PSI and Attributed Income

[kazza6809]

Hi All,

This is my first post. I run a PSI company (so Pty Ltd, single employee) and have for some time been trying to come to grips with PSI accounting methodology. Whilst I get most of it, some of the attributed income rules seem confusing and I have had various and conflicting explanations from different accountants as well as the tax office. Basically, what I want to know is this:

Scenario:

1. Say PSI of $11,000 for the month (medium withholder).
2. $1,000 is GST.
3. Say $200 in allowable expenses
4. Less $825.69 super (another expense)
5. Therefore, $9,171.31 would be available to pay as wages (if paid promptly i.e. in 14 days after the end of the PAYGW period).
6. Go to ATO calculator and the PAYGW is $2583

This would all be fine if all the wages were paid out (promptly).

However, lets say that only $8,000 were paid as wages (promptly) and that would attract PAYGW of $2119.

My questions are:

1. Is the attributed income of $1,171.31 (the amount left over after the promptly paid period has expired) also to be included in the calculation for the month so that for reporting purposes $9,171.31 is still reported and $2583 is paid to the ATO; or
2. Is only the $8,000 reported and $2119 is paid to the ATO?
3. Either way, $1,171.31 is still in the company's bank account. If the answer is 1 above, then it can be paid out at anytime as the appropriate tax has been paid. However, if the answer is 2 above, then a) can it be paid out and b) if so how much PAYGW is payable and c) what is the process?

I realise that super is payable on all wages (including attributed wages) paid. However, if at the end of the FY, there are still attributed amounts outstanding that have not been paid, is super still payable on that amount?

I have read the ATO's guide NAT 72510-09.2008 but it seems to only tell half the story. Any advice would be appreciated.

K

[JamesMillar]

Originally Posted by kazza6809

Hi All,

This is my first post. I run a PSI company (so Pty Ltd, single employee) and have for some time been trying to come to grips with PSI accounting methodology. Whilst I get most of it, some of the attributed income rules seem confusing and I have had various and conflicting explanations from different accountants as well as the tax office. Basically, what I want to know is this:

Scenario:

1. Say PSI of $11,000 for the month (medium withholder).
2. $1,000 is GST.
3. Say $200 in allowable expenses
4. Less $825.69 super (another expense)
5. Therefore, $9,171.31 would be available to pay as wages (if paid promptly i.e. in 14 days after the end of the PAYGW period).
6. Go to ATO calculator and the PAYGW is $2583

This would all be fine if all the wages were paid out (promptly).

However, lets say that only $8,000 were paid as wages (promptly) and that would attract PAYGW of $2119.

My questions are:

1. Is the attributed income of $1,171.31 (the amount left over after the promptly paid period has expired) also to be included in the calculation for the month so that for reporting purposes $9,171.31 is still reported and $2583 is paid to the ATO; Yes the surplus is the net PSI amount for the period and you need to pay PAYG withholding on that. The amount prompty paid out as wages is treated as normal wages (with effectively the same PAYG Withholding requirements. So in effect you are paying payg withholding based on the entire amount.

or
2. Is only the $8,000 reported and $2119 is paid to the ATO? No - refer above

3. Either way, $1,171.31 is still in the company's bank account. If the answer is 1 above, then it can be paid out at anytime as the appropriate tax has been paid. yes it can However, if the answer is 2 above, then a) can it be paid out and b) if so how much PAYGW is payable and c) what is the process?

I realise that super is payable on all wages (including attributed wages) paid. However, if at the end of the FY, there are still attributed amounts outstanding that have not been paid, is super still payable on that amount? I'm not certain that super is payable on net PSI "attributed" income. Remember that the normal wages you are paying out is not Net PSI and it will face super in the normal way. Super law on mandatory employer contributions is not part of the tax PSI legislation - it is separate law. It may be the case that there is no super on the net PSI attributed income. I would double check that

I have read the ATO's guide NAT 72510-09.2008 but it seems to only tell half the story. Any advice would be appreciated.Disregard everything the ATO tell you - except where its in writing. They are legally bound to honour content on their website (including NATS) so I would recommend printing any material that you are relying upon. I have seen many instances where the ATO misinterpret legislation in their written materials. Simple omissions such as "ands" and "ors" to indicate inclusive or exclusive requirements make a very big difference in the outcomes. The ATO typically get this wrong because they don't understand / consider the effect of leaving things out

K

PS also keep in mind that there are simplified Net PSI PAYG Withholding calculation methods (as compared to what you are doing which is the most precise and time consuming method). I would review paying your PSI out as wages over maybe having a higher Net PSI component for attribution. Workcare / Workcover has its on law but it probably doesn't apply to Net PSI income - only to wages paid out. Save yourself some employer "on costs" and stay away from wages where possible

[beanydc]

For the kiwis out there, this is an Aussie thing. If you have a company you need to get good advice whether to take drawings or PAYE wages. Almost always, drawings is better.

(with apologies for going slightly off topic)

[kazza6809]

Hi Everyone,

Thanks for your replies.

I realise there are easier methods for calculating PSI and wages but they are not as accurate. I have been trying to come up with a method for working all this out as closely as possible so that there are no attributed PSI left at the end of a PAYG period or EFY as that seems to complicate matter even more when there is. The year before last we were stuck with instalment payments and that wasn't very nice.

James, your comments have clarified my thinking - thank you. For the super bit, I was referencing ATO ID 2002/774 which says (as I understand it) that super is payable on normal wages and paid attributed PSI wages - it was a bit unclear about the unpaid amounts.

One final question if I may, lets say a car is salary sacrificed in a PSI company and all the expenses (whatever they are) have been worked out. The company pays FBT (which is an expense), but what if the employee makes any financial contributions (after tax) towards the expense, is the contributions PSI or "other income" or something else?

Sorry for the curly questions. Many thanks for taking time to respond.

K

[JamesMillar]

Without checking, its highly unlikely that FBT re-contributions are PSI income. I'm not sure what your GST status is but keep that in mind for FBT re-contributions as well.

[kazza6809]

Our GST status is GST registered. I was pretty sure re-contributions were not PSI. Thanks.

K

[JamesMillar]

Originally Posted by kazza6809

Our GST status is GST registered. I was pretty sure re-contributions were not PSI. Thanks.

K

No problem

Be aware that you will face GST on those re contributions.

[kazza6809]

Thanks again James for your advice. Yes, GST on contributions would have to be paid by us.

K

[kazza6809]

"I realise that super is payable on all wages (including paid attributed wages). However, if at the end of the FY, there are still attributed amounts outstanding (i.e. that have not been paid promptly as gross wages or as attributed wages), is super still payable on that amount?"

Any ideas anyone?

Ta.

[JamesMillar]

I touched on this issue in the post above – I’m not certain that super is payable on non salary attributed net PSI income. The super legislation regulating compulsory payments is separate and independent to tax law. If you could quote or provide your reference to this advice it would be easy to review.