety related purchases.

For example, it wasn’t uncommon for organisations to require employees to take a rapid antigen test before attending work or to wear a mask in the workplace.

If employers made these COVID-19 related purchases, they may be able to claim a deduction for the costs.

“It could include face masks, hand sanitizers and antibacterial spray if an employer has purchased them so that their staff can have face-to-face interactions with other employees,” says Chapman.

On the other hand, if employers required their staff to make these purchases themselves, it would be the employees claiming the cost as a deduction. HR should communicate this option to their staff, says Chapman.

“Employees would be able to claim a tax deduction for the cost of obtaining the test, but they wouldn’t be able to claim a tax deduction for the cost of going to get it. So that includes any transport costs they incur from home to the supermarket or the chemist.”

It’s important to delineate between any work and personal-related use. For example, if an employee buys a pack of rapid antigen tests and only one of those is used in order to attend the office, the employee can only claim a deduction for that one test, not for the whole pack.

3. Working from home

As was the case last financial year, employees can claim a deduction for working from home expenses in one of three ways:

• The shortcut method enables individuals to claim 80 cents per hour.
  
  “This basically wraps everything up into one fixed rate. It’s available until the end of this tax year, but it won’t be available next year,” says Chapman.
  
  The following two methods are slated to remain options for employees in the coming years. 
• The actual cost method allows individuals to calculate their working from home expenses.
  
  “This is where you claim the actual costs that you’ve incurred during the course of the year,” says Chapman.
  
  “It generally produces the biggest reduction, but it also has the largest substantiation requirement, so it can be very involved to keep all the records. You have to keep individual receipts of all expenses, you have to keep a diary so you can apportion between them between work use and private use. It’s quite a complex method.” 
• Through the fixed-rate method, employees can claim working from home expenses at 52 cents per hour.
  
  “The 52 cents per hour covers most expenses, but not everything,” says Chapman. “It won’t cover your home internet, your home phone, or the depreciation of computer equipment. So by the time you claim those as well, you usually end up making a bigger claim than if you used the 80 cent rate.”
  

While HR can communicate these options to its workforce, employees should seek personal advice from a tax agent, says Chapman.

“WFH will be a big one for many people this year. It’s about working out the best method for you. It’s really on a case-by-case basis for the particular circumstances.”

4. Common deductions for businesses

Businesses may be able to claim an immediate deduction for expenses through the temporary full expensing measure. This allows a business to claim an immediate deduction for new assets if they have a turnover of less than $5 billion, and for second-hand assets if the business has a turnover of less than $50 million.

The assets must be first held, used or installed for use between 6 October 2020 and 30 June 2023.

For many businesses, deductions made through the temporary full expensing measure this EOFY are likely to include digital transformation costs.

“Digital upscaling is going to be a substantial deduction for many organisations this financial year,” says Chapman. “Everybody wants to have the best interface with their customers, they want to have the most efficient website possible. All these sorts of costs are typically tax deductible.”

The same applies for education courses undertaken for professional development. If the business has paid for the course, it will typically be able to claim a tax deduction. This is likely to be an area of focus for companies as reskilling and upskilling to meet the skills shortage has emerged as a critical HR need.

If an employee queries whether they can claim a tax deduction for a course they have paid for and undertaken, the answer HR provides will depend on the type of course.

“Employees need to be very careful that they tick all the boxes for deductibility if they’re claiming self-education costs,” says Chapman.

“It’s worth encouraging your employees to talk to a tax agent on this one to make sure there is a necessary connection to their employment. If, for example, an employee is taking a course that enables them to get a promotion into a different type of job, that’s typically not tax deductible.” 

The same line of thinking applies to HR’s own professional development.

“If an HR advisor was claiming for a development in the HR field, that would typically be tax deductible. But if the HR professional was doing, for example, a director’s course, that probably wouldn’t be tax deductible because that relates to furthering their career in a different field.”

Protective gear or occupational clothing required for work, such as hard hats or steel cap boots, may also be tax deductible.

“If it’s customary for the business to provide that then the business can claim a deduction. If it isn’t the standard and employees have to buy the equipment themselves, then the employees can claim it,” says Chapman.

“Regardless of whether the deduction is being claimed by the employee or the employer, it’s important that proper records are kept to support the claim,” says Chapman. 

Importantly, a deduction can only be claimed if that substantiation exists and it should include:

• The name of the supplier
• The amount of the expense
• The nature of the goods or services provided
• The date the expense was paid
• The date of the documen

Typically, a receipt or invoice is sufficient.

5. Common deductions for HR

As well as helping to make sure their business is prepared for EOFY, HR professionals need to take care of their own taxes and deductions. Personal Tax Specialists has provided a wrap-up of the main tax deductions that HR professionals may be able to claim. Some of these include:

• Car expenses for transport between worksites or offices. This doesn’t apply to travel between work and home 
• Training courses such as first aid, OH&S workshop or recruitment training 
• Professional annual membership fees, such as for AHRI membership 
• Equipment used for work purposes, such as laptop or mobile phone  
• Work-related books, magazines and journals

Tax time can be overwhelming if you aren’t prepared, but being across the basics and keeping clear records throughout the year can help to keep it a stress-free process.

Not sure of your legal obligations to staff in the lead up to EOFY? AHRI’s short course, Introduction to HR Law, can help to ensure you’re compliant.
Book in for the next course on 13 July.

The post Five things HR needs to know for tax time this EOFY appeared first on HRM online.

This article provides general advice and may not be relevant to your circumstances. 

Death and taxes might be inevitable, but if the past 18 months has taught us anything it’s that things can be turned upside down in an instant and knowing how to embrace a new way of doing things becomes essential. 

This year’s EOFY is accompanied by changes to tax brackets, an increase to the minimum wage and an alternative to the WFH shortcut that might provide a better result. 

HRM asked three experts what pitfalls might await HR professionals this year, and how to avoid them. 

1. Backdated tax cuts

Last year, the federal government brought forward its proposed tax cuts to 1 July. However, the legislation wasn’t passed until October 2020, meaning there was roughly a four-month period where employees paid the existing tax amount. 

“The pay as you go (PAYG) withholding schedules were adjusted for these changes, but they only apply from the date that they were changed,” says Susan Franks, senior tax advocate at Chartered Accountants ANZ.

“This means that some employees will have had too much tax deducted from their wages in the first part of the year and may receive a tax refund when they lodge their income tax return.”

The other tax cut to be aware of, says Franks, is the extension of the low and middle income tax offsets (LMITO). 

“The LMITO is not incorporated into the PAYG withholding schedules,” she says, “As a consequence, if you are entitled to the LMITO you will need to lodge your return to receive the tax offset.”

Employee’s don’t need to complete any additional forms to claim the LMITO. The ATO will calculate this for them when they lodge their tax return. 

“If you think of HR as strategy and payroll as execution, they need to be working together to make this change as smooth as possible.” Tracy Angwin, CEO of the Australian Payroll Association

2. The minimum wage increase

The minimum wage was increased by 2.5 per cent just last week, after the Fair Work Commission’s Annual Wage Review.

However, unlike previous minimum wage increases, only some awards will receive the raise as of 1 July. For employees under the retail award the change comes into effect after 1 September. While other industries heavily impacted by COVID-19, such as those in the airline industry,  won’t see a wage increase until November 2021. 

“This will mean a lot more admin work for payroll,” says Tracy Angwin, CEO of the Australian Payroll Association. 

“For example, if you’re a retailer in the amusement and entertainment industry [with a mixed workforce], let’s say, then you might have some employees getting the 1 July raise and others under the general retail award getting it in September. And others under the Amusement, Events and Recreation Award getting it two months later.”

HR can assist payroll in this circumstance by creating clear communications for employees about when they will receive a pay rise, if they’re eligible, says Angwin. 

This could create an administrative headache for some businesses, so it’s important different departments work together.

“If you think of HR as strategy and payroll as execution, they need to be working together to make this change as smooth as possible,” she says.

3. Superannuation increase

Another change to be aware of is the mandatory superannuation increase from 9.5 to 10 per cent occurring on 1 July. This change will have a big impact on employers but for those who want to help ensure employees have a healthy nest egg come retirement HR could encourage voluntary donations.

There are some benefits to making a voluntary contribution before the end of the financial year and, as part of strengthening your people’s financial literacy, you could point them in the direction of a financial expert who can offer more details.

“A little-known feature of the tax system is that in many cases you can often voluntarily send extra money to your superannuation, then claim a tax deduction for the difference,” says Franks.

“For example, if you earn the average wage of about $89,000 in Australia, you are paying 32.5 cents in tax for most of the dollars you earn. For most people however, superannuation is only taxed at 15 per cent.”

In this instance, for every voluntary dollar employees contribute, they can claim a 17.5 cent deduction to make up the difference. The voluntary contribution must come from taxed income. Salary sacrifices and contributions made by an employer do not count.

For HR professionals, Angwin says to tread lightly when discussing this option with employees. Firstly, it is illegal for HR to provide financial advice. And secondly, you may not have all the information about an employee’s income sources, so providing advice based on your mandatory contributions could be misleading.

“If an employee wants to make additional contributions to their super all you can do is tell them what contribution you as the employer have made on their behalf and leave them to discuss the rest with a professional,” says Angwin.

4. Understanding WFH costs

Last year the Australian Tax Office (ATO) introduced the ‘shortcut method’ for employees to claim deductibles on home office costs. The shortcut method aims to simplify these deductions by rolling depreciation costs and utility expenses, such as phone, internet, electricity, heating and cooling, into one. 

Employees will need to provide evidence that they worked from home during the hours they claim. Timesheets, rosters and diaries are acceptable forms of proof, according to the ATO. 

To claim this, employees need to work out how many hours they worked remotely between 1 July, 2020 and 30 June, 2021. They then multiply this by 80 cents to find the deductible amount. 

However, Mark Chapman, director of tax communications at H&R Block, isn’t convinced this is the best method for those primarily working from home.

“Another method called the fixed rate method, or 52 cent method, is worth considering,” he says.

“You get 52 cents for every hour you worked from home, but in addition you can claim things like phone and internet costs and the depreciation on your computer. This is likely to add up to a larger claim at the end of the day.”

Similar to the shortcut method, employees need to provide evidence (such as a timesheet) to prove they worked from home during the hours they’re claiming the 52 cents for. 

Other deductibles such as phone and internet expenses, stationery costs and the decline in value of equipment, will need to be calculated separately. Employees may need to provide receipts and utility bills as evidence of these costs.

Final HR EOFY advice

Our experts share some extra points HR should consider coming into the EOFY, including:

1. 1. Be organised – “When you are discussing pay increases or bonus, consider not only the impact on employers but employees,” says Franks, “Consider questions such as ‘Are they likely to want to salary sacrifice their bonus or increase super contributions?’ and ‘Will there be enough time for them to do so before [financial] year end’. Having these conversations early can help.”
   2. Remind employees to double check pre-filled data on their tax return – “Many third parties, such as banks, won’t pass information about you to the ATO until late July or early August, so early lodgers who use the ATO’s myTax system will often find lots of data missing from their pre-fill,” says Chapman, “If you omit income and get questioned by the ATO, the legal burden will be on you, even though you’ve taken the information straight from the ATO’s systems.”
   3. Consider using the new year to brush up your skills  – “Getting a better understanding of payroll can really help HR professions,” says Angwin, “It allows you to work closer with payroll staff, but also think of the data you can pull from payroll systems if you understand them. It can help you make more informed decisions.” 

Outside of taxes and superannuation changes, the end of the financial year is often a transitional time for organisations and employees alike.

Employers might want to use this time to review employment contracts, go over employee benefits or even revisit your organisation’s mission statement.

Employees may also be reconfiguring their own finances and might ask for a pay rise or look to going part-time, so it’s worth preparing managers for these conversations.

Looking to upskill for the next financial year? Check out AHRI’s selection of short courses. Available online and in person.

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