Big fines, prison on the cards as new SG penalties introduced

New laws introducing penalties, including imprisonment up to 12 months, for non-compliance of superannuation guarantee obligations have since passed, with accountants urged to bring clients up to speed.

Earlier this month, new legislation was passed, allowing the commissioner to issue a direction to an employer to pay an outstanding super guarantee liability, with failure to comply possibly resulting in criminal penalties.

Employers who receive direction from the commissioner must also complete an approved education course.

The maximum penalty for the offence is 50 penalty units, imprisonment for 12 months, or both.

Speaking to Accountants Daily, RSM senior manager Tracey Dunn said the new law might catch out small to medium-sized family businesses where a spouse or family member may be appointed as director without fully understanding their obligations regarding super payments.

“Obviously the criminal penalties will only apply to serious cases but unfortunately in a lot of small businesses, super guarantee payment are the first thing that goes and they are quite often behind because of cashflow issues so there will be a higher risk,” said Ms Dunn.

“For example, a husband runs a business and he is the brains of the business but the wife will be put in a position where she is a director. The accountant may discuss the director obligations with the husband but then rely on the husband to relay that to the wife and she may not ever fully understand what her risk is.

“They now face a criminal penalty if within a business, those compulsory superannuation guarantee payments aren’t made on time.”

Ms Dunn believes accountants will need to be on the front foot to help their clients understand the new risks.

“Accountants and advisers really need to ensure that when their clients employ staff, they are fully aware of the risk of non-compliance with super guarantee obligations,” she said.

“There is a real onus now on accountants and tax advisers to ensure their clients really fully understand what the risk is when they take a role as either an individual employer, the director of a trustee company, or a director of a company that is employing staff.”

Latest data from the ATO place estimates for the super guarantee net gap at $2.79 billion, with Ms Dunn believing that the new measure, along with the introduction of single touch payroll to all businesses, will see the gap shrink in the near future,

“With the measures in place now, it is a clear indication now that the government is extremely serious about ensuring that employees receive their compulsory super,” she added.

The new legislation is awaiting Royal Assent, with the legislation to take effect from 1 April 2019, but will apply to SGC obligations arising from 1 July 2018.

Jotham Lian
01 March 2019
accountantsdaily.com.au

Client Alert – February 2019

Tax clinic trial to reduce tax regulatory burden

To help reduce the regulatory burden on businesses, including the tax burden, the government has allocated $1 million to set up 10 tax clinics across Australia under a trial program based on the Curtin University Tax Clinic.

Each clinic will receive up to $100,000 for 12 months to support unrepresented individual or small business taxpayers by providing general taxation advice and helping them with their tax obligations and reporting requirements. The clinics, through identifying issues and building greater understanding of the tax system in operation, are also designed to improve the interactions that small businesses and individual taxpayers have with the ATO.

The clinics will cover advice, representation, education and advocacy, and will offer students training in the profession the opportunity to work with taxpayers, under the direct supervision of qualified tax professionals.

New “work test” exemption for recent retirees

The Federal Government has created a new opportunity for some recent retirees to make additional superannuation contributions. From 1 July 2019, a 12-month exemption from the “work test” for newly retired individuals aged between 65 and 74 years with a total superannuation balance below $300,000 means many older Australians will now have an extra year to boost their superannuation savings.

The work test requires that a person is “gainfully employed” for at least 40 hours in any 30-day consecutive period during the financial year in which the contributions are made.

The contributions rules are complex, but with the right planning and advice you can maximise your contributions into superannuation at the right time.

Tip: You should also consider other measures that may be available to you, such as “downsizer” contributions (certain contributions of proceeds from the sale of your home) and “catch-up” concessional contributions (accessing unused concessional cap space from prior years).

ATO issuing excess super contributions determinations

The ATO has begun issuing determinations to people who exceeded their concessional superannuation contributions cap for the 2017–2018 financial year. These determinations will also trigger amended income tax assessments and additional tax liabilities. Individuals can elect for the ATO to withdraw their excess contributions from their super fund to pay any additional personal tax liability.

Tip: Concessional contributions include all employer contributions, such as the 9.5% superannuation guarantee and salary sacrifice contributions, and personal contributions for which a deduction has been claimed.

You have 60 days from receiving an ECC determination to elect to release up to 85% of your excess concessional contributions from your super fund to pay your amended tax bill. Otherwise, you will need to fund the payment using non-superannuation money.

Reviewing the tax treatment of granny flats

The Federal Government has asked the Board of Taxation to undertake a review of the tax treatment of “granny flat” arrangements, recommending potential changes that take into account the interactions between tax laws and the social security rules. This request for review is in response to the 2017 Australian Law Reform Commission’s report Elder abuse: a national legal response.

Currently, homeowners may have to pay capital gains tax (CGT) where there is a formal agreement, for example, for an older parent to live with their child, either in the same dwelling or a separate granny flat. This may deter families from establishing a formal and legally enforceable agreement, leaving no protection of the rights of the older person if there is a breakdown in the informal agreement.

Resolving tax disputes: government to help small businesses

The Federal Government intends to make it easier, cheaper and quicker for small businesses to resolve tax disputes with the ATO. It will establish a Small Business Concierge Service within the Australian Small Business and Family Enterprise Ombudsman’s office to provide support and advice about the Administrative Appeals Tribunal (AAT) process to small businesses before they make an application. The government will also create a dedicated Small Business Taxation Division within the AAT.

Small business tax offset: avoiding errors when claiming

The ATO has provided new tips for avoiding common errors when reporting net small business income and claiming the small business income tax offset for unincorporated small businesses. These include tips on reporting amounts in the right sections of your tax return, providing all of the relevant information, and using net income (not gross income) in your calculations.

The offset (up to $1,000) is worked out by the ATO on the proportion of income tax payable on an individual’s taxable income that is net small business income. For 2018–2019 and 2019–2020 the rate of offset is 8%.

Tip: Not sure if you’re making the most of the tax offset for your small business? We can help – contact us today to find out more.

Home office running expenses and electronic device expenses

The ATO has released an updated version of Practice Statement PS LA 2001/6, its guidance on calculating and substantiating home office running expenses and electronic device expenses that are claimed as tax deductions.

The basic principles have been amended to emphasise that you must actually incur the expenses you claim, and that there must be a real connection between your use of a home office or device and your income-producing work. On the other hand, the requirement that your income-producing use must be substantial – not merely incidental – has been removed.

There is new information on what type of evidence you need to be keep, and the cents per hour rate you can claim for eligible home office running expenses has increased from 45 cents to 52 cents per hour, effective from 1 July 2018.

Genuine redundancy payments: alignment with Age Pension age

The Federal Government has announced that it will amend the law to extend the concessional tax treatment for genuine redundancy payments and early retirement scheme payments to align with the Age Pension qualifying age.

Currently, an individual must be aged below 65 at the time their employment is terminated to qualify for a tax-free component on a genuine redundancy payment or an early retirement scheme payment.

Tip: Genuine redundancy payments are made when a job is abolished, and early retirement scheme payments are made when a person retires early, or resigns, as part of a scheme put in place by an employer.

Where an individual is under age 65 and meets the requirements of the Income Tax Assessment Act 1997, they receive tax-free a base amount of $10,399 (for 2018–2019), plus $5,200 for each whole year of service.

The government says it will amend the law to align genuine redundancy and early retirement scheme payments with the Age Pension qualifying age from 1 July 2019.

GST on property developments involving government

The ATO says it is reviewing arrangements involving property developers acquiring land from government entities, specifically where the developer provides development works to the government entity as payment for the land.

The ATO is concerned that some developers and government entities are not reporting the value of their supplies under these arrangements in a consistent manner, resulting in GST being underpaid.

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Reminder on Victoria Property Duties

Property transfers between spouses and de facto partners in Victoria involving commercial and/or investment properties will incur stamp duty costs at 5.5%.

This means that assets that do not constitute a principal place of residence are no longer exempt from transfer stamp duty.

A spouse to spouse transfer of the principal place of residence remains exempt from stamp duty.

Until 1 July 2017 all transfers of property between spouses was exempt from stamp duty.

Commencing business as a sole trader often raises the asset protection concern – so transferring ownership of the family home to the non-business spouse, is a common recommendation of advisers.

ATO set to contact clients for overdue TPAR

The Tax Office will begin contacting clients in the building and construction industry about their overdue taxable payments annual reports.

In an online update, the ATO has announced that tax practitioners who have clients in the building and construction industry, will begin to receive a list of their clients and the years overdue for their TPAR obligations.

“If your clients have not lodged their 2018 or prior year taxable payments annual reports, now is the time to get them back on track to avoid penalties,” said the ATO.

In October, the taxable payments reporting system (TPRS) was extended to the courier and cleaning industries, with a retrospective start date of 1 July 2018.

This was closely followed by an extension to the road freight, security, investigation, surveillance and information technology (IT) industries, with a start date of 1 July 2019.

The TPRS is a transparency measure that was first applied to the building and construction industry, recouping an extra $2.3 billion in its first year of operation in 2012.

Tax practitioners and bookkeepers have been urged to start educating clients on their obligations and ensuring that business clients start keeping records of contractor payments.

It is understood that the new, online TPAR form will allow further functionality, including the ability for tax and BAS agents to see client taxable payments annual report lodgment history.

“This form will be made available to inpiduals in business via MyTax initially, then progressively being made available in the Business Portal, Online Services for agents, and third party software,” the ATO BAS Agent Association Group said last year.

Jotham Lian
30 January 2019
accountantsdaily.com.au

Instant asset write-off threshold upped to $25k

The government has increased the threshold for the instant asset write-off to $25,000 as it looks to entice the small business sector ahead of a federal election.

Announced yesterday, Prime Minister Scott Morrison has pledged to increase the small business instant asset write-off to $25,000 from $20,000.

The write-off will be available for small business with an annual turnover of less than $10 million and will apply until 30 June 2020.

The government will be seeking to legislate the change when Parliament resumes on 12 February.

This measure is estimated to have a cost to revenue of $750 million over the forward estimates period, with an estimated 3 million small businesses eligible to access the write-off.

“The $25,000 instant asset write-off will improve cash flow by bringing forward tax deductions, providing a boost to small business activity and encouraging more small businesses to reinvest in their operations and replace or upgrade their assets,” Mr Morrison’s office told Accountants Daily.

The government’s decision to raise the threshold comes after Labor announced that it would introduce the Australian Investment Guarantee, a permanent feature which will allow businesses to immediately deduct 20 per cent of any new eligible asset worth more than $20,000.

Labor has also pledged to introduce a dedicated small business minister in cabinet if it forms government.

Jotham Lian
30 January 2019
accounantsdaily.com.au

Jail time for GST fraud

Warning: Very recent cases where GST fraud have landed business people in jail.

One example: A luxury property developer who caused a loss of $3.4 million to the Commonwealth through GST fraud has been sentenced to six years’ jail after an ATO investigation.

Manly man Benjamin Ensor was sentenced in the NSW District Court to six years in jail and ordered to pay reparations of more than $1.8 million. Ensor’s conviction came after an ATO investigation found he had structured his companies to fraudulently obtain GST credits and failed to report property sales to avoid paying GST, causing a loss to the Commonwealth of $3.4 million.

Between 2008 and 2011, Ensor lodged false BAS statements on behalf of nine companies of which he became the sole director, using the money he obtained to fund the purchase of luxury items including a marina at Lake Macquarie, a catamaran and a unit to live in.

The funds were also used to meet expenses incurred during the course of developing five beachfront luxury apartments in Manly. He reported his companies’ expenditure was more than $24 million and claimed more than $2.2 million in GST refunds. He also failed to report the sales of the Manly apartments on which he should have paid GST of more than $1.5 million.

In making GST refund claims, he created false invoices that showed related companies provided project management services, and produced fraudulent invoices for the purchase of high-value excavators, trailers, trucks and catamarans.

ATO assistant commissioner Aislinn Walwyn said the conviction represented the agency’s stance against illegal phoenix behaviour and tax crimes. “This case exhibits classic illegal phoenix behaviour. Companies were deliberately liquidated to avoid paying creditors and taxes. New companies continued operating the same or a similar business with the same ownership,” Ms Walwyn said.

Another example: The Maroochydore District Court sentenced David Latemore to two and a half years in jail for GST fraud and ordered him to repay more than $130,000 that he fraudulently obtained.

Between October 2008 and February 2013, Latemore lodged eight BAS and fraudulently obtained $138,723 in GST refunds and attempted to obtain a further $962,772. Although Latemore stated that he was the director of a motor vehicle and yacht business, an ATO audit found the company had no business activity, did not make any business sales or purchases, had not paid any GST and had no entitlement to receive the GST refunds claimed. He also supplied false documents to the ATO to support his claims.

Jotham Lian (composite of two articles)
29 January and 4th February 2019
accountantsdaily.com.au

Fuel tax credit rates raised

The ATO have raised the fuel tax credit rates following an update of the December quarter consumer price index.

The ATO have raised the fuel tax credit rates following an update of the December quarter consumer price index.

From 4 February, rates for liquid fuels and blended fuels for heavy vehicles travelling on public roads will rise to 15.8 cents per litre, while all other business uses will see rates rise to 41 .6 cents per litre, up from 15.4 and 41.2 cents respectively.

Fuel tax credit rates change regularly. They are indexed twice a year, in February and August, in line with the consumer price index (CPI).

Pitcher Partners customs, fuel tax and international trade director Darryl Daisley previously told Accountants Daily of some common issues he sees claimants struggling with.

“Where we’re seeing clients coming unstuck is not getting the right rate for that particular fuel, not identifying and correctly allocating the right portion to either an off-road or on-road environment and then you have to look at when you bought that fuel,” Mr Daisley said.

“The way the scheme is structured is that the small- to medium-sized to large guys, the Tax Office’s expectation is that they would like everyone to claim monthly because it goes onto the BAS, and there is a healthy portion of clients who don’t get in their claims monthly and may take a number of months before they work their claim in.

“So it’s just an added complexity of getting the right dates, the rates, the type of fuel – you may need to apportion, and some of the fuel may be ineligible for a fuel tax credit depending on your mix of your fleet and the type of vehicles that you use.”

Tax&Compliance Reporter
04 February 2019
accountantsdaily.com.au

Correcting GST Errors

If a taxpayer finds a mistake made on a previous activity statement, they can:-

Correct the error on a later activity statement if the mistake fits the definition of a “GST error” and certain conditions are met;
Lodge an amendment – the time limit for amending GST credits is four years, starting from the day after the taxpayer was required to lodge the activity statement for the relevant period; or
Contact the Australian Taxation Office (ATO) for advice

The benefit of correcting a GST error on a later activity statement (where the conditions are met) is that the taxpayer will not be liable for any penalties or general interest charge (GIC) for that error. The ATO says it is generally easier to correct a GST error on a later activity statement than to revise an earlier activity statement. Revising an earlier activity statement that contains an error can incur penalties or GIC.

Accountants often prefer to amend the activity statement, to match the returns better with the accounting records, particularly if that results in an extra refund.

AcctWeb

Strategies to handle scam phone calls and problem e-mails.

Many people have received telephone calls, recorded messages and e-mails from scammers claiming to be from organisations such as the ATO, Australia Post and Telstra saying money is owed, asking for personal information or access to their computer. One recorded message supposedly from the ATO informs you ‘you have committed tax fraud and a warrant is out for your arrest’! Another very popular scam is to say that there is a problem with your internet or a security flaw in your computer’s firewall or similar.

Why do scammers succeed?

Unfortunately, the main reason is the person receiving the call or e-mail. Scammers are trained in looking for signs of hesitancy or weakness and when they sense this they are merciless. The real problem is that the scammers know well the topics that will attract or scare people into action: monies owed, a big win, a technical issue, or to help someone.

Scammers are paid based on their success and they are highly trained in keeping people engaged and on the line.

Phone calls.

You need to be strong if you’re to avoid being caught out and the simplest way to do this is ask who they work for, what is their phone number, say you’re not interested and hang up. Or, call them out and say they are ‘a scam call’, then they often hang up on you. Phone scammers are inventive and some are ‘Phone spoofing’, this is when someone disguises the number they are calling or texting from by changing their caller ID. They hijack or imitate phone numbers, either to imitate a person, business or department to get money or information. They often choose interstate numbers so you do not immediately know you are answering an overseas call centre or potential scam call.

The best strategy though, is not to let them talk for more than a few seconds, and hang up. Hang up too soon or and they will keep ringing you back!

Major organisations will never ring up and ask for access to your computer or threaten that a warrant is out for your arrest. If a demand is made that relates to the ATO then call your accountant to make sure if ATO debts are owed and when.

E-mail scams & viruses

Common scam emails currently doing the rounds are invoices from companies that either do not exist or scam emails from organisations like ‘Australia Post’ (you have a package being delivered) or ‘ASIC’ (you have a tax debt). We may suspect they are fraudulent but too many of us still respond.

The compulsion to open that invoice or attachment is strong. Remember, everyone's e-mail address may be on scammers' lists so you will be exposed.

A second, and dangerous risk, from such e-mails is that they can have infected attachments and links that can do real damage to you, your computer, your business’s computer network and your files. Ransom ware is still out there.

Three things that help with scam, spam and malicious e-mails.

Simply delete them but some businesses and corporations use e-mail to save costs for statements and invoices and other information, so you have to be vigilant not to delete these by mistake.
This is your best defence and relates to the sender’s e-mail address. It is NOT possible for a scammer to use the exact same domain name as, say, the ATO or AFP. HOWEVER, they are getting very close. When you receive an e-mail, ALWAYS check the URL address it came from before reading or clicking – specifically the part after the @ sign. You will notice that many after the @ sign are simply ridiculous, but you will also receive some that have the supposed sender in the address, for example @ato.zzz.net.au. Always remember that the ATO bit is part of the zzz.net.au domain (the spammer) and NOT the ATO's domain. If in doubt contact the business or organisation by phone or a known email address to confirm email content.
The Subject line. There is a field of marketing that focuses on how to get people to react to a Subject line. So, reacting quickly to a subject line about a fine from the ATO is exactly what the scammer is hoping for. A subject line like this can make you click on part of the content or attachment before you think of reading or checking the sender’s address.