Tax payable on expenditure recoupments

A Full Federal Court decision has confirmed a mismatch between capital expenditure and government grants.

A windfarm operator incurred significant expenditure which was depreciated.

Upon proving the expenditure, it received a substantial government grant.

The court decided this was an assessable recoupment which mean that the grant was assessable income in full in the receipt year, whilst the expenditure remained depreciable.

It therefore had to pay income tax up front when it was already cash flow deficient.

This is not a new interpretation, but seems as a reminder to take nothing for granted when it comes to tax.

AcctWeb

Resources to help understand and implement Single Touch Payroll (STP)

STP is a significant change for business tax compliance, though for now those businesses that need to make this charge have 20 or more employees. Changes take effect on 1-7-2018, 12 months later for businesses with less than 20 employees.

In short, this change means that ‘you will report payments such as salaries and wages, pay as you go (PAYG) withholding and superannuation information from your payroll solution each time you pay your employees.’

The information and links listed below will help you quickly check or double check what you need to do to comply. If you are having trouble or want to discuss cash flow and tax implications then ask your accountant. But, above all, do not delay in getting ready for this change.

ATO resources and explanatory notes:

Source: Australian Taxation Office (ATO)

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

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

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.

How Australia is performing.

An up-to-date snapshot of Australia's vital statistics.

Please click on the following link to see all this interesting information. The areas covered are:

Overview
Markets
GDP
Labour
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Money
Trade
Government
Business
Consumer
Housing
Taxes
Climate

Access all this data here.

tradingeconomics.com

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

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

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

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