ATO impersonation scam update

 

$30,000 instant asset write-off

The ATO is reminding businesses that are looking to expand or improve their business and thinking of buying new or second hand assets, that medium sized businesses with a turnover up to $50 million (but at least $10 million) are eligible for the instant asset write-off.

This now applies to assets that cost up to $30,000 and which were purchased and first used or installed ready for use from 7:30pm (AEDT) on 2 April 2019 to 30 June 2020.

Medium sized businesses may purchase and claim a deduction for each asset that costs less than the $30,000 threshold.

For assets over $30,000 the general depreciation rules apply (which may depend on the entity).

 

Federal Court provides clarification on the PSI rules

The Federal Court recently handed down two decisions relating to the personal services income ('PSI') rules.

Income is classified as PSI when more than 50% of the income received under a contract is for a taxpayer’s labour, skills or expertise.

The PSI rules are integrity provisions which ensure individuals cannot reduce or defer their income tax by (for example) diverting income for their personal services through companies, partnerships or trusts.  If the rules apply, the individual is taxed on the income directly.

The rules do not apply if at least 75% of the individual’s PSI is for producing a result, where the individual supplies all the required 'tools of trade' and is liable for rectifying defects in the work (this is known as the 'results test').

In the first case, the Federal Court confirmed that the taxpayer did not meet the 'results test'.

The taxpayer argued that the 'results test' is still satisfied even if they do not get paid for achieving a result, provided they can show this is the custom or practice of independent contractors in their industry.

The Federal Court rejected this, agreeing with the ATO’s earlier determination to apply the PSI laws to tax the individual’s contract income as his own income, rather than income split through a partnership with his spouse (which also meant certain deductions were not allowable).

The Federal Court also affirmed the imposition of penalties for recklessness.

However, in the second case, the Federal Court allowed the taxpayer’s appeal from an earlier AAT decision, that he has failed the 'unrelated clients test' despite advertising his services on LinkedIn.

The Federal Court found the ATO and AAT had applied an exception for services provided through intermediaries (e.g., recruitment agencies) too broadly, and instead the Court preferred a narrow interpretation of the exception.

This matter has now been referred back to the AAT to be reconsidered, and the ATO has said it will consider this decision and whether an appeal is appropriate.


Deductions for a company or trust home-based business

The ATO has reminded taxpayers that, if they run their home-based business as a company or trust, their business should have a genuine, market-rate rental contract (or similar agreement) with the owner of the property.

The agreement will determine which expenses the business pays for and can claim as a deduction.

If there isn’t a genuine rental contract, there may be tax implications for the homeowner and the business for providing benefits to any individuals.

If an individual earns PSI, they may not be able to deduct some occupancy expenses.

If the business pays for or reimburses an employee of the business for some of the expenses of running the business from home, the employee can't claim a deduction for those expenses in their individual income tax return.

Also, the business may have to pay FBT if it pays or reimburses the individual for certain expenses as an employee (although exemptions and concessions may apply to reduce the FBT liability), and may need to keep additional records for FBT purposes.

 

ATO impersonation scam update

Editor: Unbelievably, scammers are still successfully bilking Australians out of tens of thousands of dollars, as a recent ATO scam report shows.

According to the July 2019 ATO impersonation scam report:

-      6,179 online scam reports were received in the first month of their new online reporting form going live;

-      6,645 phone scam reports were officially recorded, and 465 phishing scam emails were reported to reportemailfraud@ato.gov.au;

-      520 taxpayers provided scammers with their personal identifying information including date of birth, tax file number, driver's licence number and notice of assessment details; and

-      $197,057 was reported as being paid to scammers, mostly by iTunes and Google Play.

 

Using the cents per kilometre method

The ‘cents per kilometre’ method broadly allows an individual taxpayer to claim up to a maximum of 5,000 business kilometres per car, per year without the need to keep any written evidence (e.g., receipts) of car expenses.

Importantly, taxpayers making a ‘cents per kilometre’ claim are required to demonstrate that they worked out the number of business kilometres they claimed on a reasonable basis

Taxpayers claiming under this method will generally fall into one of two categories, being either those who undertake a regular or irregular pattern of work-related travel.

If a taxpayer has a regular pattern of work-related travel (e.g., a 60 kilometre round trip to the warehouse to pick up supplies twice a week, 40 weeks in the year), then this type of explanation would generally be sufficient to justify the claim.

However, if the taxpayer has an irregular pattern of work-related travel, then they would need to make a note (e.g., in a diary) of each trip. 

Also, remember that, for the 2019 income year, the rate that is applied (up to the 5,000 business kilometre maximum) is 68 cents (up from 66 cents in 2018) per business kilometre travelled.

Measuring the integrity of the ABR

From September, the Australian Business Register ('ABR') will contact a random sample of ABN holders across all entity types to:

-      confirm their business information;

-      discuss how they use the ABN, and check their understanding of how ABNs are used;

-       find out about their registration experience and ask for suggestions for how they can improve it; and

-       if applicable, confirm their entitlement to the ABN (although the ABR will not cancel ABNs unless requested).

The ABR is trying to understand and improve the experience for clients applying for, maintaining and cancelling an ABN, and will use the information to measure ABR data quality.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

'LEGO set' and 'wedding reception' are not deductible!

 

"Outrageous" deductions rejected

The ATO has published some of the most unusual claims that they disallowed last financial year.

Nearly 700,000 taxpayers claimed almost $2 billion of ‘other’ expenses, but the ATO's systematic review of claims had found, and disallowed, some very unusual expenses, including:

-   claims for Lego sets bought as gifts for children, and sporting equipment or membership fees for their child athletes;

-   claims for dental expenses ("believing a nice smile was essential to finding a job");

-   some taxpayers tried to claim the purchase of a brand new car (in excess of $20,000 each!), with one "particularly charitable" taxpayer trying to claim for a car purchased as a gift for their mother;

-   one taxpayer made a claim for "the cost of raising twins", while another claimed for the "cost of raising three children" (and another taxpayer was obviously shocked at the cost of having children, simply stating "New born baby expensive" when making their claim);

-   other taxpayers claimed child support payments, private school fees, school uniforms, before school care and other school expenses, as well as health insurance costs and medical expenses; and

-   one taxpayer decided to claim the cost of their wedding reception.

The ‘other’ deductions section of the tax return is for expenses incurred in earning income that don’t appear elsewhere on the return — such as income protection and sickness insurance premiums.

The ATO is reminding taxpayers that, in order to claim an ‘other’ deduction, the expenses must be directly related to earning income and they need to have a receipt or record of the expense.

 

ATO guidance regarding incorrect ENCC determinations

The ATO has acknowledged that an incorrect excess non-concessional contribution ('ENCC') determination may issue due to a known system issue with the calculation of some SMSF member’s total super balance ('TSB').

Editor: Recent super reforms have meant that individuals are restricted from making non-concessional contributions where their TSB equals or exceeds $1.6 million.

This is due to an individual’s pension being incorrectly 'double counted' in the calculation of their TSB (which may have occurred where the individual commenced a pension on 30 June 2017 and/or 1 July 2017).

If an incorrect ENCC determination does issue, the ATO advises that there is no need for the SMSF to amend its reporting — an amended determination should issue within 4 weeks.

Editor: If you get one of these, please contact our office and we'll help sort it out.

 

 

 

 

ATO watching for foreign income this Tax Time

The ATO is urging taxpayers who receive any foreign income from investments, family members or working overseas to make sure they report it this tax time.

New international data sharing agreements allow the ATO to track money across borders and identify individuals not meeting their obligations.

“This year, the ATO has received records relating to more than 1.6 million off-shore accounts holding over $100 billion and is now using data-matching and sophisticated analytics to identify foreign income that has not been reported,” Assistant Commissioner Karen Foat said.

The ATO has shared data on financial account information of foreign tax residents with over 65 foreign tax jurisdictions across the globe, including information on account holders, balances, interest and dividend payments, proceeds from the sale of assets, and other income.

In addition to a small number of individuals deliberately engaging in tax avoidance, the ATO is concerned about a large number that are unsure of how to meet their obligations.

“If you're an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare all of your foreign income no matter how small the amount may be.  This may include income from offshore investments, employment, pensions, business and consulting, or capital gains on overseas assets,” Ms Foat said.

"Even if you have paid tax on the overseas income it must be reported to the ATO, however you may be able to claim a foreign income tax offset to account for any foreign tax paid.”

 

The ATO hits the road

The ATO plans to visit almost 10,000 businesses this financial year in all States and Territories, across a variety of industries, as part of their strategy to deal with the black economy (they visited nearly 9,000 businesses in the 2018/19 financial year).

According to Assistant Commissioner Peter Holt, there are a number of businesses in some areas not registered for GST or PAYG withholding, which can be a sign of the black economy, as well as a number of businesses with overdue tax returns.

Other black economy signs that the ATO looks out for are things like lifestyle and assets far exceeding reported business income, sham contracting, a failure to provide pay slips, reports that employers are paying their workers cash in hand and keeping them off the books, or a lack of merchant payment facilities like EFTPOS.

Some businesses are more likely than others to get a visit from the ATO, including:

-    Residential building construction;

-    Building completion and installation services, and other construction services;

-    Building cleaning, pest control, and gardening services;

-    Accommodation;

-    Pharmaceutical and other store-based retailing;

-    Automotive repair and maintenance;

-    Cafes, restaurants, and takeaway food services;

-    Personal care services;

-    Legal and accounting services;

-    Computer system design and related services; and

-    Adult, community and other education services

Motor vehicle registries data matching program protocol

The ATO will match the data provided by the State and Territory motor vehicle registering authorities against the ATO’s taxpayer records with the objective of identifying those who may not be meeting their registration, reporting, lodgment and payment obligations.

Details will be requested where records indicate a vehicle has been transferred or newly registered during the 2016/17, 2017/18 and 2018/19 financial years where the purchase price or market value is equal to or exceeds $10,000 (approximately 2 million transactional records a year).

This data will allow compliance checks on luxury car tax, FBT and fuel schemes, as well as identifying higher risk taxpayers with outstanding taxation lodgments, and those with undeclared income or concealing the real accumulation of wealth.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO "puts the brakes" on dodgy car claims

Tax cuts become law

The Government has announced that more than 10 million Australians will receive immediate tax relief following the passage of legislation through the Parliament, which increases the top threshold for the 19% tax rate from $41,000 to $45,000 and increases the low income tax offset from $645 to $700 in 2022/23.

In combination with the legislated removal of the 37% tax bracket in 2024/25, the Government is also "delivering structural reform to the tax system" by reducing the 32.5% tax rate to 30%.

Low and middle income tax offset also now law

In addition, from the 2018/19 income year (i.e., last income year):

-     The low and middle income tax offset ('LAMITO') has been increased from a maximum amount of $530 to $1,080 per annum and the base amount increased from $200 to $255 per annum; and

-      Taxpayers with a taxable income:

       —   of $37,000 or below can now receive a LAMITO of up to $255;

       —   above $37,000 and below $48,001 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080;

       —   above $48,000 and below $90,001 are now eligible for the maximum LAMITO of $1,080; and

       —   above $90,000 but is no more than $126,000 are now eligible for a LAMITO of $1,080, less an amount equal to 3% of the excess.

The ATO is implementing the necessary system changes so taxpayers that have already lodged their 2018/19 tax return will receive any increase to the LAMITO they are entitled to (any tax refund should be deposited in the taxpayer's nominated bank account).  There will not be any need to request an amendment.

Those who are yet to lodge their tax return will have any offset they are entitled to taken into account during the normal processing of their return.

 

ATO "puts the brakes" on dodgy car claims

The ATO is making work-related car expenses a key focus again during Tax Time 2019.

Assistant Commissioner Karen Foat said over 3.6 million people made a work-related car expense claim in 2017/18, totalling more than $7.2 billion.

“We are still concerned that some taxpayers aren’t getting the message that over-claiming will be detected and if it is deliberate, penalties will apply,” she said.

“While some people do make legitimate mistakes, we are concerned that many people are deliberately making dodgy claims in order to get a bigger refund. We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for.”

One in five car claims are exactly at the maximum limit that doesn’t require receipts.

Under the cents per kilometre method, taxpayers don’t need to keep receipts, but they do need to be able to demonstrate how they worked out the number of kilometres they travelled for work purposes.

The ATO’s sophisticated analytics compares taxpayer claims with others earning similar amounts in similar jobs.

Where the ATO identifies questionable claims, they will contact taxpayers and ask them to show how they have calculated their claim, and in some cases the ATO may even contact employers to confirm whether a taxpayer was required to use their own car for work-related travel.

Case studies

The ATO’s sophisticated data analytics found a range of unsupported claims in 2018, including:

-       When the ATO asked a taxpayer to provide the logbook to support a claim of $4,800, they found the taxpayer was referring to a car service logbook rather than a logbook kept for calculating their work use car percentage (the taxpayer had not undertaken any work-related car travel during the year).

-       Another claim was flagged by the ATO's analytics indicating a taxpayer, a retail worker, had incorrectly claimed $350 for the cost of public transport to and from work.

-       The ATO also identified an office worker claiming $3,300 for 5000 kilometres of work-related travel using the cents per kilometre method, but it turned out the taxpayer's claim was based on trips he made from home to work.

 

Private health insurance statements now optional

Taxpayers with private health insurance should be aware that insurance providers are no longer required to provide statements to their members.

Taxpayers lodging their tax returns using a registered tax agent should have their health insurance details 'pre-filled' into their return (but they will need to contact their health insurer if they cannot get this information for some reason).

 

FBT and taxi travel

Taxi travel by an employee is an exempt benefit for FBT purposes if the travel is a single trip beginning or ending at the employee's place of work (or if it is a result of sickness or injury in certain circumstances).

However, the ATO is reminding taxpayers that this exemption is limited to travel undertaken in a vehicle that is licensed to operate as a taxi by the relevant State or Territory, and does not extend to travel undertaken in a ride-sourcing vehicle or other vehicle for hire that do not hold such a licence.

 

 

ATO rates and thresholds

Editor: The ATO has updated a number of rates and thresholds on their website, including the following.

Division 7A – benchmark interest rate

The Division 7A benchmark interest rate for the 2020 income year is 5.37% (up from the rate for the 2019 income year of 5.20%).

Car cost limit for depreciation

The maximum value taxpayers can use for calculating depreciation of cars is the car limit in the year in which they first used or leased the car.

In the 2019/20 income year, the car limit is $57,581, unchanged from the 2018/19 year.

Capital improvement threshold

The improvement threshold for the 2019/20 income year is $153,093, up from $150,386 for the 2018/19 income year.

SMSF LRBA interest rates

An interest rate of 5.94% charged by an SMSF in the 2020 income year under a limited recourse borrowing arrangement ('LRBA') to acquire real property would be consistent with the ATO's safe harbour terms (or 7.94% for listed shares or units).

 

ATO Data Matching Program: HELP, VSL and/or TSL debts

The ATO is conducting a data matching program for the 2019/20, 2020/21 and 2021/22 financial years to identify individuals with an existing Higher Education Loan Program ('HELP'), Vocational Education and Training Student Loan ('VSL') and/or Trade Support Loans ('TSL') debt who may not be meeting their registration, lodgment and/or payment obligations.

This data collection is expected to involve approximately 3 million individuals each year.

NEWSLETTER July 2019

P r a c t i c e  U p d a t e

July 2019

 

‘Cash in hand’ payments to workers no longer tax deductible

The ATO has reminded employers that any ‘cash in hand’ payments made to workers from 1 July 2019 will not be tax deductible.

‘Cash in hand’ refers to cash payments to employees that do not comply with pay as you go ('PAYG') withholding obligations.

Payments made to contractors where the contractor does not provide an ABN and the business does not withhold any tax will also not be tax deductible from 1 July.

In addition to the loss of a tax deduction, employers caught not complying with their PAYG withholding obligations may be penalised for failing to withhold and report amounts under the PAYG withholding system.

However, employers who mistakenly classify their employee as a contractor will not lose their deduction where their worker provides them with an ABN.

 

Uber drivers not employees

The Fair Work Ombudsman has completed its investigation relating to Uber Australia Pty Ltd and its engagement of drivers, concluding that the relationship between Uber Australia and the drivers is not an employment relationship.

The investigation found that Uber drivers are not subject to any formal or operational obligation to perform work.

Instead, Uber drivers have control over whether, when, and for how long they perform work, on any given day or on any given week, and, in particular, Uber Australia does not require drivers to perform work at particular times.

As a consequence, the FWO will not take compliance action in relation to this matter.

 

Making a Division 293 election

The ATO is reminding taxpayers and tax practitioners that the process to release money from super fund accounts to pay additional tax on concessional contributions (referred to as 'Division 293') changed on 1 July 2018.

Since then, practitioners or their clients must send the Division 293 election form to the ATO, not to the super fund (if the election form is sent to the fund it will be rejected and returned to the sender).

When the ATO receives the election form, they will have the client's nominated super fund release and send the money to the ATO, which will then be offset against any outstanding tax or other Australian Government debts before they refund any remaining balance to the client.

 

ATO targeting false laundry claims

The ATO will target false clothing and laundry work-related expense claims this Tax Time.

In 2018, around six million people claimed work-related clothing and laundry expenses totalling nearly $1.5 billion.

Assistant Commissioner Karen Foat said although many Australians can claim clothing and laundry expenses, it’s unlikely that half of all taxpayers are required to wear uniforms, protective clothing or occupation-specific clothing to earn their income.

“Last year a quarter of all clothing and laundry claims were exactly at the record-keeping limit", Ms Foat said.

"But don’t think that we won’t scrutinise a claim because we don’t require receipts”.

She also said the ATO does not ignore incorrect claims "just because they are small, because small amounts add up".

The ATO is also concerned about the number of people claiming deductions for conventional clothing, such as retail workers claiming normal clothes "because their boss told them to wear a certain colour, or items from the latest fashion clothing line", or others claiming normal clothes because they only wear them to work.

The ATO’s sophisticated data analytics is constantly improving and can identify unusual claims by comparing taxpayer claims to others in similar occupations.

Taxpayers who can’t substantiate their claims should expect to have them refused, and may be penalised for failing to take reasonable care when submitting their tax return.

 

Lifestyle assets data matching program

The ATO has released details of their "Lifestyle assets 2013-14 and 2014-15 financial years data matching program protocol".

They will obtain information on insurance policies for certain classes of assets, including marine vessels, enthusiast motor vehicles, thoroughbred races horse, fine art and aircraft to improve their profiling of taxpayers and provide a more comprehensive view of their assets and accumulated wealth.

 

Tax time tips for small business

To lend a 'helping hand' to small businesses to get their tax right this Tax Time, the ATO has identified the top 3 issues they see when small businesses lodge their tax returns:

-      Failing to report all of their income;

-      Not having the necessary records to prove small business expenses claims; and

-    Claiming private expenses as business expenses (such as travel expenses).


Fixing incorrectly issued excess NCCs determinations

The ATO has recently identified a system error that inadvertently led them to issue incorrect pre-dated excess non-concessional (superannuation) contributions ('NCCs') determinations to clients.

The ATO will extend the election due dates for all affected clients, so this issue will not disadvantage them, and will not take default action in relation to these affected clients who do not make their election by the due date.

Amended determinations will automatically issue on a case-by-case basis in coming weeks to any clients that will have a modified excess NCC amount due once their income tax return is processed.

 

Car parking threshold for 2020 FBT year

The car parking threshold for the FBT year commencing on 1 April 2019 is $8.95 (replacing the amount of $8.83 that applied in the previous year commencing 1 April 2018).

 

Trustee obligations on the ATO's radar: TFN reports

The ATO is currently reviewing adherence to certain trustee obligations, including the lodgment of Tax File Number ('TFN') reports for TFN withholding for closely held trusts.

Beneficiaries are required to quote their TFN to trustees to avoid having tax withheld from payments or unpaid present entitlements, and trustees must lodge a TFN report for any quarter in which a beneficiary quotes their TFN to the trustee.

If beneficiaries have not quoted their TFN to the trustee, the trustee must:

-       withhold tax at the rate of 47% from the distribution;

-       pay this tax to the ATO; and

- report, in an annual report, details of all withheld amounts.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

NEWSLETTER June 2019

Single Touch Payroll Update

Employers with 19 or fewer employees are required to start reporting through Single Touch Payroll (‘STP’) from 1 July 2019.

The ATO will be working with employers to support them as they transition to STP, including allowing small employers to start reporting any time from 1 July to 30 September (and the ATO will also be "generous" in granting deferrals to small employers who need more time to start STP reporting).

Note also that employers with 19 or less employees do not need to report 'closely held payees' in 2019/20 and can report closely held payees information quarterly from 1 July 2020. 

 

Employees and payment summaries

The ATO has also reminded employees that how they get their end of financial year information from their employer, showing their earnings for the year, depends on how their employer reports their income, tax and super information to the ATO.

Specifically:

-    Employers that are not yet reporting through STP will continue to provide employees with a payment summary by 14 July.

-    Employers that report through STP are no longer required to give employees a payment summary; instead this information will be provided in an 'income statement', available via the employee's myGov account by 31 July (i.e., when the employer marks it as 'Tax Ready').

Editor: We will be able to access employee clients' payment summaries or income statement information through our connections with the ATO (this has not changed).

Please contact our office if you have any queries about STP (whether as an employer or employee).

 

Cryptocurrency data matching program

The ATO is collecting bulk records from Australian cryptocurrency designated service providers ('DSPs') as part of a data matching program to ensure people trading in cryptocurrency are paying the right amount of tax, and correctly meeting their tax (and superannuation) obligations.

The ATO will collect data from cryptocurrency DSPs to identify individuals or businesses who have or may be engaged in buying, selling or transferring cryptocurrency during the 2014/15 to 2019/20 financial years (the ATO estimates that there are between 500,000 to one million Australians that have invested in crypto-assets, including SMSF trustees).

Editor: The ATO has also noted that cryptocurrency can be considered a "high risk, volatile investment", and they have already seen incidences of SMSFs losing significant amounts of their retirement savings.

They strongly recommend all trustees undertake their own investigation and appropriate due diligence before investing with any organisation investing super assets into cryptocurrency holdings.

 

 

Tax office to double audits of 'dodgy' rental deductions

Rental property owners are being warned to ensure their claims are correct this tax time, as the ATO has announced it will double the number of audits scrutinising rental deductions, with a specific focus on:

-    over-claimed interest;

-    capital works claimed as repairs;

-    incorrect apportionment of expenses for holiday homes let out to others; and

-    omitted income from accommodation sharing.

Assistant Commissioner Gavin Siebert said:

“A random sample of returns with rental deductions found that nine out of 10 contained an error.  We are concerned about the extent of non-compliance in this area and will be looking very closely at claims this year.”

“We use a range of third party information including data from financial institutions, property transactions and rental bonds from all states and territories, and online accommodation booking platforms, in combination with sophisticated analytics to scrutinise every tax return,” Mr Siebert said.

“Once our auditors begin, they may search through even more data including utilities, tolls, social media and other online content to determine whether the taxpayer was entitled to claims they’ve made".

The number one cause of the ATO disallowing a claim is taxpayers being unable to produce receipts or other documents to support a claim.

Furnishing fraudulent or doctored records will attract higher penalties and may also result in prosecution.

The ATO has also reminded taxpayers that, since 1 July 2017, they can no longer claim travel expenses related to inspecting, maintaining or collecting rent for a residential rental property, unless they are an "excluded entity".

 

Paying super to backpackers

The ATO has issued the following reminders to employers, that backpackers on working holidays:

-    are considered temporary residents, and are entitled to superannuation guarantee if they are paid $450 or more before tax in a calendar month; and

-    who leave Australia can claim the super paid to them as a Departing Australia superannuation payment ('DASP'), providing all requirements are met.

Anyone employing backpackers should:

-    check they hold a valid visa using the Visa Entitlement Verification Online ('VEVO') service;

-    use the ATO's Super guarantee eligibility decision tool to determine if they are eligible for super;

-    offer them a choice of super fund if requested, and follow the same steps as for any other worker before they start working for the employer; and

-    advise them that they can start their DASP application using the ATO's free online application system while they are in Australia.

 

 

 

New rules for immediate write-offs

Small business entity ('SBE') taxpayers who choose to depreciate their assets under the simplified depreciation rules are entitled to an immediate deduction with respect to low-cost assets in the year they are first used or installed ready for use for a taxable purpose.

Thanks to recent changes, SBE taxpayers may be entitled to an immediate deduction in the 2019 income year for acquiring certain depreciating assets costing up to $30,000 (net of entitlement to GST input tax credits) for assets used or installed ready for use from 7:30pm AEST on 2 April 2019 until 30 June 2019.

Assets acquired prior to 2 April 2019 may also be eligible for immediate write-off, although the thresholds may be lower (e.g., the threshold is $20,000 for assets used or installed ready for use from 1 July 2018 until 28 January 2019, and $25,000 for assets used or installed ready for use from 29 January 2019 until 7:30pm AEST on 2 April 2019).

On top of this, for the first time, medium sized businesses (with an aggregated turnover of less than $50 million) may also be eligible to claim an immediate deduction for acquiring assets from 2 April 2019.

Editor: While helpful, these changes have complicated matters for the 2019 year, so please contact us if you need any help.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Businesses most likely to get a visit from the ATO – Common errors with new GST withholding rules

Continued focus on the cash economy

ATO Assistant Commissioner Peter Holt has announced that, in the 2019/20 financial year, the ATO will be visiting a further 10,000 small businesses across the country, including up to 500 small businesses in Tasmania.

He further said that businesses that advertise as 'cash only' and businesses that are operating outside of the ATO's performance benchmarks for their industry will be especially targeted for a visit from the ATO.

“Businesses that pay cash in hand, or fail to lodge income tax or business activity statements, get an unfair advantage and make it harder for other businesses who are doing the right thing.  By detecting and addressing this behaviour, we’re helping ensure a level playing field for honest small businesses.”

Businesses in the following industries are most likely to get a visit from the ATO:

  •   Restaurants and cafes;

  •   Vehicle repairers;

  •   Personal care businesses including hairdressers and nail salons;

  •   Pharmacies;

  •   Construction businesses;

  •   Clothing stores;

  •   Grocery stores / small supermarkets; and

  •   Butchers.

Whilst on the road, ATO officers will also be available to help those businesses that are trying to do the right thing.

Mr Holt said the ATO will not hesitate to take strong enforcement action against those deliberately avoiding their tax and super obligations and the visits may uncover this deliberate non-compliance.

“If businesses know they have made mistakes we encourage them to let us know and work with us or their tax professional.”

 

Common errors with new GST withholding rules

The ATO has noticed some common errors made in activity statements since the introduction of "GST at settlement" on 1 July 2018.

Editor: These new laws require purchasers to withhold GST on settlement (and pay it to the ATO directly) generally when buying 'new residential premises' from developers.

In particular, the new "GST at settlement" law does not affect a supplier’s obligation to lodge their activity statement and report their GST liabilities on taxable supplies in the activity statement period in which settlement occurred.

In addition, suppliers are advised not to report GST that has been withheld at settlement and paid to the ATO by the purchaser.

Instead, a credit for the amount the purchaser withheld and paid will appear on the supplier's activity statement account once the activity statement is processed.

Latest ATO benchmarks released

The ATO has released updated benchmark data drawn from over 1.5 million small businesses around the country to "help small businesses across the country . . . gauge the strength of their business and keep an eye on their competition".

Updated benchmarks for more than 100 industries are now available for the following categories:

  •   Accommodation and food;

  •   Building and construction trade services;

  •   Education, training, recreation and support services;

  •   Health care and personal services;

  •   Manufacturing;

  •   Automotive electrical services;

  •   Machinery and equipment repair and maintenance;

  •   Architectural services;

  •   Veterinary services;

  •   Retail trade; and

  •   Transport, postal and warehousing.

The benchmarks are one of the tools the ATO uses to crack down on the black economy, along with data matching and referrals from the community.

“Businesses operating outside the benchmarks may trigger a red flag for businesses we suspect could be engaging in the black economy,” Mr Holt said.

“A frequent red flag is a business reporting minimal profit while the business owner seems to be maintaining a lifestyle far exceeding their personal income."

“If you use a registered tax professional, it’s also a good idea to have a chat with them about where your business sits in comparison with our benchmarks.  They might have some advice about steps you can take to improve your performance.”

 

ATO warning regarding annual leave loading and OTE

The ATO has recently warned employers that it considers that annual leave loading should normally be part of ordinary time earnings ('OTE') for superannuation guarantee ('SG') purposes, unless it is referrable to a "lost opportunity to work overtime".

Therefore, if employers have self-assessed on the basis that their annual leave loading is not OTE, and there is a lack of evidence to demonstrate the purpose of the entitlement, there is a risk that they may have historical SG shortfalls and be liable for the SG charge.

However, the ATO acknowledges the uncertainty around this topic, and the evidentiary difficulties in identifying the purpose for annual leave loading entitlements, and will apply a concessional compliance approach where certain requirements are met.

Editor: If this is a concern for your business, please contact our office and we can help with your SG obligations and (if necessary) determine whether you will be eligible for the ATO's concessional compliance approach.


Taxpayer living in serviced apartments overseas not a resident

The Full Federal Court has found that a taxpayer had a "permanent place of abode" in Bahrain, even though he lived in temporary accommodation, and therefore allowed his appeal against a decision that he was a resident of Australia. 

This decision confirms that the correct focus of the "permanent place of abode" residency test is whether there has been an abandonment of Australian residence (i.e., to live permanently outside of Australia), rather than whether a person actually lives in permanent accommodation overseas.

In particular, the Full Court considered that the phrase "place of abode" is not a reference to a person's house or flat or other dwelling but rather the town or country in which a person is physically residing permanently.

 

Mostly vacant property still an 'active' asset

The AAT has held that a block of land next door to a taxpayer's main residence, which they used to store materials, tools and other equipment for their business, was still an 'active asset' for the purpose of the small business CGT concessions.

Editor: The small business CGT concessions can reduce, or completely eliminate, the tax payable on the sale of an 'active asset' (basically, a business asset).

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

 

Changes to small business instant asset write-off – Expanded tax concessions for small business – Understanding STP obligations

 

Changes to the small business instant asset write-off

On 29 January 2019, the Prime Minister announced that legislation will be introduced to:

  •  extend the small business instant asset write-off by 12 months to 30 June 2020; and

  •   increase the write-off threshold from less than $20,000 to less than $25,000 (effective immediately).

The current threshold of $20,000 has applied since 7.30pm AEST on 12 May 2015 and was due to revert to $1,000 on 1 July 2019. 

Under the proposed changes, from 29 January 2019 until 30 June 2020, small businesses with an aggregated annual turnover of less than $10 million may claim an immediate deduction for the business-use portion of each depreciating asset costing less than $25,000.

Example

To illustrate, assume an individual acquires a van for $22,000 (excluding GST entitlements) on 1 February 2019.

The individual is a small business entity and estimates the van will be used 90% for the business and 10% for private purposes.

Under the current rules, while the business-use portion of the cost of the van is less than $20,000 (i.e., $22,000 x 90% = $19,800), an immediate deduction is not available because the entire cost is $20,000 or more. 

However, the van may be depreciated as part of the taxpayer’s SBE small business pool.

In contrast, an immediate deduction of $19,800 may now be claimed under the proposed changes, as the entire cost of the van is below the new threshold of $25,000. 

This measure is expected to benefit more than 3 million eligible small businesses.

Editor: On 13 February 2019, the Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 was introduced in the House of Representatives.

Once this Bill becomes law, it will open up opportunities for small businesses to claim an immediate deduction for depreciating assets (where they cost less than $25,000) up until 30 June 2020.

 

Tax scammer alert

The ATO has again warned taxpayers to be alert for scammers impersonating the ATO, as it appears they have changed tactics in 2019.

Specifically, the ATO is seeing the emergence of a new tactic where:

“scammers are using an ATO number to send fraudulent SMS messages to taxpayers asking them to click on a link and hand over their personal details in order to obtain a refund”.

The ATO has received reports of scammers maliciously manipulating the calling line identification so the phone number that appears is different to the number from which the call originated.

This is referred to as “spoofing” and is a common technique used by scammers to appear legitimate.

It appears these scams aim to steal taxpayers' personal details and identities.

The ATO has advised it will not:

  •     send an email or SMS asking a taxpayer to click on a link to provide login, personal or     financial information, or to download a file or open an attachment;

  •     use aggressive or rude behaviour, or threaten taxpayers with arrest, jail or deportation;

  •     request payment of a debt via iTunes or Google Play cards, pre-paid Visa cards, cryptocurrency or direct credit to a personal bank account; or

  •     request a fee in order to release a refund owed to taxpayers.

Editor: If you are unsure about a call, text message or email purportedly received from the ATO, the best advice is not to reply.

Should you have any concerns, please contact our office directly, or alternatively you can call the ATO on 1800 008 540 to check if the contact was legitimate or to report a scam.

 

Non-compliant payments to workers

The rules for claiming deductions for payments to workers are changing.

From 1 July 2019, businesses can only claim deductions for certain payments made to workers where they've met the Pay As You Go (‘PAYG’) withholding obligation for that payment.

Specifically, a business can only claim a deduction for the following payments if it complies with the relevant PAYG withholding rules:

  •     Salary, wages, commissions, bonuses or allowances to an employee.

  •     Directors’ fees.

  •    Payments to a religious practitioner.

  •     Payments made under a labour hire arrangement.

  •     Payments made for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.

Where the PAYG withholding rules require an amount to be withheld, the business must:

  •     withhold the amount from the payment before they pay their worker; and

  •     report that amount to the ATO.

Importantly, a deduction will not be lost if an incorrect amount is withheld (or reported) by mistake.

 

What’s new for Australian business
Expanded tax concessions for small business

The ATO has recently reminded small businesses of the expanded tax concessions potentially available to them, as outlined below:

  •     The pending increase in the small business instant depreciating asset write-off to less than $25,000 (as discussed in further detail above).

  •     Accelerated depreciation deductions for primary producers for eligible fodder storage assets, as well as for fencing and water facilities.

  •     Assistance for primary producers impacted by drought at Drought Help, or by contacting the ATO on 1800 806 218.

  •     A lower company tax rate of 27.5% for companies qualifying as a Base Rate Entity ('BRE').

  •     Increased Small Business Income Tax Offset (‘SBITO’) for eligible sole traders and individual partners and beneficiaries.

Finally, the ATO has reminded taxpayers that more businesses are now eligible for most small business tax concessions.

Specifically, from 1 July 2016, a range of small business tax concessions became available to all businesses with an aggregated turnover of less than $10 million (i.e., the turnover threshold).

Previously the turnover threshold was less than $2 million.  The $10 million turnover threshold applies to most concessions, except for:

  •     the SBITO – which has a $5 million turnover threshold from 1 July 2016; and

  •     the small business CGT concessions – which continue to have a $2 million turnover threshold.

Note: The relevant turnover threshold for accessing the lower company tax rate is $50 million from  the 2019 income year (increased from $25 million in the 2018 income year).

Single Touch Payroll Update

 

Understanding STP obligations

Single Touch Payroll (‘STP’) is a Government initiative aimed at cutting red tape for employers and improving visibility of compliance with business obligations such as:

-  salary and wages and similar payments;

-  Pay As You Go (‘PAYG’) withholding; and

-  certain superannuation related information;

by requiring ‘real time’ reporting of payroll information directly to the ATO.

Importantly, STP is designed to extract information that already exists in an employer’s payroll system.

As such, it is not intended to impose any additional burden on employers, other than requiring them to report the information to the ATO sooner.

From a practical perspective, businesses must use STP compliant software to comply with the new obligations.  This will necessitate updating or changing their current payroll software.

Generally, most payroll software providers will have already adapted their software to ensure the required reporting capability has been incorporated.

Once a business has adopted the appropriate software, ongoing reporting obligations should be dealt with as part of an automated software function.

Effectively, employers will send their employees' relevant payroll information required under STP to the ATO each time they run their payroll and pay their employees.

Crucially, in complying with their STP obligations employers will not change their payroll cycle.

When a business reports to the ATO via STP, the relevant employees will be able to view their year-to-date tax and super information through myGov.

As a result of STP reporting, a number of ongoing compliance obligations for employers will be streamlined, and/or removed.  Some benefits for employers under STP include the following:

  •  The removal of the need to issue an annual 'Payment Summary' to employees  for payments reported to the ATO via STP, provided an employer lodges a 'finalisation declaration' (i.e., generally by 14 July, although extensions are in place for the first year of STP implementation).

  •  The removal of the need to lodge a 'Payment Summary Annual Report' for payments reported through STP.

  •  From 1 July 2019, STP will enable the pre-filling of BAS Labels W1 (gross salary and wages and other payments) and W2 (amounts withheld from salary, wages and other payments) for employers that are small or medium withholders.

  •  The streamlining of employee documentation such as the lodgment of  'TFN Declarations' and 'Withholding Declarations' via enabled software.

Editor: It is important to understand that STP does not impact or change when employers must actually remit PAYG withholding amounts to the ATO or make super contributions.  The new STP obligations simply affect when employers must report these payments to the ATO.


 

STP Original commencement date

STP commenced from 1 July 2018, for employers with 20 or more employees (i.e., substantial employers).

When determining whether or not the 1 July 2018 start date applied, an employer was required to do a headcount of the number of employees they had on 1 April 2018.

Broadly included in the headcount were all full-time and part-time employees, casual employees who worked at any time during March 2018, overseas employees, any employees absent or on leave (paid or unpaid) and seasonal employees.

 

Pending STP commencement date for small employers now law

Small employers (being those with less than 20 employees) are now technically required to commence their STP reporting obligations from  1 July 2019.

The intended STP obligations on small employers has only recently become law, with the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 finally being passed by both houses of Parliament on 12 February 2019.

This means that from 1 July 2019 all employers, no matter their size, will generally be required to comply with the STP reporting obligations.

The ATO says it will be writing to small employers who have 19 or less employees and already use payroll software to tell them about STP, and remind them that if their payroll software offers STP, they can update their software and start reporting now.

 

Solutions for micro employers

For micro employers (generally defined as businesses with one to four employees) who do not currently have payroll software, a range of simple, low-cost solutions are expected to be available from early 2019. 

These solutions may include mobile apps, simple reporting solutions and portals.

An alphabetical list of the companies intending to offer these solutions has been published on the ATO website (and reproduced for your reference below).

The ATO does not (and nor does our firm) specifically endorse any of the suppliers listed below:

-   AccXite Pty Ltd

-   BAS Off Pty Ltd

-   Catsoft

-   Easy Pay Slip Pty Ltd

-   Employment Hero Pty Ltd

-   e-PayDay Pty Ltd

-   ePayroll

-   Etax Accountants Pty Ltd

-   Free Accounting Software

-   Globe BD

-   GovReports

-   Intuit Australia Pty Ltd

-   LodgeiT Pty Ltd

-   Ironbark Software

-   Myaccountant Technology Pty Ltd

-   MYOB Australia Pty Ltd

-   OB Secure Messaging

-   Sodapay

-   PwC Australia

-   Reckon Australia Pty Ltd

-   Single Touch Pty Ltd

-   SRI Enterprise Software Pty Ltd

-   Xero Australia Pty Ltd

 

Flexible ATO implementation

The Commissioner of Taxation, Chris Jordan,  recently made a personal guarantee that the ATO’s approach to STP will be “flexible, reasonable and pragmatic”.

In particular, despite the 1 July 2019 start date for small employers, the Commissioner has stated that they can start STP reporting any time from 1 July 2019 to 30 September 2019.

This effectively provides a three-month implementation reprieve for small employers.

The ATO has also indicated that there will be no penalties for mistakes, missed or late reports for the first year and exemptions will be provided from STP reporting for employers experiencing hardship, or in areas with intermittent or no internet connection.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO guidance on superannuation contributions 'downsizer contributions' – Company loans to shareholders under review – ATO to send text messages if bank account details incorrect

Company loans to shareholders under review

The Government has released a consultation paper outlining proposed reforms to ‘simplify’ the loan agreements that are generally required when a shareholder (or their associate) borrows funds (or receives a payment) from a related company.

Editor: Broadly, where a private company makes a payment or loans funds to a shareholder and/or their associate, the amount will be treated as a taxable unfranked dividend paid to the recipient. 

To avoid this, many shareholders enter into complying 'Division 7A loan agreements' (basically agreeing to repay the relevant amount within 7 years, or 25 years if the loan is secured).

With this in mind,Treasury is currently looking at (amongst other things):

 

-   simplifying the Division 7A loan rules by converting to a new 10-year model; and

-    clarifying that distributions from a trust to a ‘bucket’ company that remain 'unpaid present entitlements' come within the scope of Division 7A.

Editor: The proposed amendments are intended to apply from 1 July 2019 and will arguably be the most significant tax reforms impacting business and investment clients over the next two years.

At this stage of the consultation process, the Government is currently considering submissions made with respect to these proposals and it is expected that draft legislation, and further clarity, will be available early in the 2019 calendar year.   

ATO to send text messages if bank account details incorrect

The ATO has advised that it will send SMS text messages directly to taxpayers where incorrect bank account details were included in their tax returns and they were entitled to a refund.

The SMS will advise impacted taxpayers that:

-   their refund cannot be processed due to incorrect bank account details; and

-   they should phone the ATO on 13 28 61 to correct their details.

If impacted taxpayers contact the ATO with their correct details within seven days, any refund due will be issued electronically.

Editor: In the wake of an increase in recent tax fraud attempts, it is clear that taxpayers need to exercise additional caution when dealing with electronic messaging from (or purportedly from) the ATO.

The authenticity of ATO correspondence can be verified by calling the ATO on 1800 008 540; however, if you are ever unsure about any correspondence received, please contact our office.

 

ATO contact regarding business cars and Fringe Benefits Tax ('FBT')

The ATO has recently advised that it will be contacting taxpayers (and tax agents on behalf of their clients) that have been identified as having cars registered in their business name who have not lodged an FBT return.

The ATO has reminded businesses that:

 

-    a car fringe benefit will occur when a business owns or leases a car and makes it available for an employee's private travel or use (including garaging the car at or near an employee's home and making it available for private use); and that

-   business directors are also 'employees' for FBT purposes.

 

External collection agencies to enforce ATO lodgment obligations

The ATO has finalised a trial relating to sending overdue taxpayer lodgment obligations to external collection agencies.

As a result, it may now refer taxpayers to an external collection agency to secure tax return lodgment.

The ATO has stated that it will only refer a taxpayer to an external collection agency where the taxpayer takes no action in response to its initial correspondence letters.

 

ATO data matching and share transactions

The ATO has extended its data matching program, this time focusing on share data.

The ATO will continue to receive share data from ASIC, including details of the price, quantity and time of individual trades dating back to 2014, with more than 500 million records obtained.

The ATO will use the information to identify taxpayers who have not properly reported the sale or transfer of shares as income or capital gains in their income tax returns.

It seems share transactions are high on the ATO's priority list, given more than 5 million Australian adults (almost one-third) now own shares.

 

Improvements to employee share schemes announced

The Government has announced it intends to introduce legislation to improve the ability of small businesses to offer employee share schemes by simplifying the current regulatory framework, and reducing the time and cost burden for businesses by (amongst other things):

 

-   increasing the value limit of eligible financial products that can be offered in a 12-month period from $5,000 per employee to $10,000 per employee;

-   creating an exemption for disclosure, licensing, advertising and on-sale obligations in the Corporations Act; and

-   allowing small businesses to offer (in most instances) employee share schemes without publicly disclosing commercially sensitive financial information.

 

ATO guidance regarding 'downsizer contributions' to superannuation

The ability to make 'downsizer contributions' effectively commenced on 1 July 2018, prompting the ATO to release further guidance with respect to this new superannuation contribution classification.

Editor: This new measure will be of most assistance for individuals approaching retirement, where they dispose of their family home in an effort to ‘downsize’ and they want to contribute part or all of the proceeds to superannuation.

Basically, these measures allow older Australians to make a downsizer contribution where:

-   they are aged at least 65;

-   there was consideration received for the disposal of an eligible Australian dwelling;

-   the contract of sale for the property was entered into on or after 1 July 2018;

-   a superannuation contribution is generally made within 90 days of settlement;

-   the contribution does not exceed the lesser of $300,000 and the proceeds received from the sale of the dwelling;

-   an ownership interest in the dwelling had been held for at least 10 years (usually by the individual making the contribution or their spouse);

-   either a full or partial CGT main residence exemption applies to the disposal of the dwelling;

-   a choice to treat the contribution as a downsizer contribution is made in the approved form; and

-   broadly speaking, it is the first downsizer contribution the taxpayer has made.

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Fast-tracking tax cuts for small and medium businesses – Expansion of the Taxable Payments Reporting System – Ban on electronic sales suppression tools

 

Fast-tracking tax cuts for small and medium businesses

The Government has fast-tracked the already legislated tax cuts to small and medium businesses by bringing them forward five years.

Companies with an aggregated turnover of less than $50 million will have a tax rate of 25% in the 2022 income year (instead of the 2027 income year based on the previously legislated timeline).

Similarly, the increase in the tax discount to 16% for unincorporated entities will apply from the 2022 income year, rather than the 2027 income year.

Editor: Small and medium businesses will appreciate the earlier access to the already legislated tax cuts.

 

Proposed expansion of STP to smaller employers

Single Touch Payroll (‘STP’) commenced on 1 July 2018 for approximately 73,000 employers who have 20 or more employees.

There is currently legislation before Parliament to expand STP to all employers from 1 July 2019 and it is estimated that there will be more than 700,000 employers who will enter STP as a result.

Even though the proposed expansion is not yet law, the ATO recommends that smaller employers consider voluntarily opting-in to STP early.

The ATO acknowledges there is a large number of very small employers who have less than five employees (‘micro-employers’) who do not currently use a payroll product and has indicated that they are not looking to force them to take up a product to do STP.

Efforts are being made to work with industry to look at some alternate reporting mechanisms.

It is being reported that software developers, and even some of the larger banks, have shown an interest in developing some kind of product that would enable micro-employers to provide the necessary data to comply with STP at a low cost.

Employers who are in an area that has internet issues or challenges are reminded that there are potential exemptions available under STP.

The ATO is currently consulting with focus groups to look at flexible options to transition micro-employers to STP over the next couple of years.

Assuming the relevant legislation passes, the ATO does not realistically expect that everyone will start STP from 1 July 2019 and has indicated that it will be flexible with the commencement date, including the provision of deferrals to help stagger the uptake.

Editor: This is a very positive message from the ATO, particularly for micro-employers.  Hopefully, together with the relevant software developers, they are able to come up with a low-cost and simple alternative for those who do not currently use payroll software to comply with their STP obligations.

 

Expansion of the TPRS

The Taxable Payments Reporting System (‘TPRS’) has been expanded to the cleaning and courier services industries from 1 July 2018.

Businesses that have an ABN and make any payments to contractors for cleaning or courier services provided on behalf of the business must lodge a Taxable Payments Annual Report (‘TPAR’) each income year.

The first TPAR for payments made to contractors from 1 July 2018 to 30 June 2019 will be due by 28 August 2019.

Where cleaning or courier services are only part of the services provided by the business, they will need to work out what percentage of the payments they receive are for these services each income year to determine if a TPAR is required to be lodged.

Specifically, if the total payments the business receives for the relevant services are:

-   10% or more of their GST turnover – a TPAR must be lodged.

-   Less than 10% of their GST turnover – a TPAR is not required to be lodged, but the business can choose to lodge one.

 

Ban on electronic sales suppression tools

From 4 October 2018, the Government has banned activities involving electronic sales suppression tools (‘ESSTs’) that relate to people or businesses that have Australian tax obligations. 

The production, supply, possession or use of an ESST (or knowingly assisting others to do so) may attract criminal and administrative penalties.

ESSTs can come in different forms and are constantly evolving, some examples include:

-   An external device connected to a point of sale (‘POS’) system.

-   Additional software installed into otherwise-compliant software.

-   A feature or modification that is a part of a POS system or software.

An ESST may allow income to be misrepresented and under-reported by:

-   deleting transactions from electronic record-keeping systems;

-   changing transactions to reduce the amount of a sale;

-   misrepresenting sales records (e.g., by allowing GST taxable sales to be re-categorised as GST non-taxable sales); or

-   falsifying POS records.

Transitional arrangements are in place for six months starting from 4 October 2018 to 3 April 2019 for possessing an ESST.

Taxpayers may avoid committing an offence for possessing an ESST if they:

-   acquired it before 7:30pm 9 May 2017; and

-   advise the ATO that they possess the tool.

Importantly, the transitional provisions do not apply to the manufacture, development, publication, supply or use of an ESST.

Depending on the offence and severity of the crime, taxpayers can face financial penalties of up to 5,000 penalty units, which currently equates to over $1 million.

 

Scammers impersonating tax agents

The ATO has received increasing reports of a new take on the ‘fake tax debt’ scam, whereby scammers are now impersonating registered tax agents to lend legitimacy to their phone call.

The fraudsters do this by coercing the victim into revealing their agent’s name and then initiating a three-way phone conversation between the scammer, the victim, and another scammer impersonating the victim’s registered tax agent or someone from the agent’s practice.

As the phone conversations with the scammers appeared legitimate and the victims trusted the advice of the scammer ‘tax agent’, victims have been falling for this new approach.

In a recent example, a victim withdrew thousands of dollars in cash and deposited it into a Bitcoin ATM, fearing that police had a warrant out for their arrest.

The ATO is reminding taxpayers that they will never:

-   demand immediate payments;

-   threaten them with arrest; or

-   request payment by unusual means, such as iTunes vouchers, store gift cards or Bitcoin cryptocurrency.

Taxpayers are advised that if they are suspicious about a phone call from someone claiming to be the ATO, then they should disconnect and call the ATO or their tax agent to confirm the status of their tax affairs and verify the call.

 

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.