STP Phase 2- Non Reportable - Exempt (Fringe) Benefits

[Brian4]

It seems that this has reared its ugly head once again with STP Phase 2. (there were a number of posts about Non Reportable - Exempt (Fringe) Benefits in 2019 when STP1 came in).

We have employees who are religious practitioners and salary package part of their salary under section 57 of the FTBAA -being exempt NON-Reportable Fringe Benefits. Under STP Phase 1 we had no issues with the pre-tax deductions being excluded from the gross earnings reported to the ATO by ticking the exempt from PAYG Tax box.

However this no longer works and STP2 is once again reporting gross amounts to the ATO. I have logged into our ATO portal and checked what they receive and it definitely is the gross amounts including the "not reportable" pre-tax deductions. I spoke to MYOB payroll team yesterday and the ATO STP team (after hours on hold) but no one had an answer as to how to over come this.

The ATO's web site states "If your employee has an effective salary sacrifice arrangement, you previously would have reported post-sacrifice amounts to us. This has changed in STP Phase 2. You now must report pre-sacrifice amounts, and also report salary sacrifice separately." see ATO Phase 2 instructions (disaggregation of gross section).

Does anyone have any suggestions on how to work around this, or set up a payroll category for pre-tax deductions that will be excluded from the gross salary being reported via STP - the best I can do is to put it as and "salary sacrifice - other employee benefits" - but I'm sure this will be reported incorrectly as a Reportable Fringe Benefit.

Help please

[Thornhill2018]

Hi Brian,

OMG so please to hear im not the only one having this issue. 

How did you get around it for the final STP report.

Ive been on the phone with MUYOB and ATO and cannot get this resolved.

We even tried putting the deduction to"salary sacrifice - other employee benefits" but it still reflected in the gross amount.

None of the staff are able to do their tax returns due to this and i dont seem to be able to find a way to fix this.

thanks

[Brian4]

Hi Thornhill,

Just ended up having to trust the process - made sure all "Non-Reportable Exempt benefits" were set up as pay items with the category "Salary Sacrifice - Other Employee Benefits". It does report these in the Gross figures in the STP2 "Payroll Reporting" to the ATO - but it didn't included it in the employees tax returns gross salary/wages (nor in income test items IT1). We had a number of employees check their information in their MyGov Tax Return before we finalised to make sure - (as it updated their details each time we made a change and reported it to the ATO). Did the normal checks per MYOB website and made sure the "Total STP Taxable wages" were correct etc. So we know all our employees tax returns were correct. 

As far as I can see, Sec. 57 benefits are still classified as “Non-Reportable Exempt Fringe benefits, for Tax, Centrelink and FBT purposes and do not form part of “Adjusted Taxable Income”.  ATO web sites states "A benefit that is exempt because it is provided by a religious institution to a religious practitioner in recognition of the practitioner's pastoral duties is not reportable." https://www.ato.gov.au/business/fringe-benefits-tax/fbt-concessions-for-not-for-profit-organisations... and also see www.servicesaustralia.gov.au "what adjusted taxable income is" - only reportable benefits form ATI.

So as for it these benefits being "non-reportable" - with STP2 it seems nothing is "non-reportable" any more and who knows the agenda behind this - it will be interesting how it is utlimately reported to other government agencies.

Sorry for the delayed repsonse and I'm sure you have since resolved the issue but incase not... thought I'd still respond.  

Cheers

Brian

[CJL05]

Hi @Brian4, @Thornhill2018 I am also having this problem and am absolutely pulling my hair out. I work for a religious organisation and some of our employees take advantage of the section 57A salary package option. I followed all the steps you have mentioned when I did the end of year finalisation, however the gross amount is still showing on the income statements for these staff, and when they try to do their tax return it is coming back saying they owe thousands in tax! Really not sure how to proceed from here. Any thoughts are greatly appreciated!

[Thornhill2018]

HI CJL05

Have you changed the salary packing non reportable to the "Salary Sacrifice - Other Employee Benefits" reporting catagory?

I found i had to actually run a zero pay in order for it to take effect rather than run an update event in the stp reporting window.

If you have already finalised the year before, you will need to unfinalise it before running the zero pay then run a final report you should then see the salaray packinging show as a negative in the stp report. then finalise your year and report.

Get one of the employees that do salary packing to see if this has updated in their mygov account. 

hoe this helps.

[CJL05]

Hi @Thornhill2018 

Thank you so much for your response. I had already changed the reporting category, but have now unfinalised and run a zero pay as suggested, and I'm cautiously optimistic that this has worked. Will check in a day or so to see if it has updated correctly in the employee's mygov accounts.

Keeping everything crossed that this is the answer - I really didn't know what else to do, so thank you for getting back to me.

[Doreen_P]

Hi All

When creating the payroll category salary sacrifice, it should be created under the superannuation tab and not under deductions as it will result in reporting incorrectly. You may also check The Help Article: Assign ATO reporting categories for Single Touch Payroll reporting for further information.

Please let us know if you require any further assistance with this. We are happy to assist.

Best regards,

Doreen

[CJL05]

Thanks Doreen - this isn't a salary sacrifice for superannuation. As a NFP, this is a fringe benefit which comes under Section 57A (exempt from FBT).

The solution above from @Thornhill2018 has worked.

[CJL05]

@Sam0103 just wondering if you ever solved your issue? This solution worked for us.

[Doreen_P]

Hi, @CJL05 

Thanks for updating us.

Glad to hear that the resolution provided by @Thornhill2018 worked for you. Kindly click on "Accept as Solution" to assist other users in finding this information. Please feel free to post again if you require any further assistance. We are happy to assist.

Best regards,

Doreen