Six important things to consider in terms of next steps for meeting the ESS reporting deadline:
1 Starting early can go a long way
Given the ATO mandated software specifications for the reporting, many employers find they cannot handle the reporting requirements internally and may therefore engage with a third-party provider to at least some extent. Employers should consider starting the conversation now with their third-party providers about the 30 June 2023 reporting – doing so would give the employer sufficient time to line up all the ducks in a row, so to speak. Waiting until the end of June would be imprudent.
2 Making the data request concise can make the process run smoothly
Being clear about the data the employer needs – and doesn’t need – for the reporting, is critical. This enables, among other things, the requests the employer makes to other parts of the business to be specific. The reporting typically involves analysis of large data sets, so making sure that the data being requested is limited to that which is needed can help reduce risk and increase efficiency.
3 Engaging individuals with the right skills helps increase efficiencies and reduce errors and overlap
It is important to consider who is best placed to perform the data cleansing and analysis work. It has historically been quite common for organisations to only outsource the final calculation and reporting of the ESS income. However, where an entity has lots of transactions, employees, and/or plans, the initial data cleansing and analysis piece that is required before the calculations can even begin is of itself a huge time burden that stretches in-house resources.
Because of this, we’re starting to see a trend in organisations outsourcing this work to leverage the skills of data analysis specialists.
4 Taking on a global mindset is necessary when cross-border workers are part of the workforce
If a company has globally-mobile employees with ESS income, this adds an extra layer of complexity to the calculations. Making sure that accurate records are kept showing where the company’s employees have been working can help lower the risk of missing or inaccurate data, and untimely collection and reporting. Business travellers and employees that localise in a location following an international assignment are common examples that organisations tend to struggle with.
5 Legislative change should be a catalyst
A recent legislative change in Australia was the removal of cessation of employment as a deferred taxing point for all new and existing awards, effective 1 July 2022. Employers should consider the impact of this change, which may allow the employer to start preparation of the ESS reporting earlier in the year than previously. However, it also may mean individuals need to be tracked long after they have already left employment.
6 There’s more to it than just reporting
Although payroll tax reporting doesn’t always align with ATO ESS reporting, state revenue authorities actively match payroll tax reporting with ATO ESS reporting and will initiate reviews if there appears to be an unexplained discrepancy.