Financial support for those affected by bushfires

The last few months have seen tragic loss of lives, properties and wildlife. If you have been affected, here are some resources that may help ease some of your financial worries:

  • The ATO’s bushfire support page offers impacted parties a range of tax assistance including:
    • extra time to pay debts or lodge tax forms
    • help finding lost tax file numbers
    • re-issuing income tax returns, activity statements and notices of assessment
    • help re-constructing lost tax records
    • fast tracking refunds owed
    • payment plans tailored to your circumstances
    • remittance of penalties or interest charged during the time you have been affected
    • lodgment and payment deferrals
    • you can also call their Emergency Support Infoline on 1800 806 218.
  • Australian banks are also ready to help those affected by the fires.
    Read more from the Australian Banking Association  or contact your bank directly to access disaster assistance such as:

    • deferral of scheduled loan repayments
    • waiving of fees and charges
    • debt consolidation
    • restructuring existing loans without incurring fees
    • deferring interest payments
    • additional finance to help cover cash flow shortages
    • deferring credit card payments
    • increasing emergency credit card limits.
  • Financial assistance is available from the Federal Government including the Disaster Recovery Allowance.

Tax office to crack down on luxury items owned by the rich

At the end of last year the ATO began cracking down on tax dodgers by demanding information from 30 insurance companies about their wealthy customers during the past five years.

Insurers were instructed to provide policy information on assets that met these thresholds:

  • Aircraft: $150,000
  • Marine vessels: $100,000
  • Fine art: $100,000 per item
  • Motor vehicles: $65,000
  • Thoroughbred horses: $65,000

“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a $3m yacht then this is likely to raise some red flags,” ATO deputy commissioner Deborah Jenkins, said.

The tax office is targeting 350,000 taxpayers, with particular attention on high net worth taxpayers who had not declared capital gains on certain assets, such as paintings and sculptures.

The information provided will also help expose people who claimed GST on assets that were used for personal purposes or bought expensive items through their self-managed super funds under the pretence of an investment.

Only assets owned since July 2015 will be traced, as the ATO already has data on the two previous financial years.
Anyone who suspects they have not complied with their tax or superannuation obligations will likely receive reduced penalties if they proactively bring their situation to the attention of the ATO.

Superannuation and payroll changes to watch out for in 2020

The new year brings with it a raft of payroll changes, many aimed at reducing wage theft and non-compliance with awards.There are also several changes to superannuation to ensure fairer outcomes for employees.

Paying super on gross rate of pay
As of 1 January 2020, employers are no longer allowed to pay super only on the reduced salary of an employee after their salary sacrifice has been taken out. Instead, employers must now pay super on the employee’s gross rate of pay, which includes any salary the employee chooses to sacrifice.

Salary sacrifice and compulsory contributions
The first day of January also marked the date that salary sacrifice can no longer contribute to the super guarantee that your employer is legally required to pay. For example, prior to 2020, if an employee salary sacrificed the full superannuation guarantee of 9.5%, the employer wasn’t legally required to contribute any further amount. Starting this year, employers must always contribute the full 9.5%, regardless of how much the employee salary sacrifices.

The superannuation guarantee amnesty
A proposed bill likely to come into effect this year is the Superannuation Guarantee Amnesty bill. This provides a six-month amnesty for employers to correct any unpaid super contributions and declare these to the ATO. After this period, penalties up to 200% will apply.

Notifying employees of their annualised salary
Starting 1 March 2020, employers must notify employees of their annualised salary and their maximum ordinary working hours outside of the 38-hour week. The employer must make sure that any employee who falls under one of 22 modern awards and works more than the 38-hours isn’t paid below the minimum wage when averaging out all hours.

Tracking Hours
Employers must also record employee start, finish and break times, which must also be confirmed by the employee for each roster or pay cycle. Excess hours worked in that period must be paid to the employee as overtime if their annual salary does not pay them at or above the minimum wage for their total hours.

Tax Practitioners Board bans three agents who falsified records

In August, three tax practitioners had their registrations terminated for five years after breaching the Code of Professional Conduct.

Their offences included failure to:

  • act honestly and with integrity, having falsified supplier invoices and personal bank statements
  • lodge a personal income tax return and quarterly activity statements by their respective due dates and pay a tax liability to the Australian Taxation Office
  • advise the Board they had become an undischarged bankrupt.

In June the Tax Practitioners Board (TPB) also investigated a tax agent who allegedly lodged fraudulent BAS and failed to pay $1.6 million of outstanding tax liabilities.

In this case, the agent breached the code by:

  • lodging false BAS for clients to generate a GST refund to which they were not entitled
  • altering clients’ financial details to receive their refunds into the agent’s personal account
  • failing to pay an outstanding tax liability for themselves and for 24 related entities
  • being subject to legal recovery action.

TPB Chair, Mr Ian Klug AM, said these recent cases highlight the scrutiny that tax practitioners must be prepared to undergo in meeting the stringent requirements of registration.

‘Tax practitioners who are involved in fraudulent activities of this kind undermine public trust in honest tax advisers,’ he said. ‘Where we see criminality, we’ll also refer to the authorities for investigation and possible prosecution.’

The Tax Practitioners Board regulates tax practitioners in order to protect consumers and ensure tax practitioners meet appropriate standards of professional and ethical conduct.

Tax deductions now disallowed for non-compliant payments

As of 1 July 2019, you can no longer claim a tax deduction for a worker payment if you failed to comply with PAYG withholding and reporting obligations.

Payments can include:

  • employee salary, wages, commissions, bonuses or allowances
  • directors’ fees
  • labour-hire arrangements
  • contractor services (except supply of goods and real property) where no ABN was provided
  • non-cash benefits to any of the above parties

When PAYG rules require you to withhold an amount, you must

  • withhold the amount from the payment before you pay it to them
  • report the amount to the ATO

If these steps are not followed, you won’t be able to claim a deduction.

However, if you do accidentally withhold or report an incorrect amount, you won’t lose your deduction, but you should correct your mistake as soon as possible to minimise any penalties.

If you genuinely believed your employee was a contractor you can correct the mistake by lodging a voluntary disclosure.

You also won’t lose your deduction if you fail to report withholding payments on a taxable payments annual report (TPAR) or a payment summary annual report (PSAR).

You might be getting a call from the ABR

There are almost 8 million active Australian Business Number (ABN) holders in Australia. Last month, the Australian Business Register (ABR) began contacting a randomly selected sample in order to measure the ABR’s data quality.

If you’re contacted, you will be asked to confirm your business information and discuss your understanding, usage and experience of the ABN.

“The ABR is trying [to] understand and improve the experience for clients applying for, maintaining and cancelling an ABN,” said the ATO.

This is another step to help strengthen the integrity of the ABN system. It follows on from a recent announcement that all ABN holders who have an income tax return obligation will be required to lodge an income tax return from 2021.

From the following year, ABN holders will also need to confirm their business details annually.

Currently, ABN holders can retain their ABN even if they are not meeting their obligations to lodge an income tax return or update their ABN details.

The new requirements aim to make ABN holders more accountable while minimising the impact on already compliant businesses.

What to do if you’re hiring a ‘working holiday maker’?

Any employer can hire a working holiday maker, especially when they need labour for a short period. Working holiday makers will hold a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462).

If your new employee has ticked the box on their TFN declaration that they’re a working holiday maker there are three important steps you need to take:

Step 1: Register as an employer of working holiday makers
Make sure you fill out the Working holiday maker employer registration form online before making your first payment to them. You will need your:

  • entity type
  • contact details

Step 2: Check their visa is valid
The best way to confirm their visa is through the Visa Entitlement Verification Online (VEVO) service. Your employee can do this for you online, or via the myVEVO app, and send you an email verifying their details.

Step 3: Apply correct amounts for tax and super
You must withhold 15% from every dollar your working holiday maker earns up to $37,000. For amounts above this use the tax table for working holiday makers. Working holiday makers are not eligible for the tax-free threshold. If they do not provide you with their TFN then you will need to withhold tax at the top rate of 45%.

You also need to pay eligible super contributions as you normally would – they can claim these back when they leave Australia.

Should I use ‘cash’ or ‘accrual’ accounting to report my GST?

The main difference between cash and accrual (non-cash) accounting is timing.

If you record revenue or expenses when you pay and receive money, you’re using cash-basis accounting. This is the simplest method and is suitable for most smaller businesses who handle cash transactions. It can only be used if your aggregated turnover is less than $10 million, or if you use cash accounting for income tax.

If you wait until you raise or receive an invoice to record revenue or expenses, then you’re using accrual accounting. This can be a far more powerful tool for managing a business and is suitable for businesses that don’t get paid straight away.

Pros and Cons

Benefits of cash accounting

  • It’s simple and shows how much money you have on hand, making it easier to manage cash flow.
  • It’s an easier option for calculating GST.

Disadvantages of cash accounting

  • It doesn’t accurately show your profitability – you might look profitable simply because you haven’t paid your bills.
  • It not as useful when making management decisions, as it only shows a day-to-day view of your finances.

Benefits of accrual accounting

  • It gives you an accurate picture of your business performance and finances, allowing you to make more informed management decisions.
  • Using this method can be more successful when pitching for long-term finance.
  • You can claim GST upfront on unpaid expenses upfront.

Disadvantages of accrual accounting

  • It’s more work because you have to watch invoices, not just your bank account.
  • You may have to pay tax on income before the customer has actually paid you.

Hybrid methods

It is possible to use a hybrid accounting system. For example, you could base big financial decisions such as loan applications on accrual accounting but use cash-basis accounting to simplify some elements of your tax.

However, there are lots of rules around who can and can’t do this, so please speak to us to find out what applies to you. You’ll also likely need smart accounting software that can switch between cash-basis and accrual-basis as needed.

Statement by a Supplier – What to do if your supplier doesn’t quote an ABN

Do you have suppliers who don’t have or provide you with their ABN? In this scenario, you are required to withhold 47% from their payment and send the withheld amount to the ATO.

However, some suppliers are not required to quote an ABN and can use a Statement by a Supplier to justify why payment should not be withheld.

Individuals or businesses can use this form when any of the following apply:

  • they are not carrying on an enterprise in Australia
  • they are an individual under 18 years and the payment does not exceed $350 per week
  • the payment does not exceed $75, excluding any goods and services tax (GST)
  • the supply that the payment relates to is wholly input taxed
  • they are an individual, and a written statement is provided to the payer to the effect that the supply is either:
    • made in the course or furtherance of an activity done as a private recreational pursuit or hobby, or
    • wholly of a private or domestic nature
  • they are an individual or a partnership without a reasonable expectation of profit or gain
  • the whole of the payment is exempt income.

However, if you have reasonable grounds to believe that the statement from your supplier is false or misleading, you are still required to withhold the full 47% from the supplier’s payment.

If your supplier is operating a business or is entitled to register for an ABN, they cannot use the Statement by a Supplier form.

Get in touch if you have any ‘Statement by a Supplier’ questions or read more on the ATO website.

What is TPAR and how does it affect you?

A Taxable Payments Annual Report (TPAR) tells the ATO about contractor payments for services. This includes subcontractors, consultants and independent contractors who could be either sole traders (individuals), companies, partnerships or trusts.

You may be required to lodge TPAR by 28 August if your business provides:

  • building and construction services
  • cleaning services for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • courier services for contractor payments from 1 July 2018 (first report due by 28 August 2019)
  • road freight services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • information technology (IT) services for contractor payments from 1 July 2019 (first report due by 28 August 2020)
  • security, investigation or surveillance services for contractor payments from 1 July 2019 (first report due by 28 August 2020)

The contractor details you need to report include:

  • their ABN
  • their name and address
  • the gross amount you paid to them for the financial year (including any GST)

The ATO uses this information to identify contractors who haven’t met their tax obligations.

If your business supplies a mix of services, you should work out the percentage of payments received from any of the above services.

If your total contractor payments are 10% or more of your GST turnover (or if you are primarily in the building and construction industry) – you must lodge a TPAR.

Remember that all businesses have a GST turnover, regardless of whether or not you are registered for GST.

Additionally, if you are a government entity you may also need to use a TPAR to report grants paid.

If you are not sure whether you need to report you can contact us or visit the ATO website.