Category Archives: Business

What has the Government been up to?

Stage 3 Income tax cuts redesigned

It is only February, yet we have already seen a significant tax development that will affect the majority of Australians — the Government’s decision to ‘redesign’ the Stage 3 income tax cuts.

The table below sets out the redesigned personal income tax rates and thresholds that are now proposed to apply from 1 July 2024.

Taxable incomeTax payable
$0 – $18,200Nil
$18,201 – $45,000Nil + 16% of excess over $18,200
$45,001 – $135,000$4,288 + 30% of excess over $45,000
$135,001 – $190,000$31,288 + 37% of excess over $135,000
$190,001+$51,638 + 45% of excess over $190,000

The following table sets out the tax rates and thresholds that would have applied if the Stage 3 tax cuts had gone ahead as originally legislated.

Taxable incomeTax payable
$0 – $18,200Nil
$18,201 – $45,000Nil + 19% of excess over $18,200
$45,001 – $200,000$5,092 + 30% of excess over $45,000
$200,001+$51,592 + 45% of excess over $200,000

This means that:

– Taxpayers whose taxable income exceeds $18,200 but does not exceed $45,000 will now receive a tax cut – they would not have under the legislated Stage 3 tax cuts.

– Taxpayers whose taxable income exceeds $45,000 but is less than $146,486 will receive a larger tax cut than they would have received under the legislated Stage 3 cuts.

– Taxpayers whose taxable income is $146,486 or higher will receive a smaller tax cut than they would have received under the legislated Stage 3 cuts.

The tax-free threshold ($18,200) will remain unchanged so taxpayers whose taxable income does not exceed $18,200 will not benefit from the redesigned Stage 3 tax cuts.


GST amendments

Attribution of input tax credits to earlier periods

The Parliament is considering an amendment to the GST legislation (contained in Division 1 of Part 2 of Schedule 6 to the (Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023) that relates to the situation where a GST return for a tax period did not take into account a claim for input tax credits; for example, because they were overlooked. A 2021 High Court decision confirmed that, in such cases, there could not be an amended GST return as the claim strictly ceases to be attributable to that tax period and is instead attributable to the first tax period for which the taxpayer lodges a return that takes it into account.

The amendment restores the ATO’s ‘administrative practice’ of allowing taxpayers to lodge an amended GST return to take into account the earlier unclaimed input tax credits.

General attribution rules for creditable acquisitions

Another legislative amendment proposes to make changes to the attribution rules for acquisitions to allow the ATO to determine the tax period to which an input tax credit for a creditable acquisition is attributable. 

If the ATO makes such a determination, a taxpayer ceases to be entitled to the input tax credit only if it has not been taken into account in an assessment within four years after they were required to lodge the GST return for the relevant tax period.

The amendments have retrospective effect for tax periods that start on or after 1 July 2012.

Income tax deduction for GST paid by reverse charge

Currently, GST payable by way of reverse charge is not deductible for income tax purposes. Another amendment being considered by the Parliament (contained in Division 3 of Part 2 of Schedule 6 to the (Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023) will allow a taxpayer to deduct the amount of GST payable by way of reverse charge, to the extent that:

– The GST amount is greater than any input tax credits or reduced input tax credits to which they are entitled; and

– The general rules about claiming income tax deductions are satisfied.

Tip! Your tax adviser can explain the relevance of these legislative amendments to your business.


FROM THE ATO


Employee or independent contractor?

A ruling issued by the ATO in December last year explains when an individual is an ‘employee’ for PAYG withholding (PAYGW) purposes.

In 2022, the High Court handed down two important ‘worker classification’ decisions, i.e. about how to decide if an individual is an employee or an independent contractor. The ATO’s ruling considers the cases and comes to various conclusions:

– for PAYGW purposes, the term ‘employee’ has its ordinary meaning;

– whether a worker is an ‘employee’ of an entity under the term’s ordinary meaning is a question of fact to be determined by reference to the legal rights and obligations that constitute the relationship between the parties;

– if the parties have comprehensively committed the terms of their relationship to a written contract (and its validity is not challenged or its terms are not varied or waived), it is the legal rights and obligations in the contract alone that are relevant in determining if the worker is an employee or an independent contractor;

– the traditional factors that determine whether a worker is an employee or independent contractor (e.g. control, specified result, risk and delegation) are still relevant, but only in respect of the legal rights and obligations between the parties;

– a ‘useful approach’ for establishing whether a worker is an employee is to consider whether the worker is working in the entity’s business, based on the construction of the terms of the contract.

ATO’s compliance approach

The ATO has also published its compliance approach for businesses that engage workers and classify them as either employees or independent contractors. Specifically, it includes a risk framework for ‘worker classification’ arrangements, based on the actions taken by the parties when entering into such arrangements. The risk framework comprises four risk zones, ranging from very low risk (white) to high risk (red).

Tip! Talk to your tax adviser if you are uncertain if an individual providing services to your business is an employee or an independent contractor. The tax and superannuation implications can be significant if you get it wrong.


Are your ABN details up to date?

When did you last check your Australian Business Number (ABN) details on the Australian Business Register (ABR)? If you’re not sure, it’s time to check your details are correct.

Emergency services and government agencies use ABN details to identify businesses in areas affected by emergencies. Checking that both your physical business address and postal address are listed and up to date is important.

Other ABN details include authorised contacts, contact details and business activities.

If your details are incorrect, you may miss out on important help, information or opportunities like financial grants.

The fastest way to update your ABN details is through ABR online services (using your myGovID).

If you’re no longer using your ABN, you need to cancel it. The ATO actively reviews ABN entitlement and may cancel your ABN if there are no signs of business activity.

Tip! Although it’s your responsibility to keep your ABN details up to date, your tax adviser can do it for you.


Taxable payments annual report

If your business pays contractors to provide certain services, you may need to lodge a Taxable Payments Annual Report (TPAR) by 28 August each year.

From 22 March, the ATO will apply penalties to businesses that:

– have not lodged their TPAR from 2023 or previous years;

– have received three reminder letters about their overdue TPAR.

Last year, the ATO issued penalties of approximately $18 million to more than 11,000 businesses.

If you do not need to lodge a TPAR, you can submit a non-lodgment advice (NLA) form. If you no longer pay contractors, you can also use this form to indicate that you won’t need to lodge a TPAR in the future.

Contractor details

For each contractor you pay, you must include the following details in your TPAR:

– the ABN, if known (if a contractor’s ABN changed during the year, include each ABN for that contractor);

– the contractor’s name (business name or individual’s name) and address;

– the total amounts for the financial year of:

– the gross amount paid, including GST, and any tax withheld;

– the total GST you paid them; and

– the total tax withheld where an ABN was not quoted.

When you receive an invoice:

– check that the ABN on the invoice matches the ABN on your record for that contractor;

– ensure you create a new contractor record, if necessary.

You can check that your contractor’s details (including ABN, name and GST registration) are correct by using ABN Lookup or the ATO app.

Lodging the TPAR

Use business software if:

– it is SBR-enabled software;

– your business can create a TPAR data file to the required Taxable payments annual reporting specifications. Lodge through Online services for business using the file transfer function.

If you do not have business software, use Online services for business. You need an ABN and a secure credential myGovID and Relationship Authorisation Manager (RAM).

Tip! Your tax adviser or BAS agent can help you with your TPAR lodgment obligations.


Applying for a substituted accounting period (SAP)

An entity’s accounting period is ordinarily the 12-month period ending on 30 June. However, the ATO can allow you to adopt an alternative annual accounting period, known as a ‘SAP’.

Use the Application for a substituted accounting period form (NAT 5087) to:

– apply for a SAP; or

– revert to a standard accounting period ending 30 June.

When you apply, you must provide:

– a reason for requesting a SAP; and

– supporting evidence.

A SAP application should be lodged at least 28 days before the earlier of:

– the due date for lodgment of the income tax return for the current accounting period; and

– the due date for lodgment of the tax return for the proposed new accounting period.

Retrospective or out of date applications may be accepted in limited circumstances.

You can lodge your application either via Online services for business or by post:

Australian Taxation Office
PO Box 3000
Penrith NSW 2740

When a SAP may be granted

SAPS are granted where the entity can demonstrate its circumstances take the case out of the ordinary run. These circumstances may include:

– needing to synchronise your balance dates with the controlling entity of your economic group or the entity that holds the majority of your membership interests;

– wanting to align your balance date with the income tax consolidated group you have just exited, because your accounting systems are already set up to meet the former income tax consolidated group’s reporting requirements and it will be too costly to adjust your systems to a new balance date;

– an ongoing event, industry practice, business driver or other ongoing circumstance that makes 30 June impractical as a basis to calculate taxable income. This would include difficulties with ascertaining inventory for stock valuations, and having multiple financial reporting requirements (for example, a franchise to a franchisee).

Circumstances generally not outside the ordinary run include:

– strata or owners corporations wishing to align their balance date with their audit date;

– companies wishing to align their balance date with a change of company financial year election sent to ASIC.

It is highly unlikely that an individual would be granted a SAP.

Subsidiary members of income tax consolidated groups do not need to apply for a SAP as they do not have income tax reporting obligations.

Transitional accounting period

Where an entity is allowed to adopt a SAP, a change to the end date of its accounting period results in a transitional period of more or less than 12 months. The application form automatically calculates the end of the transitional period.

For entities that adopt a SAP for their first lodgment of an income tax return, the transitional period:

– begins on the date the entity commenced trading; and

– ends on the first occurrence of the SAP balance date.

The transitional period for a new entity must be 12 months or less.

For existing entities that have lodged previous income tax returns, the length of the transitional period is determined by a table published by the ATO (https://www.ato.gov.au/law/view/sgif/psr/ps07_021c.gif).


Depreciating assets – composite parts

Have you ever looked at a depreciating asset held by your business and wondered if it is a single asset or whether it comprises a number of separate assets? The ATO has issued a ruling on this topic.

The ATO defines a ‘composite item’ as an item made up of several components that are capable of separate existence. It is a question of fact and degree whether a particular composite item is itself a depreciating asset, or whether one or more of its components are separate assets.

The ATO provides a series of ‘guiding principles’ to assist in identifying the relevant depreciating asset. They also provide some useful examples covering assets such as industrial storage racking, a desktop computer package, a mainframe computer, a local area network and a car global positioning system.


EV home charging rates

The ATO allows a cents-per-kilometre methodology for calculating electricity costs where an electric vehicle (EV) is charged at an employee’s or individual’s (e.g. sole trader’s) home.

The employer or individual can choose to use this methodology instead of determining the actual cost of the electricity. The choice is per vehicle and applies for the whole income or FBT year. However, it can be changed from year to year.

The methodology does not apply to plug-in hybrid vehicles, electric motorcycles or electric scooters.

Cents-per-kilometre

The ‘EV home charging rate’ is 4.2 cents per km. This rate is multiplied by the total number of relevant kilometres travelled by the electric vehicle in the year in question.

Where EV charging costs are also incurred at commercial charging stations and the home charging percentage can be accurately determined, the total number of relevant kilometres must be adjusted. If the home charging percentage cannot be accurately determined, you can choose to either use the EV home charging rate and disregard the commercial charging station cost, or use the commercial charging station cost and not apply the EV home charging methodology.

Record keeping and transitional approach for 2022–23 and 2023–24

If you are an employer and you choose to apply the EV home charging rate for FBT purposes, a valid logbook must be maintained if the operating cost method is used.

To satisfy the record-keeping requirements for income tax purposes, the individual needs to have:

– a valid logbook to use the logbook method of calculating work-related car expenses. For other vehicles, the ATO recommends a logbook to demonstrate work-related use of the vehicle; and

– one electricity bill for the residential premises in the income year (i.e. to show that electricity costs have been incurred).

However, if odometer records have not been maintained as at the start of the 2022–23 or 2023–24 FBT or income year, the ATO will allow a reasonable estimate to be used based on service records, logbooks or other available information.


Sharing economy reporting regime

Under the Sharing Economy Reporting Regime (SERR), Electronic Distribution Platform (EDP) operators must report certain transactions made through their platform.

The rules generally apply from I July 2024, but they have already commenced for transactions for the supply of:

– taxi travel and ride-sourcing; and

– short-term accommodation (the ATO considers this to be for a period of 90 consecutive days or less).

Transitional arrangements are in place to help eligible small EDP operators meet their SERR reporting obligations in the first two reporting periods (see below).

What is an EDP?

Under SERR, an EDP is a service that:

– allows sellers to make supplies available to buyers (for example, guests booking accommodation, renting an asset like a handbag or lawnmower, or passengers booking car rides); and

– is delivered via electronic communication.

A seller is an entity that makes supplies via an EDP. A buyer is the end user of the supplies. An EDP can be, but is not limited to a website, an internet portal, a gateway, an application, an online store or marketplace.

Platforms are not an EDP if they provide only:

– carriage services that transmit electronic communications;

– access to payment systems or payment processing services;

– advertising that makes buyers aware of products and links them to a seller’s website.

Example: ride-sourcing provider

Saferider is a third-party ride sourcing platform that allows passengers to request rides from drivers.

Trisha wants to go to the CBD. She opens the Saferider app and types in her desired destination.

The app connects her with James, a Saferider driver in her area and provides her with the price for the service. Trisha accepts the ride with James through the app and the transaction and payment is processed through the platform.

Saferider is an EDP as the service allows sellers (the drivers) to supply ride-sourcing services to end-users (the passengers) via a smartphone application.

Example: service that does not allow entities to make supplies available to end-users

Michelle wants a plumber to fix her kitchen sink. She uses a website called Fix It where she can request quotes for plumbing services.

Jim, a plumber, contacts Michelle and quotes a price, which Michelle accepts.

Fix It is not operating an EDP as its website only allows individuals to find a service provider. Transactions are not accepted through the website between the buyer and seller and any supply is agreed to outside of the platform.

Transactions reportable under SERR

EDP operators must report to the ATO details about the provision of consideration for supplies made through their EDP that are connected with Australia.

This includes ride sourcing, short-term accommodation, hiring (not selling) of assets and services made available through the platform. Assets hired could include personal assets, storage or business space. Services could include food delivery, professional, performing tasks and activities.

EDP operators do not need to report details of all supplies made through their EDP. For example, the following supplies do not need to be reported:

– those not connected with Australia;

– where an amount of the payment for the supply must be withheld under the PAYG withholding rules, for example, salary and wages, payments to a service provider covered by a voluntary agreement to withhold and payments for supplies in enterprise-to-enterprise transactions where the supplier does not quote its ABN;

– only the title or ownership of goods or real property is exchanged; and

– certain financial supplies.

Where a supply is made through multiple EDPs, the operator of the first platform is not required to report details about the transaction in certain circumstances.

Example: connected with Australia

Short Stay Marketplace Co is an EDP through which entities can make supplies of short-term accommodation.

Using this platform, Ezra contracts with Nina to book a three-night stay at a property owned by Nina in Melbourne for $450. Short Stay Marketplace Co must report this transaction. It involves a supply that is made through the platform that is both for payment and connected with Australia (because the property is located in Australia).

If Nina owned property in Italy and Ezra booked a stay there, Short Stay Marketplace Co would not need to report that transaction as the supply of the accommodation would not be connected to Australia.

If Nina was an overseas resident, the supply of accommodation would still be connected to Australia even if the payment to the supplier was made into a bank account in Italy.

Large commercial properties used to provide short-term accommodation

EDP operators do not need to report transactions involving the supply of short-term accommodation for a reporting period if the property is a ‘substantial property’ in relation to that reporting period.

A property is a substantial property if at least 2,000 transactions were made through their EDP for the property over the 12-month period ending on the last day of the reporting period.

If the property was listed on the platform for only part of the 12 months before the last day of a reporting period, the number of transactions is proportionally adjusted to reflect the shorter time the property was listed on the platform.

Each distinct address is considered a separate property. This means that all transactions made in relation to multiple rooms at a single address (such as in a commercial hotel) would be considered to be made in relation to a single property. When there are separate addresses within a building (such as apartments in a complex), each apartment is a separate property.

When to report under SERR

The reporting periods under SERR are:

– 1 July to 31 December – the report must be submitted by 31 January of the following year;

– 1 January to 30 June – the report must be submitted by 31 July of that year.

The period in which you need to report a reportable transaction depends on when you pay the supplier. This matters for transactions where the booking, supply and payment by the operator of the EDP to the supplier occur over multiple reporting periods. Where this occurs, the operator of an EDP must report the transaction in the period when it pays the supplier.

Small operators of EDPs need not provide reports for the reporting periods from 1 July to 31 December 2023 and from 1 January to 30 June 2024 in certain circumstances. Alternatively, the operator of the platform may choose to lodge reports for those reporting periods, in which case they will be given an extension of time (to 29 February 2024 and 2 September 2024 respectively).

Penalties may apply for late or incorrect information provided.

Tip! Talk to your tax adviser if you think your business is affected by the SERR.


R&D concerns

The ATO has concerns about certain R&D arrangements and has accordingly issued Taxpayer Alerts. The ATO is concerned about:

– R&D activities delivered by associated entities – in particular, where expenditure is incurred under an agreement with an associate of the R&D entity which itself conducts the R&D activities; and

– R&D activities conducted overseas for foreign related entities – in particular, where Australian-resident R&D entities claim a tax offset under for expenditure incurred on R&D activities conducted overseas.

Tip! If your business incurs expenditure on R&D activities and you wish to claim the R&D tax offset, talk to your tax adviser.


Fuel tax credits

Fuel tax credit rates increased on 5 February. The fuel tax credit rate is indexed twice a year in February and August – based on the upward movement of the consumer price index (CPI).

As a small business owner, you can claim fuel tax credits for eligible fuel you acquired, manufactured or imported and use in your business.

Fuel tax credits give you a full or partial credit for the fuel tax (excise or customs duty) that is included in the price of fuel used in your:

– Machinery;

– Plant;

– Equipment;

– Heavy vehicles; and

– Light vehicles travelling off public roads or on private roads.

Example

The ATO has provided a useful example for small business owners.

Alex owns a landscaping business and uses a petrol-operated ride-on mower and whipper-snipper. She is eligible to claim fuel tax credits by being registered for both GST and fuel tax credits.

Alex uses the ATO’s fuel tax credit calculator (https://www.ato.gov.au/single-page-applications/calculatorsandtools?anchor=FTCCalc#FTCCalc/questions) to help work out the fuel tax credit amount that she can claim on her business activity statement (BAS). The fuel tax credit calculator can also help with corrections or adjustments on her previous BASs.

Alex has kept records showing when the fuel was acquired to support her claims and she knows to keep her records for up to five years.


KEY TAX DATES

DateObligation
21 Feb 2024 January 2024 monthly BAS due
28 Feb 2024December 2023 quarterly BAS due Pay December 2023 quarterly instalment Annual GST return due (if no income tax return due) December 2023 SG charge statement due (if required) SMSF 2022–23 annual return due (unless first return or late with return for the previous financial year)       
21 Mar 2024February 2024 monthly BAS due
21 Apr 2024*March 2024 monthly BAS due
28 Apr 2024*March 2024 quarterly BAS due Pay March 2024 quarterly instalment Employee SG contributions due
21 May 2024April 2024 monthly BAS due Lodge annual FBT return (if your business lodges one) Pay assessed FBT
28 May 2024March 2024 SG charge statement due (if required)

*Next business day applies instead

Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations.

WHAT’S NEW IN PARLIAMENT?

Small business instant asset write-off

For more than 20 years, small business entities have been able to immediately write-off the full cost of depreciating assets so long as the cost of the asset is less than the relevant threshold. The threshold has changed a lot over the years, from a low of $1,000 (up to the 2011–12 income year) to no threshold under the temporary full expensing rules that ended on 30 June 2023. Since 2012, the threshold has been $6,500, $20,000, $25,000, $30,000 and $150,000.

Following the ending of temporary full expensing on 30 June this year, from 1 July, small business entities are once again reliant on what is called the ‘instant asset write-off’ to immediately deduct the cost of eligible depreciating assets. Without government intervention, the threshold would have reverted to $1,000 from 1 July 2023. However, as previously reported in TaxWise, the Government announced in the Federal Budget 2023–24 that the instant asset write-off threshold for the 2023–24 income year would be temporarily increased (from what would have been $1,000) to $20,000.

Enabling legislation to give effect to this measure is currently before the Parliament. To remind readers, small business entities (those with an aggregated annual turnover of less than $10 million) can immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used, or installed ready for use, between 1 July 2023 and 30 June 2024. The $20,000 threshold also applies to eligible amounts included in the second element of the cost of a depreciating asset.

A consequence of the temporarily increased threshold is that the full balance of a general small business pool is required to be written off at the end of the 2023–24 income year) if it is less than $20,000.

Note that these rules apply only to small business entities that have chosen to use the simplified depreciation rules.

Lock-out rule

The ‘lock-out’ rule means that a small business entity that uses the simplified depreciation system, but then opts out, is locked out of the system for five income years. The rule, however, has effectively been suspended since May 2015, although it was due to apply again from 1 July this year.

That will not happen. The legislation giving effect to the $20,000 instant asset write-off threshold will extend the suspension of the lock-out rule to 30 June 2024.

Bonus deduction for improving energy efficiency

Also announced as part of the Federal Budget 2023–24 is a bonus deduction for improving energy efficiency. This is not only available to small businesses (those with an aggregated annual turnover of less than $10 million), but also to medium businesses (those with an aggregated annual turnover of at least $10 million but less than $50 million).

This measure is also currently being considered by Parliament.

The bonus deduction will be equal to 20% of the expenditure on eligible assets, or improvements to existing assets, that support electrification or more efficient energy use.

To qualify for the bonus deduction:

  • the expenditure must be eligible for a deduction under another provision of the tax law; and

  • the asset must be first used or installed ready for use, or the improvement cost incurred, between 1 July 2023 and 30 June 2024.

The maximum bonus deduction is $20,000 (based on $100,000 of expenditure).

Eligible assets and improvements

A depreciating asset is eligible for the bonus deduction if it:

  • uses electricity and there is a new reasonably comparable asset that uses a fossil fuel available in the market;

  • uses electricity and is more energy efficient than the asset it is replacing or, if it is not a replacement, a new reasonably comparable asset available in the market; or

  • is an energy storage, demand management or efficiency-improving asset.

An improvement to a depreciating asset is eligible if it:

  • enables the asset to use electricity instead of fossil fuels;

  • enables the asset to be more energy efficient; or

  • facilitates energy storage, demand management or monitoring.

Some types of assets and expenditures are ineligible for the bonus deduction even where they would otherwise meet the requirements. These are:

  • assets, and expenditure on assets, that can use a fossil fuel;

  • assets which have the sole or predominant purpose of generating electricity (such as solar panels);

  • capital works;

  • motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles;

  • where expenditure is allocated to a software development pool; and

  • financing costs, such as interest.


FROM THE ATO

Are you a small or medium business?

Small and medium businesses qualify for a number of tax concessions. For most tax purposes, a business qualifies as a small business entity if its aggregated annual turnover is less than $10 million. For the purposes of the small business CGT concessions, however, the threshold is $2 million, not $10 million.

A business qualifies as a medium business if its aggregated annual turnover is at least $10 million but less than $50 million. 

Aggregated turnover is worked up by adding together the annual turnovers of the business entity, any ‘affiliates’ of that entity and any entities ‘connected with’ that entity. An entity is ‘connected with’ another entity if one entity controls the other or if both entities are controlled by a third entity. Control is based on a control percentage (i.e. an interest) in the other entity of at least 40%.

In certain circumstances, the ATO has a discretion to determine that one entity does not control another entity if the control percentage is at least 40% but less than 50%. The ATO has recently published guidelines on particular issues that have emerged from the administration of this discretion.

Tip! If you have any concerns about whether your business qualifies as a small or medium business for tax purposes, talk to your tax adviser.

Small business bonus deductions – interaction with R&D

In the September Business edition of TaxWise, we told you about additional 20% tax deductions for businesses with an aggregated annual turnover of less than $50 million. These are for:

  • expenditure on external training courses delivered to employees by registered training providers – the expenditure must be incurred between 29 March 2022 and 30 June 2024; and

  • expenditure on digital operations and to digitise operations – the expenditure must be incurred between 29 March 2022 and 30 June 2023. The boost is capped at $100,000 of expenditure per income year (so the maximum bonus deduction is $20,000 per income year).

If your business is entitled to the skills and training boost or the technology investment boost, and is also entitled to a research and development (R&D) notional deduction under the R&D tax incentive program, your business can claim both the bonus deduction and the R&D notional deduction.

The bonus deduction will not affect the amount of the R&D notional deduction. The R&D notional deduction amount is the actual expenditure amount, not the expenditure amount and the bonus deduction amount.

Your business is entitled only to the notional R&D deduction (and not a deduction under other taxation law). However, any bonus deduction is still claimed based on what that other deduction would have been.

Market valuation

There are more than 200 provisions in the tax law that require a taxpayer to determine the value of an asset or liability. Examples include:

  • market value substitution rules used for domestic CGT and income tax purposes;

  • transfer pricing rules affecting non-arm’s length international dealings;

  • asset threshold tests such as those in relation to the small business CGT concessions; and
     
  • indirect tax rules such as the GST margin scheme rules.

Valuing assets (or liabilities) for tax purposes can therefore be a crucial part of business operations.

The ATO has updated its valuation guidelines – Market valuation for tax purposes. The guidelines state that the onus for providing ‘a replicable and defensible valuation’ remains with your business even when a professional is engaged to provide the valuation. Your business is responsible for ensuring that the valuer:

  • is suitably knowledgeable and experienced;

  • receives appropriate engagement instructions;

  • remains objective;

  • is not presented with obstacles or limitations that inhibit their work; and

  • provides a reasonable market value that is supported by credible evidence using an appropriate recognised valuation methodology.

A ‘replicable and defensible valuation report’ is best evidenced in a substantive context by:

  • referring to and retaining all relevant records;

  • thoroughly documenting all aspects of the valuation process; and

  • choosing the most appropriate inputs and methodology.

Tip! Valuing assets and liabilities for tax purposes is complex, particularly in the context of the requirements of the tax system. Talk to your tax adviser if your business needs to obtain a valuation.

Using a motor vehicle for business?

Here are four things to keep in mind when claiming motor vehicle expenses – such as fuel, oil, servicing and registration – for your business.

If you operate your business as a sole trader or partnership (where at least one partner is an individual), the method you must use to calculate your deduction depends on the type of vehicle. For cars, you must use either the cents per kilometre method or the logbook method. For all other vehicles, you must use the actual costs method, where you claim the actual costs of expenses you incurred based on receipts.

If you use the logbook or actual costs method, remember you can only claim the business-use portion of your motor vehicle expenses.

If you operate your business through a company or trust, you must use the actual costs method to work out the deductions you are entitled to, regardless of the type of motor vehicle you use.

If you use the logbook or actual costs method, you can only claim depreciation or the decline in value for the business-use portion of the motor vehicle. The maximum you can claim as a deduction for the depreciation of your car is $68,108 for the current income year (2023–24) or the cost of the vehicle (whichever is less).

Tip! Talk to your tax adviser about the best way to calculate the deductions and the record-keeping requirements.

Luxury car tax

If your business is registered, or required to be registered, for GST and it sells or imports a luxury car that is no more than two years old, it may be liable to pay luxury car tax (LCT). LCT may also be payable if your business provides a luxury car to an employee (either as a bonus or as part of a salary package) or associate.

Subject to certain exceptions, a luxury car is a car whose LCT value exceeds the LCT threshold. The thresholds for the 2023–24 financial year are:

  • fuel-efficient vehicles – $89,332;

  • other vehicles – $76,950.

For LCT purposes, a car is a motor vehicle (but not a motorcycle) designed to carry a load of less than 2 tonnes and fewer than 9 passengers. A car is not a luxury car for LCT purposes if it is:

  • a commercial vehicle; and

  • not designed for the principal purpose of carrying passengers.

A limousine is classified as a car, regardless of the number of passengers it is designed to carry.

The ATO has published guidelines on how to determine the principal purpose of a vehicle for LCT purposes. In particular, the guidelines list the factors to consider in determining the principal purpose of all vehicles, including utility vehicles. The guidelines also consider whether design modifications may alter a vehicle’s purpose.

The ATO states that whether a car is a commercial vehicle is determined objectively, based on the vehicle’s design, rather than how it is intended to be used in practice.

ATO’s compliance approach – utility vehicles

If a commercial vehicle with one of the following body types is supplied for an amount exceeding the LCT threshold, the ATO will treat the arrangement as high risk if LCT is not paid:

  • station wagon;

  • off-road passenger wagon;

  • passenger sedan;

  • people mover; or

  • sports utility vehicle.

The supply of a truck, cargo or delivery van without LCT being paid is treated as a low-risk arrangement.

Tip! Talk to your tax adviser if you think your business might be liable to pay LCT.

Business income and expenses

If you are running a business, most income received by the business is assessable for income tax purposes. The total amount is referred to as ‘assessable income’.

You need to report assessable income in your business’ tax return. It includes:

  • cash income and income from online transactions;

  • commissions and investment earnings;

  • recovered bad debts for which your business previously claimed a tax deduction;

  • most government payments;

  • capital gains and losses;

  • increases in the value of trading stock;

  • stock taken for personal use; and

  • payments from an insurance claim related to your business.

Make sure to also check what income you can exclude – for example, some COVID-19 government payments are not assessable if you meet the eligibility criteria.

Remember you can reduce your business’ taxable income by claiming business tax deductions, as long as:

  • the expense directly relates to earning your business’ assessable income;

  • you claim only the business-use portion if the expense is for a mix of business and private use; and

  • you have records to substantiate your claims.

Expenses may include:

  • motor vehicle and travel expenses;

  • items related to protecting staff from COVID-19;

  • employee superannuation contributions; and

  • payments you make to workers (including their wages) as long as you’ve complied with the pay as you go (PAYG) withholding and reporting obligations for each payment.

Tip! Your tax adviser can help you with your tax.


How’s your record keeping?

The ATO has reminded businesses about the importance of keeping the correct records. For one thing, good record-keeping makes things easier at tax time.

When it comes to record keeping, there are five rules. You need to:

  • keep all records related to starting, running, changing, and selling or closing your business that are relevant to your tax and superannuation affairs;

  • store records safely to prevent damage and protect information from being changed (you must not change relevant information in records);

  • keep most records for 5 years (for example, you need to keep records of losses for up to 5 years after you’ve fully claimed the loss);

  • be able to show the ATO your records if they ask for them; and

  • ensure your records are in English or easily converted to English.

Tip! Talk to your tax adviser about what records to keep and how to keep them.


Making money from content creation?

You’ll need to register for GST if you make $75,000 or more in a 12-month period. This includes receiving payments (whether cash, services, goods or a percentage of advertising revenue) for:

  • reviewing and promoting products and services;
  • content being sponsored, endorsed, or having advertising placed in it;

  • creating and posting content;

  • others licensing your content;

  • acquiring followers, viewers and subscribers; and

  • collaborating with other content creators.

When working out your GST turnover to determine if you need to register, include:

  • both taxable and GST-free sales; and

  • the value of non-monetary payments (such as products or services, gifts, clothing or makeup).

Payments you receive from recipients:

  • outside Australia may be GST-free;

  • within Australia will be taxable sales – which means GST applies to them.

Once you’re registered, you’ll need to collect GST on your taxable supplies and pay it to the ATO by lodging a business activity statement (BAS).

You may also be able to claim GST credits when you lodge your BAS.

Has your business received a support payment?

If your business received a government support grant or payment to help your business recover from COVID-19 or a natural disaster, it’s important to check if you need to include the payment in your business’ assessable income.

Grants are generally treated as assessable income, but you may be able to claim deductions if you use these payments to:

  • purchase replacement trading stock or new assets;

  • repair your business premises and fit out; or

  • pay for other business expenses.

However, some grants are not assessable. This means you don’t need to include them in your business’ tax return if eligibility requirements are met.

Non-assessable grants include:

  • COVID-19 business support payments;

  • natural disaster grants;

  • water infrastructure payments.

Your business can claim deductions for expenses associated with non-assessable grants only if they relate directly to earning assessable income. Assessable income includes things like wages, dividends, interest and rent. Your business cannot claim expenses related to obtaining the grant, such as accountant’s fees.

Tip! Talk to your tax adviser if you need help dealing with government support grants and payments.

Entertaining your employees?

With summer and Christmas just around the corner, you may be planning a party or similar event (e.g. a bowls day) for your employees. If so, make sure you consider the fringe benefits tax (FBT) implications of the party or other event.

The FBT outcome will depend on:

  • the amount spent on each employee;

  • when and where the event is held;

  • the value and type of gifts provided; and

  • who attends – is it just employees, or are partners, clients or suppliers also invited?

Don’t forget to keep all records relating to the entertainment-related fringe benefits your business provides, including how the taxable value of benefits is worked out.

Tip! Talk to your tax adviser to discuss any FBT implications.

Update your ABN details

When was the last time you checked your business’ Australian business number (ABN) details on the Australian Business Register (ABR)? If you’re not sure, it’s time to check the details are up to date.

Emergency services and government agencies use ABN details to identify businesses in areas affected by emergencies, so it’s important to check your business’ physical business address and postal address are listed.

Other ABN details include authorised contacts, contact details and business activities.

If the details are out of date, your business risks missing out on important assistance, information or opportunities such as financial grants.

It’s your responsibility to keep your business’ details up to date, but your tax adviser can update them on your behalf.

If your business is no longer using its ABN, you need to cancel it. The ATO actively reviews ABN entitlement and may cancel your business’ ABN if there are no signs of business activity.

Fixing GST or fuel tax errors

If your business made an error when reporting GST or fuel tax claims on a past business activity statement (BAS), you may be able to correct it on the next BAS.

Errors are mistakes made when completing a BAS that would result in your business paying too much tax (credit error) or paying too little tax (debit error).

Credit errors can include:

  • reporting a GST supply twice;

  • overstating the GST on supplies;

  • overstating an increasing fuel tax adjustment.

Debit errors can include:

  • understating the GST on supplies;

  • claiming GST credits for an acquisition twice;

  • overstating fuel tax credit claims, for example, double-counting fuel tax credits or incorrectly claiming for ineligible fuel;

  • overstating a decreasing fuel tax adjustment.

The debit error value limits have increased. If your business’ annual GST turnover is less than $20 million, you can correct single or multiple debit errors that are less than the value limit of $12,500. You can correct the error in a later BAS, up to 18 months from the due date of the BAS for the tax period in which the error was made.

You cannot correct an error to claim additional GST credits where the four-year time limit for claiming those GST credits has expired.

Generally, it is easier to correct a GST error on a later BAS than to revise an earlier period. Revising an earlier period that contains an error can incur penalties or general interest charge (GIC).

Keep complete and accurate records to help you calculate and support your claims.

When claiming fuel tax credits, you need to apply the correct rates. Remember that rates change regularly.

Tip! Your tax adviser can help you prepare and lodge BASs and assist with correcting errors.

Cyber security

Cybercrime can be costly for businesses. Throughout 2021–22, a cybercrime was reported every seven minutes to the Australian Cyber Security Centre (ACSC).

To avoid being a target for cyber criminals, the ATO recommends a monthly security check. Here are four simple steps:

  • Don’t compromise your device/s. Install updates for your devices and software. Regular updates ensure you have the latest security in place. You can turn on automatic updates so future updates are made as soon as they’re available.

  • Turn on multi-factor authentication (MFA) to protect your valuable information and accounts from criminals. MFA options include an authenticator app, physical token, email or SMS.

  • Back up your files regularly. Hardware failure, theft, or a virus could result in the loss of critical business information. Recovering data can be expensive and sometimes impossible.

  • Change your password to a passphrase as they are more secure. Passphrases use four or more random words and tend to be more unique, longer in length and less predictable than a password. You can even use a password manager to help you generate or store passphrases.

Summary prosecutions

The ATO can prosecute (under the Taxation Administration Act 1953 (Cth) (TAA)) a range of summary offences, including:

  • failing to lodge a tax return, BAS or FBT return;

  • failing to comply with an information gathering notice;

  • failing to comply with a Court Order under section 8G of the TAA;

  • making false or misleading statements;

  • incorrectly keeping records.

Annual results continue to increase as the ATO resumes normal operations post-COVID and environmental influences.

Here are the results for the last three years.

YearProsecutionsConvictionsReparation orders ($)Fines ($m)
2022–23177174458,7852.14
2021–229191129,8240.908
2020–2119819256,4001.65

Tax crime prosecutions

The ATO investigate more serious tax-related fraud offences, sometimes in partnership with the Australian Federal Police. Where the evidence warrants it, cases are referred to the Commonwealth Director of Public Prosecutions (CDPP) to consider prosecution. The CDPP prosecutes (under the Criminal Code Act 1995 (Cth)) a range of indictable offences, including:

  • obtaining financial advantage by deception;

  • dishonestly causing a loss to the Commonwealth;

  • forgery offences; and

  • money laundering.

Here are the results for the last three years.

YearCasesConvictionsCustodial sentencesReparation orders ($m)Fines ($)
2022–232623111.7217,200
2021–2221151214.642,000
2020–212020120.5556,000

Recent prosecutions

A NSW solicitor was convicted and fined $42,000 for failing to lodge 14 income tax returns across the 2007–08 to 2020–21 financial years. During sentencing, the magistrate remarked that, ‘As a solicitor, there is no excuse to not lodge income tax returns’.

A Brisbane carpenter was convicted and fined for failing to lodge 5 income tax returns. He received a fine totalling $5,370 and ordered to pay costs of $161.05. The magistrate commented during sentencing that, ‘Failure to lodge tax returns are not victimless crimes. Energy and resources are required to chase lodgment and that costs everybody money’.

A carpet cleaner was convicted in the Perth Magistrates Court for failing to lodge 21 income tax returns. He received a penalty of $18,000 for failing to uphold his tax obligations. During sentencing, the magistrate noted that. ‘The ATO would have taken multiple steps to elicit lodgment prior to initiating prosecution action. Twenty-one years of non-lodgment is sticking your head in the sand’.



KEY TAX DATES

DateObligation
21 Nov 2023Lodge and pay October monthly BAS
28 Nov 2023Lodge and pay September quarterly SGC (if required) 
1 Dec 2023Full self assessment companies – pay 2022–23 income tax
Non-full self assessment companies – lodge 2022–23 return 
21 Dec 2023Lodge and pay November monthly BAS
22 Jan 2024*Lodge and pay December monthly BAS 
29 Jan 2024*Superannnuation guarantee payment due date for the December quarter
31 Jan 2024Closely held trust – lodge December quarterly TFN report 
21 Feb 2024Lodge and pay January monthly BAS 
28 Feb 2024Lodge and pay December quarterly BAS  Pay second quarterly PAYG instalment for 2023–24 Lodge annual GST return (if no tax return is due)
Lodge and pay December quarterly SGC (if required)   Lodge and pay SMSF annual return for new SMSFs (unless otherwise advised)  


* The date specified is the next business day as the due date falls on a Sunday.

Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.

September 2023

What’s New – Tax Changes From 1 July 2023

The ending of temporary full expensing (which allowed until 30 June 2023 an immediate deduction for the cost of an eligible depreciating asset for businesses with an aggregated turnover of less than $5 billion), but the instant asset write-off threshold is proposed to be $20,000 for small businesses (see below);

– The ending of loss carry back (which allowed until 30 June 2023 companies to carry back tax losses back as far as the 2018–19 income year);

– the expansion of the third-party reporting system to include short-term accommodation transactions and taxi and ride-sourcing services;

– in Victoria, businesses with national payrolls more than $10 million a year will pay an additional surcharge (to address Victoria’s COVID-19 debt) on Victorian taxable wages. The surcharge is 0.5%, increasing to 1% for businesses with national payrolls of more than $100 million. This additional surcharge will apply for 10 years until 30 June 2033.

Tip! If you think any of these changes may affect your business, talk to your tax adviser.

Increased thresholds/rates

A new tax year (2023–24) started on 1 July 2023. Although the personal income tax rates haven’t changed (the Stage 3 income tax cuts don’t start until 1 July 2024), various other amounts and rates have increased for 2023–24. These are listed below.

ItemThreshold/rate for 2023–24
CGT improvement threshold$174,465
Division 7A benchmark interest rate8.27%
Car limit (depreciation)$68,108
Car expenses – cents per kilometre method (individuals and individuals in partnership only)85 cents per kilometre
Reasonable meal expenses – employee truck driverBreakfast: $28.75 Lunch: $32.80 Dinner: $56.60
Reasonable meal expenses – other employeesSee Taxation Determination TD 2023/3
Overtime meal allowance – reasonable amount$35.65
Superannuation guarantee rate11%
Superannuation guarantee maximum contribution base$62,270 per quarter

Instant asset write-off

Temporary full expensing ended on 30 June 2023. However, small businesses (aggregated annual turnover of less than $10 million) can access the instant asset write-off. This allows a small business to deduct in full the cost of a depreciating asset if its cost is less than the relevant threshold which, for the 2023–24 income year, is proposed to be $20,000.

The asset must be first used (or installed ready for use) between 1 July 2023 and 30 June 2024.

The temporary $20,000 threshold was announced as part of the Federal Budget 2023–24 in May 2023, although it is yet to be legislated.

Tip! The rules are somewhat complex so talk to your tax adviser before acquiring any depreciating assets.

GDP adjustment for 2023–24

The GST and PAYG instalment amounts are usually adjusted every year by the ‘GDP adjustment factor’.

For 2023–24, the GDP adjustment factor is 6%. For 2022–23, the GDP adjustment factor was 2%.

Bonus deduction for energy efficiency

A 20% bonus deduction will be available to businesses with aggregated annual turnover of less than $50 million which incur deductible expenditure that supports electrification and more efficient use of energy. This will include expenditure on assets that upgrade to more energy-efficient electrical goods.

The bonus deduction will not apply to electric vehicles, renewable electricity generation assets, capital works and assets that are not connected to the electricity grid and use of fossil fuels.

Up to $100,000 of total expenditure will be eligible for the incentive with a maximum bonus of $20,000 per business.

Eligible assets or upgrades will need to be first used, or installed ready for use, between 1 July 2023 and 30 June 2024.

Penalties

The value of a penalty unit has increased from $275 to $313 where the relevant offence is committed, or relevant act or omission occurs, on or after 1 July 2023.

AAT and Court fees

If you are thinking of challenging an assessment or other ATO decision and it ends up before the AAT or the Federal Court, you may be interested to know that the AAT and Federal Court fees increased on 1 July 2023. For example, the standard AAT application fee increased from $952 to $1,082. The fee is $581 (up from $511) if applying to the Small Business Taxation Division.

A lower fee of $107 (up from $94) is payable if the amount of tax in dispute is less than $5,000, or if applying to review a refusal to extend the time to lodge an objection or a refusal to release your business from paying a tax debt.

IT’S TAX TIME AGAIN!

Your business’ income tax return for the 2022–23 income year must be lodged by 31 October 2023, unless you have a substituted accounting period. If your business’ tax return is lodged through a registered tax agent, the due date for lodgment is likely to be later than 31 October, possibly even as late as May 2024. 

Lodging a tax return

Are you a sole trader?

Even if your income is below the tax-free threshold of $18,200, you still need to lodge a tax return.

Do you pay PAYG instalments? Lodge your activity statements and pay all your PAYG instalments before you lodge your tax return so your income tax assessment takes into account the instalments you’ve paid throughout the year.

Are you a partnership?

If you operate your business in a partnership:

– the partnership lodges the partnership tax return, reporting the partnership’s net income or loss (assessable income less allowable deductions).

As an individual partner, you report on your individual tax return:

– your share of any partnership net income or loss

– any other assessable income, such as salary and wages (note that any salary or wage from the partnership is treated as a share of the partnership income), dividends and rental income.

The partnership doesn’t pay income tax on the income it earns. Instead, you and each of the partners pay tax on the share of net partnership income (if any) you receive.

Are you a trust?

If you operate your business through a trust, the trust reports its net income or loss (this is the trust’s assessable income less its allowable deductions).

The trustee is required to lodge a trust income tax return.

As a beneficiary of the trust, you report on your individual tax return any income you receive from the trust.

Are you a company?

If you operate your business through a company, you need to lodge a company income tax return.

The company reports its taxable income, tax offsets and credits, PAYG instalments and the amount of tax it is liable to pay on that income or the amount that is refundable.

The company’s income is separate from your personal income.

Tip! Registered tax and BAS agents can help you with your tax.

Tax losses

A tax loss arises when the total deductions you can claim, excluding gifts, donations and personal superannuation contributions, are greater than your total income for an income year.

If your business makes a tax loss, you may be able to:

– offset the loss in the same income year against other assessable income;

– carry forward the loss and claim it as a business deduction in a later income year; or

– carry the loss back to an earlier income year (but not before 2018–19) in which the business has an income tax liability and receive a tax offset – loss carry back was available only to companies until 2022–23 and ceased to be available from 2023–24.

If your business has made more than one tax loss in a year, you will need to consider each tax loss separately.

If you’re a sole trader or in a partnership and want to offset a tax loss, first check if the business activity meets at least one of the four tests under the non-commercial loss rules. (Those rules do not apply to business losses made by primary producers and professional artists whose income from other sources is less than $40,000.)

If you do meet at least one of the four tests, then you can offset the loss against other assessable income (such as salary or investment income) in the same income year.

If you don’t meet at least one of the four tests, you can defer the loss or carry it forward to a future income year. For example, you can offset it when you next make a profit.

Non-commercial losses made by an individual with an adjusted taxable income exceeding $250,000 are quarantined.

The rules for record-keeping still apply in relation to business losses. You need to keep records for 5 years for most transactions. However, if you fully deduct a tax loss in a single income year, you need to keep records for only 4 years from that income year.

Tip! Talk to your tax adviser about the best way to utilise tax losses.

Personal services income

If you operate your business through a company or a trust, income earned by the company or trust from the provision of your personal services (known as ‘personal services income’ or PSI) will be attributed to you unless:

– the company or trust is carrying on a personal services business (PSB); or

– the PSI was promptly paid to you as salary or wages.

The company or trust will be carrying on a PSB if at least one of a number of tests are satisfied. These are:

– the results test – this is based on common law criteria for characterising an independent contractor (in contrast to an employee/employer relationship);

– the unrelated clients test – this requires the PSI to be earned from at least 2 unrelated clients who contract your services as a direct result of advertising or making a public offer of your services;

– the employment test – this requires at least 20% (by market value) of your work to be performed by employees;

– the business premises test – this requires you to use business premises that meet certain conditions (e.g. you have exclusive use of the premises and the premises must be physically separate from any premises you use for private purposes).

If 80% or more of your PSI (with certain exceptions) is income from one client (or the client and their associate(s)) and the results test is not met, the company or trust will need to obtain a PSB determination from the ATO.

The company or trust cannot deduct amounts that relate to gaining or producing your PSI, unless you could have deducted the amount as an individual or the company or trust received the PSI in the course of conducting a PSB.

Even if you don’t use a company or trust to derive your PSI, there are limitations on the deductions that you may claim against your PSI. For example, you may not be able to deduct certain home office expenses or occupancy expenses such as mortgage interest or rent.

Tip! The PSI rules are complicated so talk to your tax adviser if you provide your services through a company or trust.

Home office

A lot more people are working from home following a shift in workplace arrangement as a result of the COVID-19 pandemic. If you operate your business from a home office, you can deduct the expenses of running that office. Note there can be CGT consequences from using your home to carry on a business.

Expenses you may be able claim a deduction for include:

occupancy expenses – these include rent, mortgage interest, water rates, land taxes and house insurance premiums. Occupancy expenses are usually calculated by apportioning the expenses between the home office and the rest of the property on a floor area basis;

running expenses – these are the increased costs from using your home for your business, including electricity or gas charges for heating, cooling and lighting, cleaning costs and the decline in value and the cost of repairs of deprecating assets such as furniture, furnishings and equipment; and

work related phone and internet expenses, including the decline in value of the handset – an apportionment will be required if the phone or computer is not used exclusively for work purposes.

Running expenses

If you work from home but don’t have a home office as such, you can still claim deductions for ‘running expenses’. To simplify matters, from 1 July 2022, the ATO allows these expenses to be claimed using a fixed rate of 67 cents for each hour worked from home (it was 80 cents per hour for 2021–22 under a different method, the temporary ‘shortcut method’).

Running expenses for these purposes are energy expenses, internet expenses, mobile and home phone expenses and stationery and computer consumables expenses (separate deductions need to be claimed for any other running expenses and depreciation).

From 1 March 2023, you must keep a record of the actual time spent working from home. From 1 July 2022 to 28 February 2023, you may instead keep a record that is representative of the actual hours worked. Records also need to be retained to demonstrate you incurred the relevant expenditure. In this respect, the ATO will accept one bill per item (being energy, internet, fixed or mobile telephone and stationery and computer consumables). If the bill is not in your name, additional evidence such as a credit card statement is required to show that you incurred the expenditure.

Of course, you can still make a claim based on your actual running expenses if it produces a larger deduction. But remember that those expenses will need to be apportioned between work and private use.

Tip! If you have a home office, talk to your tax adviser about how to calculate your deduction and the records you must keep.

Company tax rate

The standard company tax rate is 30%.

The tax rate for the 2022-23 tax year for companies whose aggregated annual turnover is under $50 million (called “base rate entities”) is 25%. This is also the rate for 2023-24 and later tax years.

If more than 80% of a company’s assessable income is “base rate entity passive income” (eg dividends, rent, interest, royalties and net capital gains), the company will be taxed at the standard 30% rate.

Small business tax offset

If you are a sole trader, an individual who is a partner in a business partnership or an individual who is a beneficiary of a trust that carries on a business, you may qualify for the small business tax offset if the business’ turnover is less than $5 million (this is less than the general $10 million small business entity threshold). The offset is not available to an individual acting in their capacity as a trustee.

The offset for the 2022–23 income year (and for the 2023–24 income year) is equal to 16% of the income tax payable on the sole trader’s or other individual’s taxable income that qualifies as net small business income. The offset is capped at $1,000.

Taxable payments annual report 

Businesses that pay contractors or sub-contractors for certain services may need to lodge a taxable payments annual report (TPAR) with the ATO. The services are:

– building and construction services;

– cleaning services;

– courier or road freight services;

– IT services; and

– security, investigation, or surveillance services.

The TPAR for 2022–23 should have been lodged by 28 August 2023.

The reporting system has been extended from 1 July 2023 to include the supply of taxi and ride sharing services and short-term accommodation.

FROM THE ATO

Claiming tax deductions

A business can generally claim a tax deduction for most expenses it incurs, as long as:

– the expense relates directly to earning the business’s assessable income;

– only the business-use portion of an expense that has a mix of business and private use is claimed;

– the business has records to substantiate the claims.

A business can claim deductions for:

– day-to-day operating expenses, such as office stationery and wages – wages are deductible only if the business complies with PAYG withholding and reporting obligations;

– capital expenses, such as machinery and equipment, which typically have a long-term benefit. They can be depreciated over the term of the asset’s life.

– alternatively, the business may be able to claim an immediate deduction through temporary full expensing.

Business expenses may include motor vehicle, travel, legal, digital product and home-based business expenses, and items related to protecting staff from COVID-19 at work such as hand sanitiser and sneeze or cough guards.

A business can claim deductions for superannuation contributions made on behalf of employees.

Keep in mind, some expenses are not deductible, such as private expenses, entertainment expenses, traffic fines and expenses that relate to earning tax-free income.

It’s a good idea to keep complete records of expenses throughout the income year (instead of a representative period) to give more flexibility.

ATO example

The ATO has published on its website an example involving a sole trader called Rubi who is an IT consultant.

As part of her work, she travels to deliver seminars and workshops. Rubi follows the 3 golden rules for claiming a tax deduction when she travels for business purposes.

The expense must be for her business, not for private use.

If the expense is for a mix of business and private use, she can only claim the portion that is used for her business.

She must have the records to prove it.

Rubi uses the myDeductions tool to store receipts of all her airfares, accommodation, public transport costs, ride-sharing fares, car hire fees and other costs such as fuel, tolls and car parking. She also records her meal costs if she’s away overnight.

Rubi also keeps a travel diary to note which expenses were for business purposes and which expenses were private, such as sight-seeing. The cost of her recent tour of the Tower of London is not included in her deductions. There are some expenses Rubi can’t claim, such as entertainment, traffic fines and expenses related to earning non-assessable income.

As an employer, Rubi meets her superannuation and employer obligations by reporting her employees’ salaries or wages and paying any tax withheld amounts on time. This allows her to deduct the salaries, wages and superannuation contributions she’s paid during the year.

By the time Rubi is ready to lodge her tax return, her tax agent has everything they need to verify her deductions.

Tip! Your tax adviser can help your business maximise its tax deductions and assist with record-keeping.

Technology investment boost

Businesses with an aggregated annual turnover of less than $50 million can claim an additional 20% tax deduction for 2022–23 to support their digital operations and digitise their operations. The bonus deduction is capped at $20,000.

The expenditure must:

– already be deductible for your business under taxation law; and

– have been incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023.

If the expenditure is on a depreciating asset, the asset must have been first used or installed ready for use for a taxable purpose by 30 June 2023. That rule does not apply to expenses incurred in the development of in-house software allocated to a software development pool.

Repair and improvement costs for depreciating assets are also eligible for the bonus deduction, provided they were incurred during the relevant time period.

Eligible expenditure may include, but is not limited to, business expenditure on:

– digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;

– digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;

– e-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; and

– cyber security – cyber security systems, backup management and monitoring services.

Where the expense is partly for private purposes, the bonus deduction can be applied only to the business-related portion.

If your business is registered for GST and the expenditure is not GST-free, the bonus deduction is calculated on the GST-exclusive amount where the entity is eligible to claim a GST credit, or includes any GST that cannot be claimed as a GST credit incurred in carrying on the business.

The following expenses are not eligible for the bonus deduction:

– salary and wages;

– capital works costs;

– financing costs;

– training or education costs (these may be eligible for the skills and training boost); and

– expenses that form part of your trading stock costs.

Small business skills and training boost

Businesses with an aggregated annual turnover of less than $50 million can claim an additional 20% tax deduction for 2022–23 and 2023–24 for external training courses delivered to employees by registered training providers.

The expenditure must be:

– for the provision of training to employees of your business, either in-person in Australia, or online;

– charged, directly or indirectly, by a registered external training provider that is not you or an associate of yours;

– already deductible for your business under a taxation law;

– incurred within a specified period (between 7:30 pm AEDT on 29 March 2022 and 30 June 2024).

Training expenses can include incidental costs related to the provision of training, provided they are charged by the registered training provider, such as the cost of books or equipment needed for the course.

Where the training is a component of a larger program or course of training, the enrolment or arrangement relating to the relevant expenditure must be made or entered into at or after 7:30 pm AEDT on 29 March 2022.

If your business is registered for GST and the training is not GST-free, the bonus deduction is calculated on the GST exclusive amount where the entity is eligible to claim a GST credit, or includes any GST that cannot be claimed as a GST credit in carrying on the business.

Where deductions are to be claimed over time such as for capital deductions, the bonus deduction is calculated as 20% of the full amount of the eligible expenditure. It can be claimed upfront in the first income year in which the bonus deduction is available.

You cannot claim expenditure for:

– training of non-employee business owners such as sole traders, partners in a partnership or independent contractors; and

– costs added on an invoice by an intermediary on top of the cost of training, such as commissions or fees, as they are not charged directly or indirectly by the registered training provider.

Digital games developers

If your company develops digital games, it may be able to claim the digital games tax offset (DGTO). This is a refundable tax offset that allows eligible Australian companies that develop digital games to claim 30% of their total qualifying Australian development expenditure (QADE).

To be eligible to claim the DGTO you must:

– obtain a certificate from the Minister for the Arts stating your company’s eligibility for the DGTO and total QADE;

– be an Australian resident company with an ABN, or a foreign resident company with an ABN and a permanent establishment in Australia.

QADE must be at least $500,000 and be incurred on or after 1 July 2022. There is a $20 million cap per company, per income year – this cap also extends to a group of companies that are connected or affiliated.

Once you’ve obtained a certificate from the Minister for the Arts, you can claim the DGTO in your 2023 company tax return on the calculation statement at label E – Refundable tax offsets.

Consolidated groups should ensure the sum of all the DGTO amounts being claimed does not exceed $20 million.

Tip! Talk to your tax adviser if you need help claiming the DGTO.

Changes to fuel tax credit rates

Our fuel tax credit calculator helps you to apply the correct fuel tax credit rates when preparing your BAS.

Fuel tax credit rates change regularly, so make sure you’re using the correct rates for the relevant dates on which you acquired fuel.

On 1 July 2023, the fuel tax credit rate for heavy vehicles (such as buses, coaches and trucks) for travelling on public roads decreased because of the increase in the road user charge.

On 1 August 2023, fuel tax credit rates increased in line with the fuel excise indexation. All fuel tax credit claimants need to apply the new rates for fuel acquired from 1 August.

To make it easier, if your business claims less than $10,000 in the year you can use the rate that applies at the end of your BAS period to work out your claim.

There are time limits on correcting errors and mistakes.

The ATO provides a fuel tax credit calculator on its website. Or talk to your tax adviser.

KEY TAX DATES

DateObligation
21 Sep 2023August monthly BAS due
3 Oct 2023*Finalisation due date by payers of PAYG withholding payments reporting through STP for closely held payees
23 Oct 2023**September monthly BAS due Payment of annual PAYG instalment for 2022–23
30 Oct 2023**September quarter BAS due Payment of first PAYG instalment for 2023–24 by quarterly payers
31 Oct 20232022–23 income tax return due
31 Oct 2023PAYG withholding annual reports due (no ABN withholding; interest, dividend and royalty payments paid to foreign residents; and payments to foreign residents)
21 Nov 2023October monthly BAS due


*Next business day as the due date (30 September) falls on a Saturday (and 2 October is a public holiday in a number of States and Territories).

**Next business day as the due dates (21 and 28 October) fall on a Saturday.

Note!

Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.

Year End Tax Tips

Are you ready for the year end?

We are getting near the end of the tax year (30 June). So you might want to consider ways to ensure your business and tax affairs are in order in readiness for year end.

Ways to optimise your tax position include reducing your assessable income or increasing your allowable deductions for the 2022–23 income year. Either way, the business’ taxable income is reduced which reduces the amount of tax payable.

One way to reduce assessable income for the current income year, if your business reports income on a cash basis, is to delay sending an invoice to a customer until after 30 June. Of course, cash flow issues might mean you want to be paid sooner.

If you are in the process of selling property and the profit will be taxable as a capital gain, you could delay the sale until the next income year – but remember that the liability to pay CGT arises in the income year in which you exchange contracts and not on settlement.

You can increase deductible expenditure by bringing it forward from the next income year to the current income year. This particularly useful where an immediate deduction is available – for example, for depreciating assets under the temporary full expensing rules, start-up costs and certain prepaid expenses.

Remember that the temporary full expensing rules for depreciating assets end on 30 June this year. Although the instant asset write-off will be available again for small businesses (less than $10 million aggregated turnover) for 12 months from 1 July this year, the threshold will be $20,000 per asset (as reported in the May Budget edition of TaxWise® News), whereas there is no threshold under temporary full expensing.

Charitable donations are another good way to increase your deductions. If you are not sure if a donation will be deductible, you can check the deductibility status of charities at https://www.abn.business.gov.au/Tools/DgrListing. Don’t forget to ask for a receipt.

What are the benefits?

If you are a sole trader or a partner in a partnership, the benefits of reducing your taxable income could include:

– reducing your marginal tax rate from, for example, 45% to 37% or 37% to 32.5%; and

– avoiding liability for the Medicare levy surcharge (at least 1%) if you don’t have appropriate private health insurance.

Tip! As the end of the tax year approaches, talk to your tax adviser about ways to ensure your business is ready for year end.

Trustee resolutions

If you operate your business through a trust and you wish to make beneficiaries presently entitled to trust income for the 2022–23 income year, you should ensure your trustee resolutions are effective. This includes where you may want to stream franked dividends and capital gains that are included in trust income to particular beneficiaries.

It’s important that the trustee:

– checks the trust deed to ensure that the intended beneficiaries are within the class of persons who can be appointed trust income (or trust capital, if they intend to stream a capital gain that is not characterised as trust income under the deed) and are not excluded from being beneficiaries;

– complies with any requirements in the trust deed that concern the valid appointment or distribution of trust income to beneficiaries;

– recognises that, for tax law purposes, beneficiaries need to be made presently entitled to 2022–23 trust income by 30 June this year;

– is aware that if they fail to do what is required in a trust deed, or fail to validly appoint income to beneficiaries by 30 June, this may cause outcomes to arise that differ to what they intended. This could include other beneficiaries, or the trustee, being assessed on the relevant share of the trust’s net (taxable) income. Where a trustee is assessed, this will be at the top marginal rate of tax plus the Medicare levy (47%); and

– ensures that resolutions are unambiguous.

Family trusts

Family trust distribution tax (FTDT) happens when a trust that has made a family trust election (FTE), or an entity that has made an interposed entity election (IEE), makes a distribution outside the family group of the individual specified in the FTE. This includes when distributing to another entity. The rate of FTDT is 47%.

So where an FTE or IEE has been made, it is important to identify who is in the family group.

For a non-fixed (discretionary) trust to be within the family group of the individual specified in the FTE, that trust would need to have made either:

– an FTE with the same specified individual in place; or

– an IEE so it is a member of the specified individual’s family group.

Tip! Talk to your tax adviser – they can help you ensure that trustee resolutions are effective and that no liability to FTDT will arise.

What’s in the Parliamentary pipeline?

From a business tax perspective, a number of measures are working their way through Parliament:

– the PAYG and GST instalment uplift factors (6%) for the next income year (2023–24) – these were announced in the recent Federal Budget 2023–24;

– alternative record-keeping arrangements for employers (to be determined by the ATO) for fringe benefits tax (FBT) purposes;

– a 20% bonus deduction for expenditure incurred by a small or medium business (aggregated turnover less than $50 million) on external training for employees (ends on 30 June 2024);

– a 20% bonus deduction for expenditure incurred by a small or medium business for the purpose of digitising operations (ends on 30 June 2023);

– a 30% refundable tax offset in relation to the development of digital games in Australia;

– businesses will be able to align their excise returns and customs returns with the return period for indirect taxes (i.e. the return period for business activity statements);

– confirmation that the rules governing the income tax treatment of foreign currency will not apply to digital currencies such as bitcoin (although digital currencies issued by, or under the authority of, a government agency will continue to be taxed as foreign currency); and

– certain distributions that are funded by capital raisings will not be frankable.

Listed public companies will be affected by a measure aligning the tax treatment of off-market share buy-backs with the tax treatment of on-market share buy-backs.

Various amendments to the Corporations Act, although not tax measures, are relevant to companies. The amendments will:

– enable documents under the Act to be signed electronically and for certain documents to be sent in either hard copy or electronic form; and

– provide that companies are not required to send documents to a member where contact details are known to be incorrect.

Tip! If you think any of these measures may affect your business, talk to your tax adviser.

Are you a primary producer?

There are a number of changes in the pipeline designed to encourage primary producers to undertake additional carbon abatement activities. Briefly, these measures will:

– allow primary producers to treat the net proceeds from the sale of Australian carbon credit units (ACCUs) they first held on or after 1 July 2022 as primary production income for the purposes of the farm management deposit (FMD) scheme and income tax averaging; and

– allow primary producers to treat income derived from farm abatement activities with carbon service providers supporting ACCUs first held on or after 1 July 2022 as primary production income for the purposes of the FMD scheme and income tax averaging.

These concessions will not be available to companies and trusts.

Another measure will change the taxing point for ACCUs held by primary producers to the point of sale (but not if held by a trust). This measure means primary producers will not be taxed based on changes in the value of their ACCUs each year (unless the units are held by a trust).

These measures will commence on the first day of the first quarter after the enabling legislation receives Royal Assent. For example, if the enabling legislation is enacted in October this year, the measures will commence on 1 January 2024.

Tip!If you are a primary producer, talk to your tax adviser to find out how you can benefit from these measures.

What has the ATO been saying?

Do you have late lodgments?

The small business failure to lodge (FTL) penalty amnesty program was announced on 9 May 2023 as part of the Federal Budget 2023–24. The amnesty allows your business to bring any outstanding tax returns, business activity statements (BAS) and FBT returns up-to-date.

To be eligible for the amnesty, your business must:

– have had an aggregated turnover of less than $10 million at the time the original lodgment was due;

– have outstanding tax returns, BAS or FBT returns that were due between 1 December 2019 and 28 February 2022; and

– lodge the outstanding statement between 1 June 2023 and 31 December 2023.

If your business is eligible for the amnesty, any FTL penalty that applies to the late lodgment of an outstanding statement will be automatically remitted. You don’t need to do anything. However, the general interest charge (GIC) will continue to apply.

If your business has late lodgments, it is important to get back on track. Keeping lodgments up to date helps you understand your business’ net tax position, even if you’re having difficulty paying on time. In most cases, your business can set up its own payment plan online – the ATO’s self-serve payment plan option is available for debts up to $100,000.

If your business is no longer operating, it is important to lodge any outstanding obligations, and then cancel the ABN and any tax registrations such as GST.

Tip!If you have late lodgments, your tax adviser can help you get back on track, including talking with the ATO to find the best solution.

Getting STP Phase 2 reporting right

Most employers have now moved over to Single Touch Payroll (STP) Phase 2 reporting. In fact, by mid-May this year, more than 730,000 employers are now reporting STP Phase 2 information for over 10.8 million individuals!

The ATO, however, has noticed some common mistakes in relation to STP Phase 2 reporting. These include:

Pay codes: make sure your business has set up its pay codes correctly and that payments, including allowances, paid leave and overtime, are itemised separately.

Continuity of year-to-date (YTD) reporting: if your business transitioned to STP Phase 2 reporting part-way through the financial year, check that the YTD amounts that have already been reported through STP Phase 1 are maintained. This includes salary and wages paid to employees, employment termination payments and pay as you go (PAYG) withholding amounts. This applies unless you used an alternative method for transitioning to STP Phase 2.

Employee details: information such as an employee’s name, tax file number and date of birth helps the ATO match your business’ STP records with your employees. As the end of the financial year approaches, now is a good time to make sure these details are accurate and complete.

Employment basis: your business needs to report accurate information about employees’ employment basis (such as full time, part time, or casual) each time the payroll is run.

Joined the bustle of a side hustle?

With new and emerging ways to make money, the ATO is reminding taxpayers to consider if they are “in business” and to declare all income when lodging their tax return this year.

Record numbers of taxpayers are now working multiple jobs or supplementing their income with “side hustles” or “gig” economy activities, and it’s important everyone pays the right amount of tax. If you earn money through continuous and repeated activities for the purpose of making a profit, then it’s likely you are carrying on a business.

Businesses have a range of obligations depending on their structure and turnover, including registering for an ABN, keeping the right records and lodging the right type of tax return. They may also have to register for GST.

The ATO is reminding taxpayers about their obligations if their side hustle is generating income. This could be anything from animal breeding to earning income through digital platforms, such as ride share or food delivery, or even online content creation, like social media influencers.

If your home has become more like a warehouse and is stocked to the hilt with goods to sell, then you are likely to be running a business.

If you are running bootcamp sessions, in addition to your 9-to-5 job, that is a side hustle and you need to declare this income to the ATO.

The ATO doesn’t generally consider activities as “in business” when they are a one-off transaction (unless it is the first step in carrying on a business or intended to be repeated) or an activity from which you don’t seek to make a profit.

The ATO has two case studies that illustrate how a “side hustle” can be a business. 

Case study: Hayley heads off-track for fun, but on-the right-track for business

Hayley works in hospitality at night and spends most days fishing or four-wheel driving. She decides to start developing “how-to” YouTube videos when fishing and four-wheel driving. Hayley’s online following is rapidly increasing, and she’s now earning money from her videos.

With the growing online interest, Hayley cuts back her hospitality work and starts to invest more effort into her videos. Hayley sets up a production schedule that sets out the type of content she will produce on a weekly basis, buys equipment to improve her production quality, completes an online video editing course to improve her editing skills and records all expenses from her content creation activity.

Hayley looks at all her activities together and determines she is carrying on a business because she:

– intends to make a profit to supplement her salary and wage income;

– set up a regular schedule for these activities; and

– operates in a business-like way (she has a plan and system for making a profit).

Case study: Byron’s bolstering biceps becomes a business

Byron works an office job Monday to Friday and runs a bootcamp on the weekend. It started as a free weekly fitness session that Byron organised because he loves exercise. Byron invited friends and members of his local community to meet each Saturday morning and do weights and cardio together. No payment was expected, but there was an optional donation into a kitty. Byron would generally buy equipment for the group with the money from the kitty. Byron isn’t a qualified personal trainer (PT), but due to the growing interest in his sessions, he has decided to start studying PT. At this stage, Byron’s activities are considered a hobby because he:

– doesn’t complete the activities with the intention to make a profit;

– isn’t qualified; and

– isn’t carrying on the activities in a business-like manner.

However, once Byron becomes a licensed PT, he starts running more sessions and charging customers a set rate for the sessions. He also buys an insurance policy and arranges marketing activities to promote his sessions. Byron has now changed the intention of his activities and he is now considered to be carrying on a business.

The recipe for business success

With tax time around the corner, it’s a great time to start thinking about your tax return. It’s also a good time to put good business practices in place ready for the new financial year.

Successful businesses that meet their obligations practise good cash flow management and good record keeping. They also have the right digital tools to help them perform daily business activities easily and securely, making it easier to work with the ATO when it’s convenient.

Remember, it’s important to lodge your business’ tax return on time, even if you can’t pay. This will show the ATO you are aware of your business’ obligations and doing your best to meet them.

If you’re worried your business won’t be able to pay on time, the ATO may be able to set up a payment plan for you.

Record-keeping

Knowing what records you need to keep and ensuring they’re complete and accurate is important. You need to keep most records for 5 years, so you should store them in a safe place. They should also be written in English – or easily converted to English. A good record system makes it easier for you to report and lodge on time.

The ATO’s top 4 tips for record-keeping are:

– Always keep detailed records of payments to contractors providing Taxable payment reporting system (TPRS) services, so it’s easier to prepare and lodge the Taxable payments annual report (TPAR), by 28 August.

– Make sure vehicle logbook records are no more than 5 years old. If a logbook will be older than this when you plan to lodge your tax return, or your pattern of use of your car has changed, you need to start a new logbook.

– Check if government grants or payments you receive are taxable and need to be reported as business income when you lodge your return. This includes payments from the National Disability Insurance Scheme (NDIS) or Childcare Subsidy payments.

– Record the amounts withheld from any payments you receive and keep written evidence from the payer, including their details and ABN. Payments may be withheld because you didn’t quote an ABN, you’ve done subcontracting work through a labour hire firm or you have a voluntary agreement with the payer to withhold tax amounts.

Tip! Your tax adviser can help your business meet its tax obligations.

Do you have a pre-2010 employment agreement?

The ATO has reminded employers about changes to some registered employment agreements.

Some employers and their employees are still covered by pre-2010 agreements (also known as “zombie agreements”). These agreements will terminate automatically in December this year.

If you are an employer with this type of agreement, you must tell your employees in writing about the coming changes. You must do this before 7 June 2023.

The Fair Work Commission has published resources on its website to help you meet this obligation. Click here for more information.

GST and motor vehicles

The ATO has published information to help businesses find out if GST applies to motor vehicle purchases and sales.

Definition of motor vehicles for GST purposes

The term “motor vehicle” (for GST purposes) means a motor-powered road vehicle.

For GST purposes, a “car” is a motor vehicle designed to carry a load of less than one tonne and less than 9 passengers. The term “car” does not include a motorcycle or similar vehicle.

For GST purposes, a “motor vehicle” does not include a road vehicle where both of the following apply:

– the main function of the vehicle is not related to public road use; and

– the vehicle’s ability to travel on a public road is secondary to its main function.

Examples of such vehicles include road rollers, graders, tractors and earthmoving equipment.

GST when purchasing a motor vehicle

If a motor vehicle is used solely in carrying on your business and your business is registered for GST, the business is generally entitled to claim a credit for the GST included in the price of the vehicle, provided you have a tax invoice.

Certain rules apply to luxury car purchases, leased vehicles and purchasing second-hand vehicles.

GST when disposing of a motor vehicle

You need to account for GST when your business disposes of a motor vehicle if the disposal is a taxable supply.

A “decreasing adjustment” (reduced GST payment) may be available for the business use element if the vehicle was used for both business and private purposes, and for vehicles used for making financial supplies.

An “increasing adjustment” may have to be made if you continue to hold a motor vehicle after your business’ GST registration is cancelled. The increasing adjustment takes into account the market value and percentage of business use of the vehicle at the time your GST registration is cancelled.

There are certain rules for luxury cars, trade-ins, disposals to an associate and disposals by a charity.

Tip! Talk to your tax adviser if you are uncertain about the GST consequences of buying and selling a vehicle which is used in your business.

Working out the LCT on a sale

Cars with a luxury car tax (LCT) value over the LCT threshold attract an LCT rate of 33%.

To work out the LCT amount that is payable if your business sells a car, use the following formula:

(LCT value − LCT threshold) × 10 ÷ 11 × 33%.

The LCT thresholds are:

Financial yearFuel efficient vehiclesOther vehicles
2022–23$84,916$71,849
2023–24$89,332$76,950

Like other business taxes, you report and pay LCT on your activity statement.

The LCT value is the retail price of the car, including:

– GST and any customs duty;

– dealer delivery charges;

– standard and statutory warranties;

– additional items, such as accessories, modifications and treatments to the car before delivery or under an arrangement with the supplier or an associate of the supplier. These inclusions may be made at or before the time of delivery (unless made solely for the purpose of adapting it for driving by, or transporting, a person with a disability); and

– fleet rebates, run-out model support incentive payments and any other motor vehicle incentive payments that are third-party consideration.

The LCT value does not include:

– LCT included in the sale;

– other Australian taxes, fees or charges such as stamp duty, transfer fees and registration;

– compulsory third-party insurance (CTPI);

– extended warranties;

– costs associated with financing the purchase of the car; and

– service plans.

The amount of LCT can be reduced by any LCT already paid.

FBT issues

New rates and thresholds

A new FBT year (2023–24) started on 1 April 2023. Relevant amounts and thresholds for the new FBT year include:

– record-keeping exemption threshold — $9,786 ($9,181 for 2022–23);

– statutory or benchmark interest rate — 7.7% (4.52% for 2022–23);

– car parking threshold — $10.40 ($9.72 for 2022–23).

The cents per km rates (for motor vehicles other than cars) for the 2023–24 FBT year are (the 2022–23 rates are in brackets):

     0-2500cc                           Over 2500cc                          Motor cycles

     62 cents (58 cents)           73 cents (69 cents)                18 cents (17 cents)

Living away from home – in Australia

The weekly food and drink expenses for the 2023–24 FBT year that the ATO accepts as reasonable for a living-away-from-home allowance (LAFHA) paid to employees living away from home within Australia are:

1 adult1$316
2 adults$474
3 adults$632
1 adult and 1 child$395
2 adults and 1 child$553
2 adults and 2 children$632
2 adults and 3 children$711
3 adults and 1 child$711
3 adults and 2 children$790
4 adults$790
Each additional adult3$158
Each additional child$79

A person is considered an adult for LAFHA purposes if they were aged 12 years or older before the beginning of the FBT year.

Living away from home – outside Australia

The weekly food and drink expenses for the 2023–24 FBT year that the ATO accepts as reasonable for a LAFHA paid to employees living away from home outside of Australia can be found in Taxation Determination TD 2022/2. Some of those reasonable amounts (for one adult) are set out below.

CountryWeekly amount – 1 adult
Argentina$201
Austria$437
Cambodia$137
China$437
Fiji$273
France$437
Germany$437
Greece$346
Hong Kong$437
India$273
Indonesia$273
Ireland$437
Italy$437
Japan$437
Malaysia$273
Nepal$273
New Zealand$346
Norway$537
PNG$346
Philippines$273
Qatar$537
Saudi Arabia$437
Singapore$537
South Africa$201
South Korea$537
Spain$437
Sri Lanka$273
Taiwan$437
Thailand$346
UAE$537
UK$437
USA$437
Vanuatu$346
Vietnam$273

Where your employee is accompanied by other family members while overseas, the reasonable food and drink amount per week for the family is worked out by multiplying the amount shown above by the relevant factor. For example:

Family groupFactor
2 adults1.5
3 adults2.0
1 adult and 1 child1.25
2 adults and 1 child1.75
2 adults and 2 children2.0
2 adults and 3 children2.25
3 adults and 1 child2.25
3 adults and 2 children2.5
4 adults2.5

From the courts

A Sydney man was sentenced to jail by the Supreme Court of NSW for his involvement in a syndicate that committed a $105 million tax fraud over a 3-year period.

Patrick Willmott, 36, was sentenced to 9 years’ jail in May, with a non-parole period of 6 years. He was convicted on 2 charges:

– conspiracy to dishonestly cause a loss to the Commonwealth; and

– conspiracy to deal with money of a value of $1 million or more believing it to be the proceeds of crime.

The syndicate responsible for this large-scale and organised tax fraud conspiracy was dismantled as part of Operation Elbrus – an investigation led by the Australian Federal Police (AFP), with significant assistance from the ATO as part of the Serious Financial Crime Taskforce (SFCT).

Operation Elbrus exposed a large-scale and organised tax fraud and money laundering conspiracy, which used Plutus Payroll Australia Pty Ltd and other payroll service entities to divert amounts of money payable to the ATO as pay as you go (PAYG) withholding tax and goods and services tax (GST) for the conspirators’ benefit.

Mr Willmott jointly exercised day-to-day control over second-tier companies and their bank accounts used by the syndicate to withhold money and underpay a portion of the PAYG withholding and GST owed to the ATO. His role included processing payments for the second tier companies, at the direction of other conspirators.

Key tax dates

DateObligation
21 June 2023  May monthly BAS due
30 June 2023Superannuation guarantee contributions must be paid by this date to qualify for a tax deduction in 2022–23
14 July 2023Issue PAYG payment summaries if not reporting through STP
21 July 2023June monthly BAS due
28 July 2023Lodge and pay June quarterly BAS
Pay June quarterly PAYG instalment
June quarter employee superannuation guarantee contributions due
31 July 2023Finalisation declaration due if reporting through STP
1 Aug 2023Fuel tax credit rates change
14 Aug 2023PAYG withholding annual report due if not reporting through STP
21 Aug 2023July monthly BAS due
28 Aug 2023June quarter SG charge statement due
Taxable payments annual report due
21 Sep 2023August monthly BAS due
3 Oct 2023*Lodge annual TFN withholding report (trustee of a closely held trust)

Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.

From the ATO – Has your business been impacted by the floods?

If you’re a small business in an Australian Government Disaster Recovery Payment declared local government area, you don’t need to request a deferral for certain obligations.

You won’t be penalised if you lodge by the later date but remember to pay by the original due date. If you can’t pay by the due date, contact the ATO to discuss payment options and request a remission of general interest charge.

If you need help, even if you haven’t been directly affected by the floods, the ATO may be able to:

  • give you extra time to pay tax or lodge tax returns, activity statements or other obligations
  • help you reconstruct lost or damaged tax records;
  • prioritise any refunds owed to you.

Tip! If you are having problems in lodging a return or an activity statement or paying a tax bill, talk to your tax adviser.

Tax concessions for small business entities

The ATO has reminded small business entities (aggregated turnover of less than $10 million) that they are eligible for various tax concessions. Some (but not all) of the concessions are now also available to medium sized businesses (aggregated turnover of at least $10 million but less than $50 million).

Income tax concessions

Start-up costs – small and medium businesses are entitled to deduct certain costs when starting up a business, including professional, legal and accounting advice and government fees and charges.

Simplified trading stock rules – this concession allows small and medium businesses to choose not to account for changes in the value of their trading stock at the end of the financial year for tax purposes. The business will need to record how the value of the stock was estimated, but there is no need to tell the ATO it has chosen to use an estimate.

The business can choose not to conduct a stocktake (and account for changes in the value of trading stock) if there is a difference of $5,000 or less between:

If the business chooses not to use an estimate, it will need to conduct a stocktake and account for the changes in the value of the stock.

Immediate deductions for prepaid expenses – small and medium businesses may be able to claim an immediate deduction for prepaid expenses incurred in an income year where the payment covers a period of no more than 12 months that ends by the end of the following income year.

Two-year amendment period for small and medium sized businesses the Commissioner generally has a two-year period, starting after the day on which the ATO issued a notice of assessment, to amend the assessment. For a medium sized business, this concession applies only if the assessment is for an income year starting on or after 1 July 2021. The two-year amendment period does not apply if the business is in a ‘high risk’ category, has complicated tax affairs or is subject to an anti-avoidance provision.

Small business restructure roll-over – small businesses can change the legal structure of their business without incurring an income tax liability when active assets are transferred from one entity to another. This roll-over applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

Medium sized businesses cannot access this concession.

CGT concessions

There are four CGT concessions available to eligible small businesses:

The small business CGT concessions are available where one of the following conditions is satisfied:

Importantly, the asset in question (i.e. the capital gain from the CGT event that happened to the asset that will benefit from the CGT concessions) must be an active asset. This means that the asset must be used in the course of carrying on a business (whether alone or in partnership) or must be an intangible asset (for example, goodwill) inherently connected with a business.

There are certain exceptions. For example, an asset that is used mainly to derive rent, interest or royalties is generally not an active asset.

The active asset test is satisfied if the asset was an active asset:

If the asset is a share in a company or an interest in a trust, it must meet additional conditions.

Other concessions

These include:

  • for small businesses – e.g. accounting for GST on a cash basis, and paying GST by instalments and reporting GST annually;
  • for small and medium sized businesses – e.g. FBT exemptions for car parking benefits and the provision of work-related portable electronic devices; and
  • for small and medium businesses – a business can pay PAYG instalments using a GDP-adjusted notional amount calculated by the ATO.

Tip! Talk to your tax adviser to make sure your business is utilising any available concessions.

Tax losses

Before you claim a tax loss, make sure you have correctly claimed expenses to which you are entitled. Overclaiming expenses can put your business in an incorrect tax loss situation.

Keeping accurate and complete records will help you keep track of your tax losses. It can help you avoid incorrectly carrying back a tax loss or carrying forward tax losses to deduct in future years.

If your business makes a tax loss in the current income year, you can generally carry forward that loss and claim a deduction for your business in a future year (subject to satisfying either the continuity of ownership test or the same or similar business test in the case of a company).

Companies and entities taxed as companies (e.g. corporate limited partnerships) may be able to claim the loss carry back tax offset. You can carry back losses made in 2019–20, 2020–21, 2021–22 and 2022–23 to an earlier income year (but no further back than 2018–19) and claim a refundable tax offset.

If you’re carrying on a non-commercial business activity as an individual, either alone or in a partnership, and your business makes a loss, you must consider the non-commercial loss rules.

Tip! Talk to your tax adviser about how to best utilise a tax loss.

Changing loss carry back choice

If your company has chosen to carry back a loss from one income year to an earlier income year (but not before 2018–19), it may want to change how much of the tax loss it carries back. This needs to be done on the approved ATO form and within the time limit for amending the relevant tax assessment.

The change will take effect from the day your company made the original loss carry back choice.

The ATO provides this example.

XYZ Co made a loss carry back choice in its Company tax return 2021 to carry back $5,000 of the $10,000 tax loss it made in that income year to the 2019–20 income year. Later it decides that it wants to carry back all the $10,000 tax loss to the 2019–20 income year.

XYZ Co notifies the ATO of its change in loss carry back choice using the approved form within the time limit for amending its tax assessment for the 2020–21 income year.

The period for amending an assessment is generally 2 years if your company is a small business entity (aggregated turnover of less than $10 million) or, if the income year starts on or after 1 July 2021, a medium sized business (aggregated turnover of less than $50 million). Otherwise, the amendment period is generally 4 years.

For a company balancing on 30 June, the first income year starting on 1 July 2021 is the 2021–22 income year.

Using business money from your private company for personal purposes

There may be tax consequences if you take or use money or assets from your private company or trust for personal purposes.

For example, it is quite common for the company or trust to make a loan to a shareholder or an associate of a shareholder (e.g. the shareholder’s spouse or child). When a private company lends money or assets to a shareholder, the shareholder may be taken to have received a Division 7A deemed dividend if certain conditions are not met.

If this happens, the shareholder will need to report an unfranked dividend as part of their assessable income in their individual tax return. This has no impact on the company’s balance sheet, tax return or franking account.

To avoid a Division 7A deemed dividend, before the company tax return is due or lodged (whichever comes first), the loan must:

  • be repaid in full; or
  • put on complying terms.

To put a loan on complying terms, the loan must:

  • be made under a written agreement and signed and dated by the lender;
  • have an interest rate for each year of the loan that at least equals the benchmark interest rate (4.77% for 2022–23);
  • not exceed the maximum term of 7 years, or 25 years in certain circumstances when the loan is secured by a registered mortgage over real property.

The company must include any interest earned from the loan in its assessable income in its tax return.

You (the shareholder):

  • must make the minimum yearly repayment each year comprising principal and interest components (the ATO publishes a Division 7A calculator to work this out);
  • cannot borrow money from the company to make the minimum yearly repayment;
  • can make payments on the loan using a dividend declared by the company. This dividend, which can be franked, must be reported in your individual tax return as assessable income.

It is important to keep accurate records of any such transactions and ensure they are reported correctly for tax purposes.

Unpaid present entitlement

An unpaid present entitlement (UPE) arises where a beneficiary of a trust is presently entitled to a share of trust income but it remains unpaid. If the beneficiary is a private company and the trust is a shareholder of the company or an associate of a shareholder of the company, the ATO considers that the unpaid amount is a loan from the company to the shareholder (or associate) and therefore subject to the operation of Division 7A.

The ATO has recently issued a final taxation determination, revising its views on the application of Division 7A where there is a UPE. For example, the ATO now considers that Division 7A may apply where a private company beneficiary has knowledge of a UPE and does not demand payment. 

Tip! Division 7A is very complex – particularly the UPE rules – so talk to your tax adviser to make sure you don’t take steps that result in a Division 7A unfranked dividend.

Check your business’ PAYG instalments

Now is a good time to check that your business’ PAYG instalments still reflect its expected end of year tax liability.

If the business’ circumstances have changed and you think it will pay too much (or too little) in instalments for the 2022–23 income year, the instalments can be varied on the next activity statement (due on 28 April 2023). Instalments can be varied multiple times throughout the year. The varied amount or rate will apply for the remaining instalments for the 2022–23 income year or until another variation is made.

If your business is affected by COVID-19 or a natural disaster, the ATO has said it will not apply penalties or charge interest to varied instalments if the business has made its best attempt to estimate its end of year tax liability.

If an amount or rate is varied online, paper activity statements and instalment notices will no longer be issued. These will be issued electronically. Your business will need to consider this when deciding how to lodge, revise and vary future activity statements and instalment amounts.

Tip! Your tax adviser or BAS agent can help you with your business’ activity statements and tax returns.

Four tips to help nail your record keeping

Good record keeping helps you manage your business and cash flow, and ensures you get the right outcome with your business’ tax return.

The ATO’s top 4 tips for record-keeping are:

  • TPRS) services so it’s easier to prepare and lodge the Taxable payments annual report (TPAR) by 28 August.

Digital record-keeping

There are advantages in keeping business records digitally. If, for example, your business uses a commercially-available software package, it may help the business:

If your business uses cloud storage, either through accounting software or a separate service provider, for example, Google Drive, Microsoft OneDrive or Dropbox, you should ensure:

eInvoicing storage

Regardless of your business’ eInvoicing software or system, it is responsible for determining the best option for storing business transaction data. You should:

Valuing assets

It is important to value assets (or liabilities) correctly for tax purposes. Valuations may be required for a variety of purposes, such as:

But valuing an asset isn’t always easy. To help taxpayers, the ATO has updated its guidance on market valuation for tax purposes. The updated guidance sets out the ATO’s views on a range of matters, including:

Tip! Valuing an asset (or a liability) for tax purposes is complex. Talk to your tax adviser if your business needs to obtain a valuation for tax purposes.

New changes to home-based business expenses

If you wholly or partly operate your business from home, you may be able to claim the business-use portion of expenses you incur. For example:

  • occupancy expenses (such as mortgage interest or rent, council rates, land taxes and home insurance premiums);
  • running expenses (such as electricity, gas, phone, internet, stationery, cleaning and the decline in value of assets);

The temporary shortcut method (80 cents per hour) ended on 30 June 2022 and the fixed-rate method has been revised.

For the 2022–23 income year, the revised fixed rate is 67 cents per hour. You no longer need to:

  • have a dedicated home office space;
  • separately work out the business-use portion of phone, internet, gas and electricity.

You can also separately claim the decline in value of depreciating assets and equipment, including any repairs and maintenance costs.

If you want to use the revised fixed rate method, you need to keep a record of all hours worked from home for the entire income year (for example, on a timesheet, roster or in a diary).

If you haven’t kept a record of all hours worked from home, you can use a representative record of your hours only from 1 July 2022 to 28 February 2023. You will need a record of the total number of your actual hours worked from home from 1 March 2023 to 30 June 2023.

Your business structure can also affect the method you can use and the expenses you can claim.

Tip! Talk to your tax adviser if you wholly or partly operate your business from home.

FBT issues

FBT return time

If your business provided fringe benefits to its employees or their associates between 1 April 2022 and 31 March 2023, it’s now time to lodge the 2023 fringe benefits tax (FBT) return and pay any outstanding FBT. [An associate includes a spouse, child, parent, sibling and most other relatives (but not cousins).]

You should note the following dates:

  • The 2022–23 FBT year ended on 31 March 2023.
  • You’ll need to lodge the FBT return and pay any outstanding liability by 22 May to avoid interest and penalties (the statutory due date of 21 May falls on a Sunday this year).
  • If you’re lodging electronically via a tax agent, the due date to lodge and pay is 26 June (the concessionary due date of 25 June falls on a Sunday this year).
  • If it is the first time your business will use a tax agent to lodge an FBT return, you’ll need to contact them before 21 May. The agent needs to add your business to their FBT client list by this date to be eligible for the June lodgment and payment date.

If your business doesn’t need to lodge an FBT return but it is registered for FBT, you should still let the ATO know by the date the return would have been due. You can do this by completing a Notice of non-lodgment – Fringe benefits tax form.

While it’s important to lodge and pay on time, there may be circumstances where your business can’t. If this is the case, you should contact the ATO or speak with your tax adviser as early as possible.

Don’t forget to keep all records relating to the fringe benefits that have been provided during the 2022–23 FBT year, including how the taxable value of the benefits was calculated.

Tip! Your business’ tax adviser can help you prepare the FBT return and work out if your business has an FBT liability.

New FBT year resolutions

To help your business start the new FBT year (commencing on 1 April 2023) on the right foot, the ATO has published a few tips.

When providing fringe benefits to employees, your business needs to:

  • self-assess its FBT liability for the FBT year;
  • lodge an FBT return (if your business has an FBT liability or paid FBT instalments through its activity statements);
  • pay the FBT owed by the due date; and
  • include the reportable fringe benefits on each employee’s income statement or payment summary (if the total taxable value per employee is more than $2,000).

If your business’ FBT liability for the 2022–23 FBT year was $3,000 or more, you will need to pay four quarterly instalments.

You should also know that:

  • there are exemptions and concessions that can reduce the amount of FBT your business pays; and
  • errors on the FBT return can be amended or you can make a voluntary disclosure.

Tip! Speak to your tax adviser to learn more about FBT.

Party-planning for employees

Is your business planning a party for its employees, or thinking in advance about an end-of-financial-year celebration? If so, make sure you consider the FBT implications as the party or celebrations may constitute entertainment-related fringe benefits.

This will depend on:

  • the amount spent on each employee;
  • when and where the party is held;
  • who attends – just employees, or are partners, clients or suppliers also invited?; and
  • the value and type of gifts provided.

Remember to keep all records relating to any fringe benefits provided during the FBT year, including how the taxable value of benefits is calculated.

Tip! Talk to your tax adviser before holding a party for employees.

FBT thresholds and rates for 2023–24

The FBT rate (47%) and the gross-up rates — 2.0802 where the benefit provider is entitled to a GST credit (type 1 gross-up rate) and 1.8868 where the benefit provider is not entitled to a GST credit (type 2 gross-up rate) — for the 202324 FBT year are unchanged from the 202223 FBT year.

The following have changed for the 202324 FBT year:

  • the benchmark interest rate (e.g. for loan fringe benefits) is 7.77% (up from 4.52%); and
  • the record keeping exemption (also relevant for eligibility to use the base rate method to calculate FBT) is $9,786 (up from $9,181).

The cents per km rates for motor vehicles (other than a car) for the 202324 FBT year are:

  • 0–2500cc – 62 cents (up from 58 cents);
  • over 2500cc – 73 cents (up from 69 cents); and
  • motorcycles – 18 cents (up from 17 cents).

The ATO has also published (in Tax Determination TD 2023/2) the reasonable food and drink amounts for the 202324 FBT year for employees living away from home (LAFHA), both in Australia and overseas. 

Tax Tips

Temporary full expensing

Don’t forget that temporary full expensing – which allows an immediate deduction for the full cost of depreciating assets – ends on 30 June this year.

To take advantage of temporary full expensing, your business must acquire and start to use an asset (or have it installed ready for use) by 30 June 2023.

This will allow your business to increase its deductions for 2022–23 and thus reduce the tax payable.

Quick tax risk checklist

In a speech at the annual Financial Review CFO Live summit, ATO Second Commissioner, Jeremy Hirschhorn, shared a ‘quick tax risk checklist’ to help CFOs understand the level of tax risk of their companies. Understanding this risk can support businesses when developing and implementing their tax governance framework.

High level questions for the Board

What is your tax governance framework?

What is the risk stance and structural tax settings of the company?

Do you understand the current (and historic) relationship with the ATO?

If profits are not fully taxed, why not?

Questions for the tax team

Are there KPIs that support the organisation’s goals and stated tax risk appetite?

Is the tax corporate governance clear, and is it is ‘lived’?

Do you understand the relationship between financial reporting and tax, including GST and indirect taxes?

Do you understand where you sit relative to your business peers?

Do you have high levels of assurance over your tax ‘infrastructure’?

What is your conduct in resolution of tax disputes (including applying the LPP protocol)?

Could you call yourself a transparency role-model?

Have you received a high assurance rating previously? If not, why not?

Questions for significant transactions

Is the position for significant transactions consistent with the risk appetite of the organisation?

Is the ATO likely to dispute this position? Have you sought certainty from the ATO in the form of a ruling?

What would happen to revenue collections if everyone did this?

Has the adviser been given a full scope, or are there areas that have been scoped out that are relevant?

Are the facts and assumptions underpinning the advice supportable and could be evidenced in court proceedings? What happens if they are wrong/disproved?

Key tax dates

DateObligation
21 Apr 2023March 2023 monthly BAS due
28 Apr 2023March 2023 quarterly BAS due
 Pay March 2023 quarterly PAYG instalment
 Employee superannuation guarantee (SG) contributions due
22 May 2023*April 2023 monthly BAS due 2022–23 FBT return due
29 May 2023*March 2023 SG statement due (if required)
21 June 2023May 2023 monthly BAS due
21 July 2023June 2023 monthly BAS due
28 July 2023June 2023 quarterly BAS due
 Pay June 2023 quarterly PAYG instalment

Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.

January is traditionally a quiet time for many businesses, but the ATO hasn’t stopped publishing useful information.

Hiring contractors

You have a choice between hiring contractors and employees – both are legitimate as long as the conditions of the working contract match the worker’s classification.

It’s important to understand the difference between employees and independent contractors because:

  • it changes your obligations for paying and reporting tax, superannuation and other entitlements for your workers; and
  • penalties and charges may apply if you incorrectly classify an employee as a contractor and fail to meet the relevant obligations or entitlements for that worker.

Although you generally don’t need to make super guarantee contributions for independent contractors, you may be required to make contributions for a contractor where the contract engaging them is wholly or principally for their labour.

If they’re registered for GST, you will need to pay the appropriate GST to them for the services or work they provide to your business.

PAYG withholding – employee or contractor?

As noted above, it is important to understand the difference between employees and independent contractors.

Last year the High Court handed down 2 important decisions on whether a worker is an employee or an independent contractor. The High Court placed particular importance on the terms of any valid written contract between the individual providing services and the entity using those services.

The High Court’s decision has prompted the ATO to issue a draft ruling explaining when an individual is an “employee” for the purposes of the PAYG withholding rules. It is important to note that the label attached to the arrangement between the parties – employee or contractor – is not relevant. The previous Taxation Ruling on this issue has been withdrawn.

The ATO also issued a draft a Practical Compliance Guideline (PCG) outlining its compliance approach for businesses that engage workers and classify them as employees or independent contractors. It sets out how the ATO allocates compliance resources, based on the risk associated with the classification.

So, this may be a good time to check with your tax adviser whether individuals providing services to your business are genuine independent contractors or are, in fact, employees.

Employee for super guarantee purposes?

It is also important to know for super guarantee purposes whether an individual providing services to your business is an employee.

You pay super on behalf of an employee regardless of whether they:

There was an important change last year (from 1 July 2022) – you now have to pay super for employees who are paid less than $450 in a month.

The rules for determining whether someone is an “employee” for super guarantee purposes are a bit different to the rules that are relevant for PAYG withholding purposes. Thus, the ATO has said that the draft ruling mentioned above will not be binding on them for super guarantee purposes.

Tip! If you are uncertain whether you need to pay super on behalf of a person working for you, talk to your tax adviser.

Are you still using your ABN?

Your ABN may be flagged for cancellation if you haven’t reported business activity in your tax return, or there are no signs of business activity in other lodgments or third-party information.

If the ATO identifies your ABN as inactive, they will contact you by email, letter or SMS.

If you:

If your ABN has been cancelled and you are still entitled to it, you’ll need to reapply.

You can reapply for the same ABN unless your business structure has changed, for example, if you were a sole trader and you now operate the business through a company.

All ABN holders have a responsibility to keep their business details up to date. This includes cancelling your ABN if your business is no longer operating. You must tell the ATO of any changes to your business details within 28 days of the change.

Tip! Your tax adviser or BAS agent can give you further advice.

Are you changing your business structure?

If you are changing your business structure, for example from a sole trader to a company, you will need a new ABN. Other situations where you need to cancel your ABN and apply for a new ABN include where changing from:

You must ensure that your ABN details are updated on your tax invoices. This is essential as your ABN is used to:

Other businesses and entities must withhold payment at the top tax rate if the ABN quoted on the invoice is incorrect or the details do not match up.

Remember to ensure that you update your GST registration details whenever you get a new ABN.

Tip! Talk to your tax adviser before changing your business structure as there may be significant tax consequences.

Received a business support grant?

You may have received a business support grant recently to help your business through tough times. If so, it is important to know whether you will have to pay tax on the grant.

The basic principle is that business grants are treated as assessable income. However, some grants are not taxable, which means you don’t need to include them in your business’ tax return if the relevant eligibility requirements are met.

COVID-19

A COVID-19 business grant or support program payment you received in the 2020–21 or 2021–22 financial year from a State or Territory government, or in the 2021–22 financial year from the Commonwealth Government, will not be taxable if:

  • the payment is received under an eligible program – the ATO has published on its website a list of eligible grants and support programs (ref QC 66889); and
  • you carried on a business and have an aggregated turnover of less than $50 million in either the income year the payment was received or the previous income year.

If you included a grant in your tax return that is not taxable, you can amend your return.

Storms and floods

Small businesses and primary producers affected by storms and floods may be eligible to receive special disaster recovery grants.

Grants may be administered by a State or Territory government or the Commonwealth Government.

You don’t need to pay tax on certain categories of grants for the following storms and floods:

Bushfires

2019–2020 Bushfires Relief Recovery payments and benefits provided by any level of government, including local governing bodies, are not taxable.

Deductions

Remember, you can only claim deductions for expenses associated with non-taxable grants if they relate directly to earning assessable income. You can’t claim expenses related to obtaining the grant, such as accountant’s fees.

Do you provide car parking for employees?

If you provide car parking for your employees, you may have to pay fringe benefits tax (FBT) on those benefits.

A car parking fringe benefit will generally arise if an employer provides car parking to an employee and various conditions are satisfied, including:

“All-day parking” basically means parking for a continuous period of 6 hours or more during the period from just after 7 am to just before 7 pm (on the same day). So a fee charged after 1 pm is not a fee for “all-day parking”, as there cannot be a continuous period of at least 6 hours ending before 7.00 pm.

Exemptions

Car parking benefits are exempt from FBT where the benefits are provided:

The small business car parking benefits exemption applies if the following conditions are satisfied:

This exemption is not available to listed public companies, subsidiaries of listed public companies and government bodies.

Tip! As from 1 April 2022, the ATO has updated guidance on what qualifies as a commercial car parking station. Talk to your tax adviser if you provide car parking for employees as you may be affected.

Shortfall interest charge

If your income tax assessment is amended and your tax liability is increased (in other words, there is a tax shortfall), the ATO will apply the shortfall interest charge (SIC) on a daily compounding basis to the shortfall.

The SIC is applied for the period from the due date for payment of the earlier, understated assessment until the day before the ATO issues the notice of amended assessment.

The SIC rate is updated quarterly using a formula set by law. For example, the SIC rate for the period from 1 January to 31 March 2023 is 6.06% (the daily rate is 0.01660274%). The SIC rate is 4 percentage points lower than the general interest charge (GIC). The GIC is payable when a tax bill is not paid on time or an amount withheld from a payment is not paid to the ATO.

The due date for payment of the SIC (and the extra tax payable under the amended assessment) is 21 days after the day the ATO issues the notice of the amended assessment. Once the due date has passed, the GIC will apply automatically to any unpaid tax and SIC.

The ATO has the power to remit an amount of SIC in extenuating circumstances, for example, if the ATO contributes to an error that leads to a shortfall, if the shortfall amount is paid before the notice of amended assessment issues or if a delay in supplying documents or other information is directly attributable to a natural disaster such as a flood.

If the ATO refuses to remit the SIC you have objection and review rights, but only if the SIC is more than 20% of the tax shortfall amount.

Five new year’s tax resolutions

The ATO has published on its website 5 new year’s resolutions to keep if you want to stay on top of your tax in 2023.

Are you earning an increasing income from a hobby? You might already be in business for tax purposes.

If you’re the director of an Australian company, you need to apply for a director ID. If you missed the 14 December 2022 deadline, you can request an extension of time. The ATO has said it is taking a reasonable approach to those directors who try to do the right thing.

It’s important to update your ABN details. Also, if you’re going to earn over $75,000 this financial year, you’ll need to register for GST.

Good record keeping helps you manage your business and its cash flow.

PSI is income produced mainly (more than half) from your skills or efforts as an individual. If you’re earning PSI, you’ll need to work out if you’re a personal services business to determine whether the PSI rules apply to your income. The rules affect how you report your income and the deductions you can claim.

The last few years have thrown some curve balls at small business, so it’s good to be prepared.

Tip! If you are worried about any of these or any other tax issues, talk to your tax adviser.

Protect your business from cyber scams

The ATO has warned small businesses about business email compromise scams.

Cybercriminals send fraudulent emails posing as a legitimate business contact or staff member. They typically request a change in bank account details for a deposit, wages or invoice payment. Victims then unknowingly send money to the cybercriminal.

These fraudulent emails may come from hacked email accounts, or cybercriminals might register domain names that are similar to legitimate companies.

The ATO advises that you can protect yourself, and the reputation of your business, by taking a few simple steps:

Taxpayers have also been advised to be wary of scammers impersonating ATO officers on Twitter, Facebook and other social media platforms.

Scammers scan public conversations on social media, where taxpayers ask questions or make complaints about the ATO. The scammers then use a fake ATO profile to contact the taxpayer directly with an offer to help resolve a complaint or follow up on a comment. Once trust is established, the scammers then ask the taxpayer to click on a link or provide personal details.

The ATO is working with social media platforms and other government agencies to address this.

Phoenix Taskforce – targeting dodgy businesses

The Phoenix Taskforce, which was established in 2014, brings federal, state and territory agencies together to combat illegal phoenix activity.

Illegal phoenix operators deliberately liquidate, wind up, or abandon their business to avoid paying their debts. Just like the mythological phoenix, these “dodgy individuals” often rise up with a near-identical business and restart the process.

As well as short-changing employees, suppliers and sub-contractors, illegal phoenix operators can put honest businesses at a competitive disadvantage. They cost businesses, employees, and the community an estimated $2.85 billion to $5.13 billion a year.

The Phoenix Taskforce takes action against phoenix operators by:

  • working to disrupt their business model and make it financially unviable;
  • removing their ability to operate;
  • applying financial penalties; and
  • prosecuting the worst offenders.

The most serious cases are referred to the Serious Financial Crime Taskforce (SFCT).

The director identification number initiative will:

If you know or suspect phoenix or shadow economy activity or tax evasion, you can report it by:

Foreign incorporated companies

A company that is incorporated overseas will be treated as a resident of Australia for tax purposes if it carries on business and has its central management and control (CM&C) in Australia. This is called the CM&C residency test.

In 2018, following a High Court decision, the ATO revised its views on the CM&C residency test. It issued a new ruling stating that a company incorporated overseas which carries on a business will be treated as a tax resident of Australia if its CM&C is in Australia. It does not matter where the company’s actual trading or investment operations take place, whether in Australia or overseas.

The ATO also issued a Practical Compliance Guideline (PCG) in 2018 advising that it would not apply resources to review or seek to disturb a company’s status as a foreign resident if the company:

This compliance approach in the PCG has now been extended for a 4th time, to 30 June 2023, for “companies impacted in their efforts to change their governance arrangements”, for example, because of COVID-19.

WHAT HAS PARLIAMENT DONE?

FBT exemption for electric vehicles

In the September 2022 Business edition of TaxWise® News, we told you about the fringe benefits tax (FBT) exemption for electric and other low emission cars used by employees for private use. At the time, this measure was being considered by the Parliament. It is now law.

During its progress through Parliament, the Government agreed to phase out the FBT exemption for plug-in hybrid electric cars. As a result, the exemption for such cars will cease from 1 April 2025 (the start of the 2025–26 FBT), unless the relevant car is made available to the employee before that date.

Tip! Talk to your tax adviser for more information about the FBT exemption for electric and other low emission cars.

Failing to keep correct records

From 12 March 2023, the ATO will be able to issue a “tax-records education direction” if your business has failed to comply with its tax-related record-keeping obligations (subject to certain exceptions). A tax-records education direction will require you to complete an approved tax record-keeping course. This will be an alternative to the existing administrative penalties.

You can nominate an appropriate person within the business to complete the course.

You will have to provide the ATO with evidence that the course was completed.

A tax-records education direction cannot be issued where the failure to keep records does not give rise to an administrative penalty. These include certain FBT statutory evidentiary records and records substantiating certain work and business expenses. 

ATO decisions affecting small business

The Administrative Appeals Tribunal (AAT) can now order that certain decisions of the ATO affecting small business be stayed pending the outcome of the AAT’s review of the decision. The AAT can also vary or revoke such an order.

For example, if your business is challenging an income tax assessment before the AAT, you can apply to the Small Business Taxation Division of the AAT for an order staying, or otherwise affecting, the operation or implementation of the assessment.

This measure applies to businesses with an annual aggregated turnover under $10 million.

Note that the Government has proposed to abolish the AAT and replace it with a new federal administrative review body.

WHAT’S IN THE PARLIAMENTARY PIPELINE?

Bonus deductions for small and medium business

Legislation presently before Parliament will provide small and medium businesses (those with aggregated annual turnover of less than $50 million) with bonus deductions equal to 20% of eligible expenditure incurred on external training or technology. The expenditure must already be deductible under the taxation law.

Training – the 20% boost is available for expenditure incurred on training employees, either in-person in Australia or online, between 7:30pm on 29 March 2022 and 30 June 2024. The training must be conducted by a third party registered training provider, which must not be an associate of the business.

Technology – the 20% boost is available for expenditure incurred between 7:30pm on 29 March 2022 and 30 June 2023 on the business’ digital operations or on digitising its operations. If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023. The technology bonus deduction is capped at $20,000 per financial year.

Parliament is scheduled to resume on Monday 6 February 2023 so these measures could be passed by the end of February 2023.

Tip! Talk to your tax adviser if you think your business might qualify for either of the bonus deductions.

Reducing FBT compliance costs

Another measure being considered by Parliament should reduce employers’ FBT compliance costs.

The new rules will allow employers to rely on adequate alternative records (as determined by the ATO) which contain the information required for FBT record keeping purposes, instead of keeping and retaining the current designated statutory evidentiary documents such as prescribed employee declarations.

The ATO has already released 2 draft determinations specifying alternative records in certain circumstances where a fringe benefit consists of the reimbursement of car expenses or where a travel diary is presently required.

Tip! Talk to your tax adviser about your FBT record-keeping obligations. They can also advise you if you should benefit from these new measures.

KEY TAX DATES

DateObligation
21 Feb 2023January 2023 monthly BAS due
28 Feb 2023December 2022 quarterly BAS due
Pay December 2022 quarterly instalment notice
Annual GST return due (if no income tax return due)
December 2022 SG charge statement due (if required)
SMSF 2021–22 annual return due (unless first return or late with return for previous financial year)
21 Mar 2023February 2023 monthly BAS due
21 Apr 2023March 2023 monthly BAS due
28 Apr 2023March 2023 quarterly BAS due Pay March 2023 quarterly instalment notice Employee super guarantee contributions due
21 May 2023*April 2023 monthly BAS due Lodge and pay annual FBT return (if your business lodges one)
28 May 2023*March 2023 SG charge statement due (if required)

*The next business day will apply.

Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.

Registrar confirms more than one in four have yet to apply.

The business registrar has extended the director ID application deadline by two weeks, from November 30 to December 14.

The Australian Business Registry Services said despite a record of 78,000 directors applying on 29 November alone, around 700,000 had still to apply from a total of more than 2.5 million – equivalent to 28 per cent.

ABRS registrar Chris Jordan said it would apply a “pragmatic compliance approach” to directors if they applied by 14 December.

“The ABRS will not apply compliance resources to determine whether individuals met their director ID obligations by 30 November 2022 if they apply for a director ID by 14 December 2022,” Mr Jordan said.

“Whilst penalties or offences can apply, the community can expect ABRS to take a reasonable approach to support people to apply.”

Mr Jordan said that over 1.8 million directors had now applied for their director ID, up from 1.5 million last week.

Following the significant shortfall in applications, many predicted that the ABRS would extend the deadline.

In the past few weeks paper forms have been mailed out to directors who have yet to apply although the ATO, which administers the scheme, has declined to say how many.

By applying for an ID, Mr Jordan said directors were helping to protect the community from those doing the wrong thing.

“For example, illegal phoenix activity, which is estimated to cost the community up to $5 billion a year,” he said.

The Treasurer, the Hon Dr Jim Chalmers MP, handed down his (and the Albanese Government’s) first Budget on 25 October 2022.

There were few tax measures in the Budget. What measures there were mostly affect multinationals. You can read about the tax measures further below.

Final Budget Outcome for 2021–22

The underlying cash balance (deficit) for 2021–22 was $32.0 billion (1.4% of GDP). The Final Budget Outcome for 2021–22 represents a reduction in the underlying cash balance of $47.9 billion compared with that estimated in the Federal Budget 2022–23 released on 29 March 2022. This was a result of higher receipts of $27.7 billion and lower payments of $20.1 billion.

Gross debt was $895.3 billion (39.0% of GDP) at the end of 2021–22, $10.7 billion lower than estimated in the Federal Budget 2022–23 in March. Net debt was $515.6 billion (22.5% of GDP), $115.8 billion lower than estimated.

What’s the Government’s plan?

In the Government’s own words, the Budget is intended to:

– ‘provide responsible cost-of-living relief that delivers an economic dividend’ — this includes making child care more affordable for more than 1.2 million families, cutting the cost of medicines for around 3.6 million Australians, expanding the Paid Parental Leave scheme to reach 26 weeks in 2026, delivering more affordable housing, and getting wages moving again (by ‘making it easier for employees and businesses to come together and reach agreement on wages and conditions’);

– ‘build a stronger, more resilient and more modern economy’ by lifting ‘the speed limit on the economy by better utilising Australians’ talents, building their skills, broadening Australia’s economic base and creating the industries of the future’; and

– ‘begin the hard task of budget repair to pay for what is important’ — as a first step, the Budget makes significant savings from ‘redirecting spending to priorities, unwinding wasteful spending to support budget repair, better aligning infrastructure investment with market capacity, and improving the fairness and integrity of the tax system’.

The Government expects to save $22 billion in spending reductions and reprioritising expenditure, $3.7 billion from improving the integrity of the tax system and $952.8 million through action to enforce the payment of tax by multinationals.

Specific measure

Specific spending measures announced in the Budget include:

– $4.6 billion to increase Child Care Subsidy rates to make early childhood education and child care more affordable for eligible families;

– $531.6 million to expand the Paid Parental Leave Scheme — the number of weeks available to families will increase from 20 weeks to 26 weeks by 1 July 2026;

– $350 million to build 10,000 homes under a new Housing Accord, which sets an ‘aspirational target’ of 1 million new, well-located homes over 5 years from mid-2024;

– $324.6 million over 4 years for the Help to Buy scheme, which will give eligible home buyers an equity contribution to buy a home with a smaller deposit and mortgage;

– an additional $491.8 million over 4 years on 20,000 new government supported university places for under-represented people, prioritising areas of skills shortages such as teaching, nursing and engineering;

– $270.8 million over 2 years to prioritise construction and new equipment at primary and secondary schools;

– $1.4 billion over 4 years to expand and amend Pharmaceutical Benefits Scheme (PBS) listings to include new medicines, such as treatments for COVID-19 and cancer;

– $787 million over 4 years on reducing PBS patient co-payments from $42.50 to $30 on 1 January 2023 (an ongoing annual cost of $233.4 million);

– $235 million over 4 years for urgent care clinics that will provide an option for 24/7 care outside hospital emergency departments;

– $2.4 billion to extend full-fibre access to 1.5 million additional premises, including over 600,000 in regional Australia;

– $1.9 billion to support the transition of regional industries to net zero emissions;

– $3 billion to meet disaster recovery costs from this year’s floods;

– $262.6 million to establish and support the proposed National Anti-Corruption Commission.

Helping small business

The Government will provide $15.1 million over two calendar years from 1 January 2023 to 31 December 2024 to extend the Small Business Debt Helpline and the NewAccess for Small Business Owners programs to support the financial and mental wellbeing of small business owners.

This measure will redirect partial funding from the Australian Small Business and Family Enterprise Ombudsman component of the measure in the Federal Budget 2022–23 in March titled Small Business Support Package, and savings identified as part of the Spending Audit.

Increased penalties

The Government will increase penalties for breaches of competition and consumer law to deter conduct that stifles competition and increases costs to consumers. Maximum penalties for corporations will increase from $10 million to $50 million per breach, and from 10% of annual turnover to 30% of turnover (whichever is greater) during the period the breach took place.

Pensioners

Pensioners will receive a one-off credit of $4,000 to their work bonus income bank, to support those who want to work or work more hours, without losing their pension. In addition, the Government will increase the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.

The Government will not proceed with the Pension Supplement changes announced in the Mid-Year Economic and Fiscal Outlook (MYEFO) 2016–17 in relation to permanent departures overseas and temporary absences.

Want to read more?

More information can be found in the Budget papers at budget.gov.au.

BUDGET TAX MEASURES

The tax measures announced for the first time in the Budget are outlined below.  

Intangible depreciating assets

The Government will not proceed with the measure to allow taxpayers to self-assess the effective life of intangible depreciating assets, previously announced in the Federal Budget 2021–22. This measure was due to apply to assets acquired on or after 1 July 2023.

This means that the effective life of intangible depreciating assets, such as patents, registered designs, copyrights and in-house software, will continue to be set by legislation.

Share buy-backs

The Government will improve the integrity of the tax system by aligning the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs.

This measure will result in no amount of the purchase price received from these particular off-market share buy-backs being treated as a dividend.

This measure will apply from the time of the announcement on Budget night (7:30pm AEDT on 25 October 2022).

Thin capitalisation changes

The Government will strengthen Australia’s thin capitalisation rules to address risks to the corporate tax base arising from the use of excessive debt deductions. This measure will apply to income years commencing on or after 1 July 2023.

The current thin capitalisation regime limits debt deductions up to the maximum of three different tests: a safe harbour (debt to asset ratio) test; an arm’s length debt test; and a worldwide gearing (debt to equity ratio) test. The Government will replace the safe harbour and worldwide gearing tests with earnings-based tests to limit debt deductions in line with an entity’s activities (profits).

This measure includes changes to:

– limit an entity’s debt-related deductions to 30% of profits (using EBITDA — earnings before interest, taxes, depreciation, and amortisation — as the measure of profit). This new earnings-based test will replace the safe harbour test;

– allow deductions denied under the entity-level EBITDA test (interest expense amounts exceeding the 30% EBITDA ratio) to be carried forward and claimed in a subsequent income year (up to 15 years);

– allow an entity in a group to claim debt-related deductions up to the level of the worldwide group’s net interest expense as a share of earnings (which may exceed the 30% EBITDA ratio). This new earnings-based group ratio will replace the worldwide gearing ratio;

– retain an arm’s length debt test as a substitute test which will apply only to an entity’s external (third party) debt, disallowing deductions for related party debt under this test.

The changes will apply to multinational entities operating in Australia and any inward or outward investor, in line with the existing thin capitalisation regime. Financial entities will continue to be subject to the existing thin capitalisation rules.

Other multinational tax integrity measures

The Government will introduce:

– an anti-avoidance rule to prevent significant global entities (entities with global revenue of at least $1 billion) from claiming tax deductions for payments made (on or after 1 July 2023) directly or indirectly to related parties in relation to intangibles held in low- or no-tax jurisdictions (a jurisdiction with a tax rate of less than 15% or a tax preferential patent box regime without sufficient economic substance); and

– reporting requirements for relevant companies to enhance the tax information they disclose to the public, for income years commencing from 1 July 2023.

Under the new reporting requirements:

– significant global entities will be required to prepare for public release certain tax information on a country by country (CbC) basis and a statement on their approach to taxation;

– Australian public companies (listed and unlisted) will be required to disclose information on the number of subsidiaries and their country of tax domicile; and

– tenderers for Australian Government contracts worth more than $200,000 will be required to disclose their country of tax domicile (by supplying their ultimate head entity’s country of tax residence).

ATO tax avoidance taskforces

The Government will extend the existing ATO’s Shadow Economy Program for a further 3 years from 1 July 2023. This will enable the ATO to continue a strong and co-ordinated response to target shadow economy activity, protect revenue and level the playing field for those businesses that are following the rules.

The Government has also boosted funding for the ATO’s Tax Avoidance Taskforce by around $200 million per year over 4 years from 1 July 2022, in addition to extending this Taskforce for a further year from 1 July 2025. This will support the ATO to pursue new priority areas of observed business tax risks, complementing the ongoing focus on multinational enterprises and large public and private businesses.

These measures are estimated to increase receipts by $4.9 billion and increase payments by $1.785 billion over the 4 years from 2022–23.

The Government will also provide $80.3 million to the ATO to extend the Personal Income Taxation Compliance Program for 2 years from 1 July 2023.

Legacy measures dropped

The Government has reviewed and will not proceed with the following legacy tax and superannuation measures that were announced but not legislated by the previous Government:

– the MYEFO 2013–14 measure that proposed to amend the debt/equity tax rules;

– the Federal Budget 2016–17 measure that proposed changes to the taxation of financial arrangements (TOFA) rules (a delayed start date was announced in the Federal Budget 2018–19);

– the Federal Budget 2016–17 measure that proposed changes to the taxation of asset-backed financing arrangements;

– the Federal Budget 2016–17 measure that proposed to introduce a new tax and regulatory framework for limited partnership collective investment vehicles;

– the Federal Budget 2018–19 measure that proposed to change the annual audit requirement for certain self-managed superannuation funds (SMSFs);

– the Federal Budget 2018–19 measure that proposed to introduce a limit of $10,000 for cash payments made to businesses for goods and services;

– the Federal Budget 2018–19 measure that proposed to introduce a requirement for retirement income product providers to report standardised metrics in product disclosure statements; and

– the MYEFO 2021–22 measure that proposed establishing a deductible gift recipient category for providers of pastoral care and analogous well-being services in schools.

Legacy measures – start dates deferred

The Government will defer the start dates of the following legacy tax and superannuation measures to allow sufficient time for policies to be legislated and implemented:

– the MYEFO 2019–20 measure proposing a sharing economy reporting regime will be deferred from:

– 1 July 2022 to 1 July 2023 for transactions relating to the supply of ride sourcing and short-term accommodation; and

– 1 July 2023 to 1 July 2024 for all other reportable transactions (including but not limited to asset sharing, food delivery and tasking-based services)

The Federal Budget 2021–22 measure proposing to relax the residency requirements for SMSFs and APRA-regulated small superannuation funds will be deferred from 1 July 2022 to the income year commencing on or after the date the enabling legislation receives Royal Assent; and

The Federal Budget 2021–22 measure making technical amendments to the TOFA rules will be deferred from 1 July 2022 to the income year commencing on or after the date the enabling legislation receives Royal Assent.

Other measures

The Government announced a number of non-business related measures:

– the maximum financial penalties for breaches relating to residential land under the foreign investment framework will double on 1 January 2023 (fees for all applications made under the foreign investment framework doubled on 29 July 2022);

– the value of a penalty unit will increase from $222 to $275 for offences committed on or after 1 January 2023;

– the minimum eligibility age for making super downsizer contributions will be lowered from 60 to 55 (this measure was announced before the Budget and is contained in a bill currently before Parliament);

– donations made from 1 July 2022 to 30 June 2025 to Australians for Indigenous Constitutional Recognition will be tax deductible; and

– the listing of Australian Women Donors Network as an entity eligible to receive tax deductible donations (as a DGR) will be extended for 5 years, for gifts made from 9 March 2023 to 8 March 2028.

Personal tax rates – no changes

There were no changes in the Budget to personal income tax rates. This means that the Government:

– has committed (for the time being) with the Stage 3 income tax cuts that are already legislated to come into effect from the 2024–25 income year (from 1 July 2024); and

– did not extend the Low and Middle Income tax offset (LMITO) (which ended on 30 June 2022) to the 2022–23 income year – this means that taxpayers earning up to $126,000 will pay more tax this year than for 2021–22 (an additional $1,500 if taxable income is between $48,000 and $90,000).

Tip! Talk to your tax adviser about any of the Budget measures that might affect your business.

WHAT’S NEW?

COVID-related grants

Payments made before 1 July 2022 to businesses affected by the COVID-19 pandemic under various State and Territory programs are not taxable. At the end of August, the Government added a number of Victorian and ACT programs to the scheme. This means that payments under these additional programs are non-assessable non-exempt income (tax-free). The Victorian programs are:

– Business Costs Assistance Program Four – Construction;

– Licenced Hospitality Venue Fund 2021 – Top Up Payments;

– Business Costs Assistance Program Round Two – Top Up;

– Business Costs Assistance Program Round Three;

– Business Costs Assistance Program Round Four;

– Business Costs Assistance Program Round Five;

– Impacted Public Events Support Program Round Two;

– Live Performance Support Program (Presenters) Round Two;

– Live Performance Support Program (Suppliers) Round Two;

– Commercial Landlord Hardship Fund 3.

The additional ACT program is ACT HOMEFRONT 3.

FROM THE ATO

Director ID – time is running out

Time is running out for directors of companies in Australia to apply for their director identification number (director ID), with the 30 November deadline less than a month away.

A director ID is required for the director or alternate director of:

– a company, registered Australian body, or registered foreign company under the Corporations Act 2001;

– an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

To check if a director ID is required, you can search ABN Lookup with the ABN or business name. If an ASIC Registration — ACN or ARBN or ARSN or ARFN — is showing against the record, the director of the company will need to apply for a director ID.

Directors under the CATSI Act have a different timeframe in which to apply.

All CATSI Act directors can apply for a director ID now and must apply by 30 November 2023. New directors must apply for their director ID prior to appointment from 1 November 2022.

To apply

The fastest way to apply for a director ID is online, using the myGovID app to log in to the Australian Business Registry Services (ABRS) website. It’s free to apply and directors must apply themselves to verify their identity. A myGovID with at least a Standard identity strength is required.

In addition to your myGovID, you will need:

– a tax file number (TFN);

– the residential address as held by the ATO; and

– information from 2 documents to verify your identity.

Documents that can be used include:

– bank account details;

– an ATO notice of assessment;

– APRA fund account details;

– a dividend statement;

– a Centrelink payment summary; and

– a PAYG payment summary (this is different from an income statement or PAYG instalment activity statement).

Business income and expenses

If you are running a business, most income received by the business is assessable for income tax purposes. The total gross amount is referred to as ‘assessable income’.

You need to report assessable income in your business’ tax return. It includes:

– cash income and income from online transactions;

– commissions and investment earnings;

– recovered bad debts for which your business previously claimed a tax deduction;

– most government payments;

– capital gains and losses;

– increases in the value of trading stock;

– stock taken for personal use; and

– payments from an insurance claim related to your business.

Make sure to also check what income you can exclude – for example, some COVID-19 government support payments are not assessable if you meet the eligibility criteria.

Remember you can reduce your business’s taxable income by claiming business tax deductions, as long as:

– the expense directly relates to earning your business’ assessable income;

– you claim only the business-use portion if the expense is for a mix of business and private use; and

– you have records to substantiate your claims.

Expenses may include:

– motor vehicle and travel expenses;

– items related to protecting staff from COVID-19;

– employee superannuation contributions; and

– payments you make to workers (including their wages) as long as you’ve complied with the Pay as you go (PAYG) withholding and reporting obligations for each payment.

Tip! Your tax adviser can help you with your tax.

Using a motor vehicle for business?

Here are 4 things to keep in mind when claiming motor vehicle expenses — such as fuel, oil, servicing and registration — for your business.

If you operate your business as a sole trader or partnership (where at least one partner is an individual), the method you must use to calculate your deduction depends on the type of vehicle. For cars, you must use either the cents per kilometre or logbook method. For all other vehicles, you must use the actual costs method, where you claim the actual costs of expenses you incurred based on receipts.

If you use the logbook or actual costs method, remember you can only claim the business-use portion of your motor vehicle expenses.

If you operate your business through a company or trust, you must use the actual costs method to work out the deductions you are entitled to, regardless of the type of motor vehicle you use.

If you use the logbook or actual costs method, you can claim depreciation or decline in value only for the business-use portion of the motor vehicle. The maximum you can claim as a deduction for the depreciation of your car is $64,741 for the 2022–23 income year or the cost of the vehicle (whichever is less). You may be eligible to claim depreciation under the temporary full expensing rules.

Tip! Talk to your tax adviser about the best way to calculate the deductions and the record-keeping requirements.

How’s your record keeping?

The ATO has reminded businesses about the importance of keeping correct records. For one thing, good record-keeping makes things easier at tax time.

When it comes to record-keeping, there are 5 rules. You need to:

1. keep all records related to starting, running, changing, and selling or closing your business that are relevant to your tax and superannuation affairs;

2. store records safely to prevent damage and protect information from being changed (you must not change relevant information in records);

3. keep most records for 5 years (for example, you need to keep records of losses for up to 5 years after you’ve fully claimed the loss);

4. be able to show the ATO your records if they ask for them; and

5. ensure your records are in English or easily converted to English.

Tip! Talk to your tax adviser about what records to keep and how to keep them.

Using business stock for private purposes?

If you are a sole trader or a partner in a partnership and take goods from your business for your private use, make sure you accurately record this in your stock on hand.

Accessing your trading stock for private use is fine from a tax perspective, but you need to account for the stock correctly:

– each time you use it (as you would if you sold it); and

– at the end of each income year.

If you do not adjust the actual cost of goods sold to reflect the goods you used for private consumption, you could be incorrectly claiming expenses you’re not entitled to.

A good plan is to set up regular reconciliation processes to help you keep track of each time you take stock for private use. Keep a record which shows:

– the date

– a description of what was taken

– the reason stock was taken; and

– the cost or market value of the item (excluding GST).

At the end of the income year, any goods taken for your own use should not be accounted for as stock on hand.

Certain businesses can use the amounts that the ATO will accept as estimates of the value of goods taken from trading stock for private use. The ATO recently published the accepted estimates for 2022–23. They are reproduced below.

Type of businessAmount (excluding GST) for adult/child over 16Amount (excluding GST) for child aged 4-16
Bakery$1,360$680
Butcher$990$495
Restaurant/café (licensed)$4,830$1,950
Restaurant/café (unlicensed)$3,900$1,950
Caterer$4,120$2,060
Delicatessen$3,900$1,950
Fruiterer/greengrocer$1,010 $505
Takeaway food shop$4,030$2,015
Mixed business (includes milk bar, general store and convenience store)$4,870$2,435

Entertaining your employees?

With summer and Christmas just around the corner, you may be planning a party or similar event (e.g. a bowls day) for your employees.

The ATO has reminded employers to make sure they consider the fringe benefits tax (FBT) implications of the party or other event.

These will depend on:

– the amount you spend on each employee;

– when and where the event is held;

– the value and type of gifts you provide; an

– who attends – is it just employees, or are partners, clients or suppliers also invited?

Don’t forget to keep all records relating to the entertainment-related fringe benefits you provide, including how you worked out the taxable value of benefits.

Tip! Talk to your tax adviser to discuss any FBT implications.

Superannuation for holiday work

From 1 July 2022, you need to pay superannuation guarantee (SG) for employees at the rate of 10.5%, regardless of how much you pay them. This is because the former $450-per-month income threshold for SG eligibility has been removed.

Take Jane for instance. She is a 22-year-old employee working a short-term job at a restaurant over the holiday season. She works 23 hours in a month, earning $430 before tax.

In the past, holiday employees such as Jane would not be paid superannuation as they earned below the $450 income threshold. Now, Jane will be eligible for superannuation paid on her ordinary time earnings at the rate of 10.5%.

This change doesn’t affect other eligibility requirements for SG. Workers who are aged under 18 years still need to work more than 30 hours in a week to be eligible.

For example, Anish is a 17-year-old employee working a job at a hotel over the holiday season. Anish works 32 hours in a week at the hotel and earns $800 before tax. He also works 5 hours at his local café, earning $150.

As Anish worked more than 30 hours in one week at the hotel, his employer will need to pay superannuation on the $800 he earned.

As Anish works less than 30 hours a week at the café, he is not entitled to superannuation from this employer. Likewise, Anish is not entitled to superannuation for any weeks he works less than 30 hours at the hotel.

Check your payroll and accounting systems are up to date so you are correctly calculating your employees’ SG payments.

Get new workers onboard faster

Did you know your employees can complete a tax file number (TFN) declaration through ATO online services? This is an easy way for them to provide you and the ATO with the required information. If your new employee has a myGov account linked to the ATO, once they are logged in they can:

– access ATO online services;

– go to the ‘Employment’ menu;

– select ‘New employment’ and complete the form.

Your employees will need your ABN to complete the form. When they submit it, their TFN declaration details are sent straight to the ATO, so you don’t have to. The form will then enable them to print and give you the summary of their tax details. You’ll need the summary so you can input the data into your system.

If your payroll software can link to the online commencement forms, it will automatically receive your new employees’ information from the ATO, saving you time spent entering the information manually. Check with your software provider to find out if they offer this service.

The New employment form can also be used to collect a range of information. Employees can use it to authorise variations to the amount you withhold from their pay for tax or the Medicare levy, or to advise you of their choice of superannuation fund. They can also use it to update their tax circumstances with you, for example, if:

– their residency status has changed;

– they no longer have a government study and training loan; or

– they are claiming the tax-free threshold from another employer.

You can continue to use your current processes when preferred, including providing a paper TFN declaration where the employee can’t create a myGov account or doesn’t have access to the internet.

Stapled superannuation funds for employers

A stapled superannuation fund is an existing superannuation account linked, or ‘stapled’, to an individual employee so it follows them as they change jobs.

Stapled funds avoid the need to open a new superannuation account every time an employee starts a new job, thus reducing account fees. Note that if choice of superannuation fund obligations are not met, additional penalties may apply.

You need to request stapled superannuation fund details for your business’ new employees when:

– you need to make superannuation guarantee (SG) payments for that employee;

– they are eligible to choose a superannuation fund but don’t, including contractors for whom you pay mainly for their labour but who are employees for SG purposes.

You may need to request stapled superannuation fund details for some employees who aren’t eligible to choose their own superannuation fund. This includes employees who are:

– temporary residents; or

– covered by an enterprise agreement or workplace determination made before 1 January 2021.

For employees who started working for your business on or after 1 November 2021 and have not provided a valid choice of superannuation fund, you should make contributions into:

– the employee’s stapled superannuation fund; or

– the employer nominated account (if the ATO advises you that they do not have a stapled superannuation fund).

If an employee later nominates their choice of superannuation fund, you have 2 months to start paying contributions into that fund.

Steps to requesting stapled superannuation fund details

Before you can request stapled superannuation fund details, you need to have offered all eligible employees a choice of superannuation fund.

You or your authorised representatives can request stapled superannuation fund details using ATO online services. Check and update the access levels of your authorised representatives in ATO online services. (Your tax adviser may also be able to make a request on your behalf.)

You must also establish an employment relationship. You can request your employee’s stapled superannuation fund details after you submit a TFN declaration or Single Touch Payroll (STP) pay event, which identifies that you have an employment relationship or link to your employee.

Choice shortfall penalty

You may have to pay the choice shortfall penalty, which is the additional SG charge (SGC), if you contributed to your default fund without making a stapled superannuation fund request.

To avoid the choice shortfall penalty, make sure you:

– request the stapled superannuation fund details for your employee as soon as possible if they have not provided you with their choice of fund;

– pay the employee’s full SG contribution to the stapled superannuation fund we return to you in the request; and

– pay the contribution to the stapled superannuation fund by the quarterly due date.

Tip! Your tax adviser may be able to help your business meet its superannuation obligations.

SUCCESSFUL PROSECUTIONS

Brothers busted for fake document scheme

Two brothers (YB and AB) who ran an accounting firm (Halifax Business Consulting) have received criminal convictions for a scheme to falsify Commonwealth documents, including business activity statements (BAS) and notices of assessment (NOA), in order to obtain bank loans for their business and a number of clients.

The ATO uncovered the scheme after auditing another matter and launching a subsequent investigation that saw search warrants executed at Halifax’s office and an employee’s home.

The ATO found evidence that the brothers had paid employees and others to create false BAS and NOAs that inflated sales or earnings, which would then be passed off as genuine to banks and other lenders. In several cases, they had commissioned the firm’s graphic designer (Mr V) to alter documents at their request.

The brothers would make handwritten amendments to the documents – sometimes doubling their clients’ actual earnings – before sending them on to Mr V to digitally manipulate. Mr V went to great lengths to make the documents look legitimate. In one email, he reminded his boss (YB) to provide only one of the doctored documents by facsimile or hard copy, to avoid someone noticing he had edited the original document’s security stamp.

Mr V was convicted for the part he played in the offending. He was sentenced to a 12-month Community Correction Order requiring him to complete 200 hours of unpaid community work.

YB was convicted and sentenced to 10 months imprisonment while his brother (AB) was convicted and sentenced to 6 months imprisonment. Both were released immediately on a $1,000 recognisance release order requiring them to be of good behaviour for 18-months.

Restaurateur served with jail term

A McLaren Vale restaurateur (Mr R) has been sentenced to 5 years and 3 months imprisonment after being found guilty of fraudulently obtaining $613,262 in GST refunds and attempting to obtain a further $210,333 that was stopped by the ATO.

Between September 2016 and November 2017, Mr R submitted 19 false business activity statements (BAS), which considerably overstated the total sales and acquisitions of the restaurant and gift shop business that he operated with his wife.

Several documents provided by Mr R throughout the audit contained inconsistencies, including a sales summary from a point-of-sale (POS) system that was created in Microsoft Word, and a POS report claiming to cover the dates of 1 June to 31 June, despite there being only 30 days in June.

During the ATO’s audit, Mr R also supplied a forged medical document advising his wife was receiving treatment for cancer. The ATO later checked with the doctor listed on the document, who confirmed she didn’t write the letter and wasn’t treating anyone by that name.

In sentencing, Her Honour Judge Kudelka described Mr R’s offending as ‘persistent and deliberate’, and that his false claims about his wife’s health were ‘despicable’. Mr R was sentenced to 5 years, 3 months and 2 days imprisonment, with a non-parole period of 3 years. He has also been ordered to pay $599,122 in reparations.

5 years jail for serial GST fraudster

A Queensland woman (Ms B) has been sentenced to 5 years imprisonment, with a non-parole period of 20 months, for attempting to fraudulently obtain more than $650,000 in GST refunds, as well as other offences.

Ms B used ABNs that weren’t linked to active businesses to submit a series of false claims for GST input tax credits.

While some of Ms B’s earlier claims were paid, ATO audits found she could supply no evidence to prove she was running a business. As a result, the ATO disallowed her claims and cancelled her GST registration.

Despite this Ms B repeatedly reactivated her GST registration and continued to make a series of fictitious claims. On each occasion, ATO checks confirmed she could not provide any supporting documentation that she was actually running a business, and each time her claim was disallowed.

In total, Ms B obtained a financial benefit of over $150,000 and attempted to claim a further $500,000.

Tip! If you know or suspect phoenix, tax evasion or shadow economy activity, the ATO would like you to report to it by completing the tip-off form on the ATO website or phoning them on 1800 060 062.

KEY TAX DATES

DateObligation
21 Nov 2022October monthly BAS due date
28 Nov 2022Lodge SG statement and pay September quarterly SGC (if required)
1 Dec 2022Full self-assessment companies — pay 2021–22 income tax
21 Dec 2022Lodge and pay November monthly BAS
21 Jan 2023*Lodge and pay December monthly BAS
28 Jan 2023*Superannuation guarantee payment due date for December quarter
31 Jan 2023Closely held trust — lodge December quarterly TFN report
21 Feb 2023Lodge and pay January monthly BAS
28 Feb 2023

Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.

A new government – tax changes?

In case you are wondering what the incoming Labor Government said about tax during the election campaign, the brief answer is very little. Unlike at the 2019 election, Labor has not proposed any significant tax policies – unless you are a multinational. Labor has proposed to ‘close tax loopholes exploited by multinational companies’.

Labor has proposed a number of other measures to help small businesses, including:

  • Ensuring that small businesses are paid on time to sustain growth across the economy with a mechanism to ensure payment within 30 days (the current average contract payment time sits at 37 days);
  • Making unfair contract terms illegal so small businesses can negotiate fairer agreements with large partners;
  • Driving a genuine collaboration with small businesses and government to reduce the time small businesses spend doing taxes, cut paperwork and target support; and
  • Reducing small business transaction costs at the point of payment with a clear timeline for implementing least cost routing or similar (small businesses are disproportionately impacted by higher transaction fees that eat into profits – around $804 million a year).

Parliament – what happened when the election was called?


When the Federal election was called, a number of tax measures contained in bills that were before the House of Representatives lapsed. From a business perspective, these measures included:

  • the proposal to allow small businesses to apply to the Administrative Appeals Tribunal for an order staying ATO decisions being reviewed by the AAT – eg an objection to a tax assessment;
  • the proposal to allow taxpayers to self-assess the effective life of certain intangible depreciating assets;
  • the proposed patent box regime that will tax certain income arising from exploiting a medical or biotechnology patent at 17%;
  • the proposal for foreign resident workers participating in the Australian Agriculture Worker Program to be classified as employees from 1 July 2022 – a consequence would be that fringe benefits provided to such workers from that date may be subject to FBT.

Any bills that were before the Senate when the election was called lapse on 1 July 2022.

Whether the Labor Government reintroduces all the lapsed measures remains to be seen, but they have not previously expressed any opposition to them.

Year-end tax tips

The end of the current income year (2021–22) is approaching. There are a few things you can do before 30 June to reduce your tax bill.

Key threshold amounts for tax offsets

If you are an individual taxpayer, including a sole trader or a partner in a partnership, or your business is carried on through a trust and you are a beneficiary or through a company and you are a shareholder, you may be entitled to the Low Income tax offset (LITO) or the Low and Middle Income tax offset (LMITO), depending on your taxable income. The key income thresholds are set out below.

  • $37,001 – LMITO ($675) increases by 0.5 cents for every dollar above $37,000
  • $37,501 – LITO (maximum $700) phases out by 0.5 cents for every dollar above $37,500
  • $45,001 – 19% tax rate increases to 32.5%
  • $48,001 – maximum LMITO ($1,500) payable
  • $66,668 – LITO ceases to be payable
  • $90,001 – maximum LMITO ($1,500) phases out by 0.3 cents for every dollar above $90,000
  • $120,001 – 32.5%% tax rate increases to 37%
  • $126,000 – LMITO ceases to be payable
  • $180,001 – 37% tax rate increases to 45%.
    $90,001 (singles) and $180,001 (families) are relevant thresholds for qualifying for the private health insurance tax offset (or insurance premium reduction) or liability for the Medicare levy surcharge – but add $1,500 for each dependent child after the first one.

LMITO is due to end this income year and will therefore not be available from the 2022–23 income year. You do not need to do anything to claim the LITO or the LMITO. The ATO will automatically apply the relevant offset if you are eligible on assessment when you lodge your 2022 income tax return.

Defer assessable income

If your taxable income for the income year is approaching any of the above key thresholds, you may want to consider deferring assessable income so your taxable income for the year remains below the relevant threshold.

For example, if you account for your income on a cash basis, you could delay issuing an invoice so you won’t be paid until after 30 June – that way, the income is taxed next income year. However, that may not work if you account for your income on an accruals basis. Of course, cash flow issues might mean you would prefer to be paid more promptly.

If you are in the process of selling property and the profit will be taxable as a capital gain, you could defer the sale until the next income year – but remember that the liability to pay CGT arises when you exchange contracts and not on settlement.

Increase deductions

Another way to keep taxable income below a relevant threshold is to increase deductions. For example, you could bring forward the purchase of one or more depreciating assets (new assets are deductible outright under temporary full expensing). An immediate deduction is also available for start-up costs and certain prepaid expenses.

Charitable donations are a good way to increase your deductions. If you are unsure whether a donation will be deductible, you can check the deductibility status of charities at https://www.abn.business.gov.au/Tools/DgrListing. In certain circumstances, you can claim a deduction if you donate trading stock. Don’t forget to ask for a receipt.

Tip! As the end of the income year approaches, talk to your tax adviser about ways to minimise your tax bill.

What concerns the ATO?

eInvoicing

The ATO is encouraging businesses to use eInvoicing. This is the new, standardised way to send and receive electronic invoices directly through your accounting software – eInvoices are sent directly between buyers’ and suppliers’ software through a secure network.

Once the sender creates the invoice in their software, this information is sent directly and securely to the receiver’s software, ready to be approved and paid.

The ATO states that eInvoicing saves time, money and gives you better control of your invoicing by:

  • reducing repetitive manual entry of invoices, as eInvoices automatically appear in your software;
  • removing the need to chase lost or incorrectly addressed invoices, as eInvoices are delivered using your trading partner’s ABN, with key invoice details validated before they are sent
  • eliminating costly and time-consuming errors in invoices that often happen with manual entry;
  • providing greater visibility of the delivery status of your invoices, with real-time information available directly in your accounting software;
  • reducing the risk of fake, unsolicited or compromised invoices and other false billing scams, including business impersonation scams; and
  • allowing you to trade seamlessly with eInvoicing-enabled businesses in Australia and around the world.

Tip! Talk to your accounting software provider today to see how you can get started with eInvoicing.

Is cash flow an ongoing issue?

The ATO’s Cash Flow Coaching Kit is a resource to help you better manage your cash flow. It offers practical, step-by-step information and short activities, including case studies.

You’ll learn effective cash flow management practices and find the right information to improve your business and financial knowledge, make critical decisions and plan ahead to stay viable. These skills help you meet your financial commitments, including tax and super obligations. The kit is useful for all business types at any stage of the business lifecycle. It helps you assess your cash flow health by addressing four key questions:

  • Am I trading profitably?
  • Have I put enough aside to meet my regular financial commitments?
  • Does my business have enough to spend on myself and pay others?
  • Is my business getting ahead or falling behind?

The ATO states that advisers tell them the kit helps their clients identify practical actions they can take to better manage their cash flow and meet their business goals.

Tip! Talk to your tax adviser. They can use the kit to help you break down cash flow complexities and uplift your cash flow know-how.

If you don’t pay your tax

The ATO understands that taxpayers, in particular small business operators and sole traders, sometimes have cash flow issues meaning they can’t pay their whole tax bill on time. If you are having a problem, the ATO encourages you to engage with them early so they can help you deal with your debt while it’s still manageable.

If you don’t pay the amounts you owe the ATO on time, they will charge interest on your unpaid amounts and use any future refunds or credits to repay the amounts you owe.

The ATO may take stronger action if you are unwilling to work with them to address your debt or repeatedly default on agreed payment plans.

Debts on hold

An aged debt is an uneconomical non-pursued debt that the ATO has placed on hold (it does not show as an outstanding balance on your ATO account) and has not undertaken any recent action to collect.

If you have an aged debt, you may receive a letter from the ATO reminding you of the debt.

From June 2022, the ATO will recommence offsetting any tax refunds or credits to pay off any debts on hold. In some cases, the ATO may use credits from other government agencies to pay off the aged debt.

Director penalties

The ATO has published on its website detailed information about the responsibilities of a company director for ensuring that the company’s tax and superannuation guarantee (SG) obligations are reported and paid on time.

If you are a current or former company director, the ATO can recover from your unpaid amounts of:

  • Pay as you go withholding (PAYGW);
  • GST; and
  • SG charge.

If these obligations are not met, you become personally liable for the unpaid amounts, unless you take steps to ensure the company meets its obligations, appoints an administrator or goes into liquidation (only within certain time limits).

Any amounts that you are personally liable for are called director penalties. The ATO can recover the penalty amounts from you after issuing a director penalty notice (DPN).

Becoming a new company director

Before you become a company director, check if the company has any unpaid or unreported PAYGW, GST and SG charge liabilities. Once you are appointed as a company director, you are responsible for ensuring the company meets its PAYGW, net GST and SG charge obligations in full by the due date.

You are no longer a director

If you resign as a director of the company, you remain liable for director penalties for liabilities of the company that were due before the date of your resignation. In certain circumstances, you may also be liable for liabilities that fall due after your resignation.

Director penalty notices

Before recovering your company’s unpaid amounts, the ATO must give you a DPN. The notice outlines the unpaid amounts and remission options available to you.

The ATO can recover the amounts of the director penalty by:

  • issuing garnishee notices;
  • offsetting any of your tax credits against the director penalty;
  • initiating legal recovery proceedings against you to recover the director penalty.
Director penalties are a parallel liability

Once DPNs have been issued, the ATO may commence or recommence recovery action from each director personally, because these penalties are a parallel liability.

To recover the debt, the Commissioner can pursue either the company or the directors.

This means that any payment or credit applied to the company’s account, or to a director’s account, to reduce the penalty will reduce the director penalty amount for the other directors and the company’s corresponding liability for the same reporting period.

Tip! Talk to your tax adviser if you are a company director and the company owes PAYGW amounts, GST or SG charge.

FBT issues

Lodge and pay

The ATO has reminded employers that have provided their employees with fringe benefits to consider their fringe benefits tax (FBT) obligations – including registering, reporting, lodging and paying FBT.

The ATO expects many employers to have an FBT obligation for the first time due to benefits provided during COVID-19.

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages. Typical fringe benefits include allowing an employee to use a work car for private purposes, paying an employee’s gym memberships or providing tickets to concerts or events.

ATO Assistant Commissioner, Michelle Allen, said: ‘We have seen more employers providing fringe benefits to their employees because of COVID-19. This includes, paying for items that allow their employees to work from home and providing non-cash benefits as an incentive or reward for employees to get their COVID-19 vaccination. We’ve even heard of an employer providing their employees with pets to keep them company while they work at home!’

FBT returns for the 2021–22 FBT year were due by 21 May 2022 – that is also the payment date. However, if your business uses a registered tax agent to prepare and lodge its FBT return, the business may have additional time to lodge and pay.

FBT rates and thresholds

A new FBT year (2022–23) started on 1 April 2022. Relevant amounts and thresholds for the 2022–23 FBT year include:

  • record-keeping exemption threshold – $9,181 ($8,923 for 2021–22);
  • statutory or benchmark interest rate – 4.52% (same as for 2021–22);
  • car parking threshold – $9.72 ($9.25 for 2021–22).

The cents per kilometre rates (for motor vehicles other than cars) for the 2022–23 FBT year are:

0–2500cc Over 2500cc Motor cycles
58 cents 69 cents 17 cents

For 2021–22, the 0–2500cc and over 2500cc rates were 56 cents and 67 cents per kilometre respectively; the motor cycle rate was 17 cents per kilometre.

Living away from home – in Australia

The weekly food and drink expenses for the 2022–23 FBT year that the ATO accepts as reasonable for a living-away-from-home allowance (LAFHA) paid to employees living away from home within Australia are:

1 adult1 $289
2 adults $434
3 adults $579
1 adult and 1 child $362
2 adults and 1 child $507
2 adults and 2 children $580
2 adults and 3 children $653
3 adults and 1 child $652
3 adults and 2 children $725
4 adults $724
Each additional adult3 $145
Each additional child $73


1 A person is considered to be an adult for LAFHA purposes if they were 12 years or older before the beginning of the FBT year.

Living away from home – outside Australia

The weekly food and drink expenses for the 2022–23 FBT year that the ATO accepts as reasonable for a LAFHA paid to employees living away from home outside of Australia can be found in Taxation Determination TD 2022/2. Some of those reasonable amounts (for one adult) are set out below.

Country Weekly amount – 1 adult
China $437
France $437
Germany $437
Hong Kong $437
India $273
Indonesia $273
Italy $437
Japan $437
Malaysia $273
New Zealand $346
PNG $346
Singapore $537
South Korea $537
Taiwan $437
Thailand $346
UAE $537
UK $437
USA $437
Vanuatu $346
Vietnam $273

Where your employee is accompanied by other family members while overseas, the reasonable food and drink amount per week for the family is worked out by multiplying the amount shown above by a factor specified in Taxation Determination TD 2022/2. For example:

Family group Factor
2 adults 1.5
1 adult and 1 child 1.25
2 adults and 1 child 1.75
2 adults and 2 children 2

Scams and crimes

ATO urges vigilance following new scams approach

The ATO is urging taxpayers to be vigilant following an increase in reports of fake websites offering to provide tax file numbers (TFN) and Australian business numbers (ABN) for a fee but failing to provide the service.

The fake TFN and ABN services are often advertised on social media platforms like Facebook, Twitter, and Instagram.

The advertisements offer to obtain a TFN or ABN for a fee. Instead of delivering this service, the scammer uses these fraudulent websites to steal both money and personal information.

In 2021, more than 50,000 people reported ATO impersonation scams with victims losing a total of more than $800,000.

Tips to protect yourself from scammers

The ATO proposes a number of tips to protect yourself from scammers.

Know your tax affairs – You will be notified about your tax debt before it is due. Check if you have a legitimate debt owed by logging into your myGov account via an independent search or by calling your tax agent if you have one (on a phone number sourced independently).

Guard your personal and financial information – Be careful when clicking on links, downloading files or opening attachments in emails and SMS text messages. Only give your personal information to people you trust and don’t share it on social media.

If you are unsure, don’t engage – If a call, SMS or email leaves you wondering if it is genuine, don’t reply. Instead, you should phone the ATO’s dedicated scam line 1800 008 540 to check if it is legitimate. You can also verify or report a scam online at ato.gov.au/scams. You can also visit ScamWatch to get information about scams (not just tax scams).\

Know legitimate ways to make payments – Scammers may use threatening tactics to trick their victims into paying fake debts via unusual methods. For example, they might demand pre-paid gift cards or transfers to non-ATO bank accounts. To check that a payment method is legitimate, visit ato.gov.au/howtopay.

Talk to your family and friends about scams – If you or someone you know has fallen victim to a tax related scam, call the ATO as soon as you can.

ATO warning against GST fraud

The ATO has identified, and is taking strong action, to respond to significant fraud involving participants inventing fake businesses to claim false refunds.

The ATO is warning the community not to engage with this fraud and for participants to come forward before they take tougher action.

Sophisticated risk models deployed by the ATO, coupled with intelligence received from banks including through the AUSTRAC-led Fintel Alliance and the Reserve Bank of Australia, identified a recent spike in suspicious refunds.

The ATO, through Operation Protego, is investigating around $850 million in potentially fraudulent payments made to around 40,000 individuals, with the average amount fraudulently claimed being $20,000.

The ATO is working with financial institutions who have frozen suspected fraudulent amounts in bank accounts.

The fraud involves offenders inventing fake businesses and ABN applications, many in their own names, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.

The ATO is working closely with law enforcement agencies to prioritise criminal action against those who have established and induced participation in fraudulent activity.

Tax crime prosecution case studies

The ATO has published details of a few successful prosecutions for fraud.

False claims land swimming teacher in hot water

A former swimming teacher has been sentenced to 3 years’ jail for obtaining and attempting to obtain more than $250,000 in fraudulent GST refunds.

Ms C lodged several original and amended business activity statements for her swim school business. In each case, she knowingly overstated the purchase amounts to obtain a financial advantage. In total, $97,114 worth of fraudulent GST refunds were paid into her back account. She also tried to obtain an extra $181,947 but the ATO stopped these refunds.

Ms C will be released from jail after 15 months, on entering into a $1,000 recognisance on the requirement that she be of good behaviour for 2 years. She was also ordered to repay the full $97,114.

Doctor prescribed jail time for failure to comply

A doctor from Western Australia has been sentenced to 7 months’ jail following a long history of non-compliance.

In February 2020, Dr R was convicted and fined $50,000 for failing to lodge 5 tax returns and 13 business activity statements (BASs). As part of his sentence, he was ordered to submit the outstanding lodgments within 2 months.

When they were not received, he was prosecuted again. This time, he was charged with 18 counts of failing to comply with court orders under the Tax Administration Act 1953.

In April 2022, while sentencing Dr R, the Magistrate stressed that tax obligations are not optional, and that non-compliance places a burden on the rest of the community.

Dr R will be released from jail after 2 months, upon entering into a $10,000 recognisance to be of good behaviour for the remainder of his sentence. As part of the good behaviour bond, he will need to lodge each of the outstanding tax returns and BASs by 30 September 2022.

The ATO said that the decision to prosecute is not one they make lightly. Before initiating prosecution action, they make multiple attempts to contact taxpayers to provide and help support.

If you’re falling behind on your obligations or have made an honest mistake, the ATO will work with you to find a solution. But in instances like this, where people have consistently evaded their obligations and refused to comply, the consequences will catch up with them.

Bank manager sentenced to 3 years’ jail

A former tax accountant and bank manager has been sentenced to 3 years’ jail for attempting to obtain a financial advantage of more than $390,000.
Mr S was the owner, director and authorised tax representative of a bank franchisee. Over a period of 2 years, he failed to lodge business activity statements (BASs). An audit resulted in him owing nearly $200,000 in taxes and penalties.

When this debt wasn’t paid, the ATO applied to have the company wound up. In the meantime, Mr S lodged 66 false BAS revisions where he deliberately reduced the PAYG withholding to nil. Not only did this eliminate the debt, but it also created a credit of $144,538.

Mr S requested a refund of the credit amount. But the ATO’s investigations found the revisions to be entirely fraudulent, so the refund was never released.

Fraudster tracked down

A NSW man who obtained more than $171,000 in fraudulent GST refunds has been sentenced to 2 years’ and 8 months’ jail.

Between December 2011 and April 2015, Mr C said he was providing handyman, carpentry and computer repair services. He reported that the business had made more than $3.3 million in sales during this period, claiming corresponding acquisitions and input tax credits.

However, when the ATO commenced an audit, it became clear that the claims were false. He didn’t hold a licence to perform carpentry or building work in NSW during the offending period. His bank statements didn’t contain any activity that would suggest he was carrying on an enterprise.

Mr C was originally due to face court in 2019, but he failed to appear. He evaded authorities until December 2020 when he was located and arrested by police.

GST fraudster jailed

A man who pretended to be running a business to get his hands on fraudulent GST refunds has been sentenced to 3 years’ jail.
Between October 2014 and January 2018, Mr P lodged 14 quarterly business activity statements (BASs) in relation to his sole trader real estate business. He claimed the business had made more than $300,000 in sales and claimed $256,955 in GST credits. But according to bank records, he didn’t receive any income from the business. There was also insufficient cash flow to support the purchases he reported.

Mr P later admitted the claims were false; he hadn’t been carrying on a business. In total, he obtained $189,270 in fraudulent GST refunds. He also attempted to obtain an additional $39,778, but this was stopped by ATO officers.

When the matter was heard at the Perth District Court, Mr P pleaded guilty to 13 counts of obtaining a financial advantage by deception and one count of attempting to obtain a financial advantage by deception. In addition to his jail term, he was ordered to pay back $187,486.

Key tax dates

Date Obligation
21 June 2022 May monthly BAS due
30 June 2022 Superannuation guarantee (SG) contributions must be paid by this date to qualify for a tax deduction in 2021–22
14 July 2022 Issue PAYG payment summaries if not reporting through STP
21 July 2022 June monthly BAS due
28 July 2022 Lodge and pay June quarterly BAS
Pay June quarterly PAYG instalment
Employee SG contributions due
June quarter SG due
31 July 2022* Finalisation declaration due if reporting through STP
1 Aug 2022 Fuel tax credit rates change
14 Aug 2022* PAYG withholding annual report due if not reporting through STP
21 Aug 2022* July monthly BAS due
28 Aug 2022* June quarter SG charge statement due
Taxable payments annual report due
21 Sep 2022 August monthly BAS due



DISCLAIMER
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.
*The next business day as the due day falls on a Saturday or a Sunday.

Flood Support

Disaster recovery payments

If your business was affected by the recent floods in NSW and Queensland, you may receive a recovery payment from a local, state or federal government agency. The ATO website advises that the income tax treatment of these support payments is as follows:
  • Australian Government Disaster Recovery Payment (one off payment of $1,000 per adult and $400 for each child younger than 16) and Australian Government Disaster Recovery Payment – Special Supplement (a total of $2,000 per adult and $800 for each child under 16, paid in 2 instalments) — you don’t pay income tax on these payments.
  • Disaster Recovery Allowance (a short-term allowance for up to 13 weeks – the amount varies) — this payment is generally taxable.
  • Natural Disaster Relief and Recovery Arrangements — payments under this scheme are generally taxable.
  • Ex gratia recovery payments — whether you pay tax on these payments depends on the specific circumstances of the payments and whether the Commonwealth Government has determined to exempt such payments from tax.
Even if a disaster relief payment is not taxable, you may have to include it in your tax return. If you provide emergency assistance to employees, you can claim a tax deduction for the payments. However, you are not required to withhold tax from the payments as the employee does not pay tax on them. Tip! Talk to your tax adviser if you are uncertain whether a disaster recovery payment is taxable and whether you need to disclose it in your tax return.

ATO help

The ATO can help businesses affected by the recent floods, including businesses not directly impacted. Activity statements and instalment notices Small businesses in affected local government areas (LGAs) in Queensland and NSW who need to lodge business activity statements and instalment notices with an original due date of 28 February 2022 or 21 March 2022 can lodge relevant returns up until 28 March 2022. They do not need to request a lodgment deferral if they are able to lodge by that date. This does not apply to significant global entities or large businesses, who will need to contact the ATO to work through any lodgment concerns. Lists of affected LGAs in Queensland and NSW can be found on the Services Australia website. Be aware that:
  • ATO systems will still reflect the original lodgment due date of these documents until they are lodged. The due date will only update after the lodgment has been received.
  • You may see a penalty on your account until the ATO can complete the process of remitting associated penalties.
  • The payment due date for these lodgments will not change. However the ATO will take an empathetic approach to your situation. General interest charge (GIC) will still apply if payment is not made by the original payment due date. If you are not able to pay by the due date, you should contact the ATO to discuss payment options and request a remission of GIC.
If you were not able to lodge by 28 March 2022, you can apply for a deferral on a case-by-case basis. If you already have a deferral, it will remain in place. Other ATO assistance If you are affected by the floods, the ATO will fast track any GST refunds you are owed. In addition, the ATO may:
  • give you extra time to pay a debt;
  • set up a payment plan tailored to your particular circumstances, including an interest-free period;
  • help you find your lost tax file number (TFN) after verifying your identity;
  • re-issue tax returns, activity statements and notices of assessment;
  • help you re-construct lost or damaged tax records; and
  • remit penalties or interest charged during the time you have been affected.
You can also vary your PAYG instalments, as well as claim a credit at label 5B on your activity statement for previous instalments paid. The ATO has said that it will not apply penalties or charge interest on variations for the 2021–22 income year if you have taken reasonable care to estimate your end of year income tax liability. Tip! Your tax adviser can also liaise with the ATO on your behalf. 

What is new?

Pre-Budget announcements

The Treasurer announced that the following measures will form part of the Federal Budget 2022–23:
  • the GDP uplift rate that applies to PAYG instalments and GST instalments will be set at 2% for the 2022–23 income year;
  • PAYG instalment payments will be aligned with financial performance. Thus, if financial performance declines, companies may be able to get refunds of instalments paid automatically (the implementation date is 1 January 2024);
  • the Government will facilitate sharing of Single Touch Payroll data with the State and Territory Governments on an ongoing basis to cater for pre-filling payroll tax returns;
  • eligible businesses will have the option of reporting taxable payments at the same time as activity statements (the implementation date is 1 January 2024) — this will remove the requirement to lodge a yearly Taxable Payments Annual Report (TPAR);
  • the Government will develop systems to ensure all trusts will have the option to lodge income tax returns electronically (the implementation date is 1 July 2024); and
  • manufacturers, importers and distributors in the alcohol and fuel sectors with an annual turnover of less than $50 million will be able to lodge and pay excise and excise-equivalent customs duty on a quarterly basis (from 1 July 2023).
If the Federal Budget 2022–23 contains more information on these measures, we will report it in the special Federal Budget edition of TaxWise® News due out on Tuesday 5th April 2022

Changes approved by Parliament

The following changes are now law:
  • the extension of temporary full expensing (for depreciating assets) by 12 months to 30 June 2023 — so your business will be able to claim an outright deduction for the cost of depreciating assets you acquire (and install ready for use) before 1 July 2023 (this includes second hand assets if your business has an aggregated turnover of less than $50 million);
  • the extension of the loss carry back for companies to include the 2022–23 income year (a loss can be carried back as far as 2018–19);
  • a change to the taxation of employee share scheme interests subject to deferred taxation;
  • removing the Superannuation Guarantee $450 monthly income threshold (from 1 July 2022).

Changes in the pipeline

Bills currently before Parliament will:
  • allow a small business to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) for an order staying, or otherwise affecting, the operation of an ATO decision being reviewed by the AAT. For example, the AAT may direct the ATO not to take steps to collect a disputed debt that is being reviewed;
  • make disaster recovery grants paid to small businesses and farmers in relation to Cyclone Seroja tax-free;
  • reduce from 32.5% to 15% the effective tax rate on the first $45,000 of net income (i.e. salary, wages, bonuses etc less deductions) earned (from 1 March 2022) by foreign resident workers participating in the Australian Agriculture Worker Program or the Pacific Australia Labour Mobility scheme — this will affect the amounts withheld by employers (it is likely that the ATO will make new withholding schedules available for employers);
  • allow the ATO to require a taxpayer to complete an approved record-keeping course where the ATO reasonably believes the taxpayer has failed to comply with laws governing tax records — this will be an alternative to paying an administrative penalty; and
  • allow a business to self-assess, for depreciation purposes, the effective life of most intangible assets, e.g. copyright (other than copyright in a film), patents and in-house software, but not for assets held before 1 July 2023.
Of course, these measures may not be passed by the Parliament before the next Federal election (which will be held in May). If that happens, it is reasonable to assume they will be re-introduced in the next Parliament since they are uncontroversial and should receive bi-partisan support regardless of which party forms government. Deduction for COVID-19 tests The Government has announced that legislation will be introduced to make it clear that work-related COVID-19 test expenses incurred by individuals will be tax deductible. This will include Polymerase Chain Reaction (‘PCR’) tests and Rapid Antigen Tests (‘RATs’). If you provide COVID-19 testing to your employees, FBT will not be payable.

From the ATO

Tax losses

Before you claim a tax loss, make sure you have correctly claimed expenses that you are entitled to. Overclaiming expenses can put your business in an incorrect tax loss situation. Keeping accurate and complete records will help you keep track of your tax losses. It can help you avoid incorrectly carrying back a tax loss or carrying forward tax losses to deduct in future years. If your business makes a tax loss in the current year, you can generally carry forward that loss and claim a deduction for your business in a future year (subject to satisfying either the continuity of ownership or the business continuity test). Companies and entities taxed as companies (e.g. corporate limited partnerships) may be able to claim the loss carry back tax offset. You can carry back losses made in the 2019–20, 2020–21, 2021–22 and 2022–23 income years to an earlier income year (but no further back than 2018-19) and claim an income tax offset in the company’s 2021, 2022 or 2023 income tax return.  If you’re carrying on a non-commercial business activity as an individual, either alone or in a partnership, and your business makes a loss, you must check to see how the non-commercial loss rules apply to you. Tip! Talk to your tax adviser about how to best utilise a tax loss.

Changing loss carry back choice

If your company has chosen to carry back a loss from one year to an earlier year (but not before 2018–19), it may want to change how much of the tax loss it carries back. This needs to be done on the approved ATO form and within the time limit for amending the relevant tax assessment. The change will take effect from the day your company made the original loss carry back choice. The ATO provides this example. XYZ Co made a loss carry back choice in its Company tax return 2021 to carry back $5,000 of the $10,000 tax loss it made in that income year to the 2019–20 income year. Later it decides that it wants to carry back all the $10,000 tax loss to the 2019–20 income year. XYZ Co notifies the ATO of its change in loss carry back choice using the approved form within the time limit for amending its tax assessment for the 2020–21 income year. The time limit for amending an assessment is generally 2 years if your company is a small business entity (aggregated turnover of less than $10 million) or, if the income year starts on or after 1 July 2021, a medium business (aggregated turnover of less than $50 million). Otherwise the time limit is generally 4 years. For a company balancing at 30 June, the first income year starting on 1 July 2021 is the 2021–22 income year.

Using business money for private purposes

There may be tax consequences if you take or use money or assets from your company or trust for private purposes. For example, it is quite common for the company or trust to make a loan to a shareholder or an associate of a shareholder (e.g. the shareholder’s spouse or child). When a company lends money or assets to a shareholder, the shareholder may be taken to have received a Division 7A deemed dividend if certain conditions are not met. If this happens, the shareholder will need to report an unfranked dividend in their individual tax return. A deemed dividend has no impact on the company’s balance sheet or income tax return. To avoid a Division 7A deemed dividend, before the company tax return is due or lodged (whichever comes first), the loan must:
  • be repaid in full; or
  • put on Division 7A complying terms.
To put a loan on Division 7A complying terms, the loan must:
  • be in a written agreement and signed and dated by the lender;
  • have an interest rate for each year of the loan that at least equals the benchmark interest rate (4.52% for 2021–22);
  • not exceed the maximum term of 7 years, or 25 years in certain circumstances when the loan is secured by a registered mortgage over real property.
The company must include any interest earned from the loan in its tax return. You (the shareholder or associate of the shareholder):
  • must make the minimum yearly repayment each year (the ATO publishes a Division 7A calculator to work this out);
  • cannot borrow money from the company to make the minimum yearly repayment;
  • can make payments on the loan using a dividend declared by the company. This dividend must still be reported in your individual tax return as assessable income.
It is important to keep accurate records of any such transactions and ensure they are reported correctly for tax purposes. This may require a transaction to be reported in both the company’s or trust’s tax return and your individual tax return. Unpaid present entitlement An unpaid present entitlement (UPE) arises where a beneficiary of a trust is presently entitled to a share of trust income but it remains unpaid. If the beneficiary is a private company and the trust is a shareholder in the company (or an associate of a shareholder), the ATO considers that the unpaid amount is a loan from the company to the shareholder (or associate) and therefore subject to the operation of Division 7A. The ATO has recently issued a draft taxation determination, revising its views on the application of Division 7A where there is a UPE for arrangements arising on or after 1 July 2022. For example, the ATO now considers that Division 7A may apply where a private company beneficiary has knowledge of a UPE and does not demand payment of that amount.  Tip! Division 7A is very complex – particularly the UPE rules – so talk to your tax adviser to make sure you don’t take steps that result in a Division 7A deemed dividend.

Check your business’ PAYG instalments

Now is a good time to check that your business’ PAYG instalments still reflect its expected end of year income tax liability. If the business’ circumstances have changed and you think it will pay too much (or too little) in instalments for the year, the instalments can be varied on the next activity statement. Instalments can be varied multiple times throughout the year. The varied amount or rate will apply for the remaining instalments for the tax year or until another variation is made. If your business is affected by COVID-19 or a natural disaster, the ATO has said it will not apply penalties or charge interest to varied instalments if the business has made its best attempt to estimate its end of year income tax liability. If an amount or rate is varied online, paper activity statements and instalment notices will no longer be issued. These will be issued electronically. Your business will need to consider this when deciding how to lodge, revise and vary future activity statements and instalment amounts. Tip! Your tax adviser or BAS agent can help you with your business’ activity statements and tax returns.

Digital record keeping

The ATO has highlighted the advantages of keeping business records digitally. If, for example, your business uses a commercially-available software package, it may help the business:
  • keep track of business income, expenses and assets as well as calculate depreciation;
  • streamline its accounting practices and save time so you can focus on the business;
  • automatically calculate wages, tax, superannuation and other amounts for activity statement and other purposes;
  • meet Single Touch Payroll (STP) reporting obligations;
  • back up records using cloud storage to keep records safe from flood, fire or theft.
Digital storage of paper records Paper records (or hard copies) can be stored digitally. The ATO accepts images of business paper records saved on a digital storage medium, provided the digital copies are true and clear reproductions of the original paper records and meet its five rules for record-keeping. Once an image of the original paper records is saved, there is no need to keep the paper records unless required by a particular law or regulation. However, if information (for example, supplier information, date, amount and GST) is entered into accounting software from digital or paper records, the business may still need to keep a copy of the actual record, either digitally or on paper. Some accounting software packages may do both accounting and record keeping. The ATO website gives tips on how to choose suitable record-keeping software. Providing the ATO with copies of records If the ATO asks to see copies of records that are kept digitally, you can provide either digital or printed copies. The ATO may also request documentation about the record-keeping system (for example, information about regular back-up and record destruction procedures) or ask for paper copies. Cloud storage If your business uses cloud storage, either through accounting software or a separate service provider, for example, Google Drive, Microsoft OneDrive or Dropbox, you should ensure:
  • the record storage meets the record-keeping requirements;
  • you download a complete copy of any records stored in the cloud before you change software provider and lose access to them.
eInvoicing storage Regardless of your business’ eInvoicing software or system, you are responsible for determining the best option for storing business transaction data. You should:
  • ensure that the process meets the record-keeping requirements
  • discuss the options with your software provider
  • talk to your business adviser, if necessary.

Don’t get burned by a phoenix

The ATO has warned small businesses about phoenixing. That happens when (to quote the ATO) a ‘dodgy’ business shuts down to avoid paying its debts, but then pops up under a different company name without any debt. The ATO is working, through the Phoenix Taskforce, with other federal, state and territory agencies to detect, deter and disrupt illegal phoenix businesses. Here are 5 red flags to look out for when working with a company:
  • unusually low quotes or tenders can suggest that the company isn’t taking superannuation or PAYG instalments into account;
  • the company directors have previously been involved with liquidated entities;
  • the company’s name and directors have changed, but the manager and staff remain the same;
  • the company is requesting payments to a new company;
  • you’re told that your last contract won’t be paid unless you sign a new contract, often with a different company name from the one you first dealt with.
If you suspect illegal phoenix activity, you can contact the ATO by phoning 1800 060 062 or by emailing phoenixreferrals@ato.gov.au.

Re-contributing superannuation amounts

Individuals can now re-contribute amounts they withdrew under the COVID-19 early release of superannuation program without the contributions counting towards their non-concessional contributions cap. These contributions can be made between 1 July 2021 and 30 June 2030. The individual must use the approved form and give it to the superannuation fund by the time the contribution is made. Individuals can make COVID-19 re-contribution amounts to any fund of their choice where the fund rules allow. A fund cannot accept a COVID-19 re-contribution amount if it exceeds $20,000 (the maximum amount that could be withdrawn under the COVID-19 early release program). If the amount re-contributed exceeds the amount withdrawn, the difference will be treated as a non-concessional contribution. A COVID-19 re-contribution may qualify as an eligible personal superannuation contribution that attracts the government co-contribution.

SMSF statistics

The ATO’s Self-managed super fund quarterly statistical report – December 2021 (contains some interesting statistics on the self-managed superannuation fund (SMSF) sector. Highlights include:
  • there are 601,906 SMSFs;
  • there are 1,129,321 members of SMSFs;
  • the total estimated assets of SMSFs are $876.7 billion;
  • the top asset types held by SMSFs (by value) are listed shares (28% of total estimated SMSF assets) and cash and term deposits (17%);
  • 53% of SMSF members are male and 47% are female;
  • 86% of SMSF members are 45 years or older.

Employee or independent contractor?

It is an age old question. Is the individual providing services to your business an employee or an independent contractor? The High Court recently considered this issue in two separate cases and agreed in both that it is the ‘totality of the relationship between the parties’ that should be considered. However, instead of adopting a ‘multifactorial’ approach, considering factors such as the degree of control, who bears the commercial risk and who provides the equipment, the High Court focused on the contractual relationship between the parties. This is not the place to analyse the High Court’s decisions in detail. However, it is worth noting that the High Court observed that where the terms of the parties’ relationship are comprehensively committed to a written contract (that is not a sham), the terms of the contract should determine the character of the relationship. On that basis, the High Court held that the relevant individuals were employees in one case (CFMEU v Personnel Contracting), but not in the other (ZG Operations v Jamsek).         These cases are relevant for tax (e.g. PAYG withholding obligations) and the Superannuation Guarantee (SG) scheme. Of course, the SG picture is complicated by rules treating certain individuals as employees for SG purposes, even if they are not employees at common law. Tip! Talk to your tax adviser if you have any concerns about the status of your relationship with individuals who provide services to your business.

FBT issues

FBT return time

The 2022 Fringe benefits tax (FBT) year ends on 31 March 2022, so it’s a good time to start considering what you need to do to lodge your business’ FBT return and pay FBT. You’ll need to work out if the business has an FBT liability for any fringe benefits provided to employees (or their associates) between 1 April 2021 and 31 March 2022. An associate includes a spouse, child, parent, sibling and most other relatives (but not cousins). If your business has an FBT liability for the 2022 FBT year, the FBT return and payment is due by 23 May 2022. This date applies as the statutory due date of 21 May falls on a weekend this year. The due date may differ if your business uses a tax agent. If your business does not have an FBT liability, and it is registered for FBT, you still need to inform the ATO. You can do this by completing a Notice of non-lodgment – Fringe benefits tax form by the date your return would have been due. Don’t forget to keep all records relating to the fringe benefits that have been provided, including how the taxable value of the benefits was calculated. Tip! If your business provides fringe benefits to employees (or their associates), your tax adviser can help you prepare your FBT return and work out if you have an FBT liability.

FBT thresholds and rates for 2022–23

Normally by the time the April edition of TaxWise is prepared, the ATO has released the various thresholds for the new FBT year (the FBT year commences on 1 April). But not this year. The 2022–23 FBT thresholds had not been released by the time we prepared this edition of TaxWise. However, we have used the rules specified in the FBT legislation to work out:
  • the statutory (or benchmark) interest rate (e.g. for loan fringe benefits) — this should be 4.52% for 2022–23 (the same as for 2021–22); and
  • the record keeping exemption (also relevant for eligibility to use the base rate method to calculate FBT) — this should be $9,181 for 2022–23 (up from $8,923 for 2021–22).
Taxation determinations will be issued specifying:
  • the cents per kilometre rates for motor vehicles (other than a car); and
  • the reasonable food and drink amounts for employees living away from home.
The car parking threshold for the 2022–23 FBT year can be calculated once the All Groups CPI number (weighted average of the eight capital cities) for March this year is available.

Key tax dates

Date Obligation
21 Apr 2022 March 2022 monthly BAS due
28 Apr 2022 March 2022 quarterly BAS due
  Pay March 2022 quarterly PAYG instalment
  Employee Superannuation Guarantee contributions due
23 May 2022* April 2022 monthly BAS due 2021–22 FBT return due
30 May 2022* March 2022 SG charge statement due (if required)
21 June 2022 May 2022 monthly BAS due
21 July 2022 June 2022 monthly BAS due
28 July 2022 June 2022 quarterly BAS due
  Pay June 2022 quarterly PAYG instalment
*These are the next business days as the due dates (21 and 28 May) fall on a Saturday.

DISCLAIMER
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

Small business updates

Welcome to 2022! January is traditionally a quiet time for many businesses, but the ATO hasn’t stopped providing useful information to help small business owners and workers navigate what is sure to be another busy year.

Here are the latest updates from the ATO.

ATO help for small businesses

The ATO has a range of support available for small businesses experiencing difficult situations, such as natural disasters, mental health challenges or financial hardship. The difficulties may be related to the COVID-19 pandemic.

Depending on your circumstances, the ATO may be able to:

▪ give you extra time to pay your tax;
▪ set up a payment plan tailored to your situation;
▪ re-issue tax returns, activity statements and notices of assessment (e.g. if you need to access government payments or concessions);
▪ help you reconstruct lost or damaged tax records;
▪ prioritise any refunds you are owed;
▪ remit penalties or interest charged during the time you have been affected.

Tip! Talk to your tax adviser if you are experiencing difficulties meeting your tax obligations. They can contact the ATO on your behalf.

Do your employees travel for work? Is it a travel allowance or LAFHA?

If you have employees who travel for work, the ATO has published new guidance (Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances, and living-away-from-home allowances) to help you determine whether to pay them a travel allowance or a living-away-from-home allowance (LAFHA).

It is necessary to determine whether that allowance is a travel allowance or a LAFHA as they are subject to different tax treatments.

What is a travel allowance?

A travel allowance is an allowance that an employer pays to an employee to cover losses or outgoings that:

▪ an employee incurs for travel away from their ordinary residence (either within or outside Australia) that they undertake in the course of their duties as an employee; and
▪ are incurred for accommodation or for food or drink expenses, or expenses that are incidental to the travel.

A travel allowance will need to be included as an amount in your employee’s assessable income and may need to have tax withheld from it under the PAYG withholding rules.

What is a LAHFA?

A LAFHA fringe benefit may arise if you pay an employee an allowance to cover additional expenses and any disadvantages suffered due to them being required to temporarily live away from their normal residence to perform their employment duties. Additional expenses are not considered deductible expenses.

A LAFHA payment you provide to your employee may be considered a LAFHA fringe benefit and will need to be reported in your annual fringe benefits tax (FBT) return.

Note! As a rule of thumb, the ATO will treat an allowance as a travel allowance if the period away from home does not exceed 21 days.

Cancelling your GST registration

You or your tax adviser must cancel your GST registration within 21 days of:

▪ selling or closing your business; or
▪ changing your business structure – this includes changing from a partnership to a company, unless the old entity carries on another business.

You can choose to cancel your GST registration if your GST turnover is below the threshold for compulsory registration ($75,000) unless you:

▪ are a taxi driver (including ride-sourcing or chauffeur services);
▪ represent an incapacitated entity who is registered or required to be registered for GST – for example, an individual who is bankrupt or a company in liquidation;
▪ are an Australian resident who acts as an agent for a non-resident that is registered (or required to be registered) for GST.

The ATO advises on its website that the date you choose to cancel your GST registration should be the last day you want to be registered. The ATO usually cancels your GST registration from the date you choose. However, you cannot:

▪ cancel your registration retrospectively if you are still operating on a GST-registered basis after the date you choose;
▪ continue to operate on a GST-registered basis after your cancellation date; and
▪ cancel if you have already lodged an activity statement for the period containing the date of cancellation.

You can cancel your GST registration:

▪ through Online services for business;
▪ through your registered tax adviser;
▪ by phone on 13 28 66 – between 8.00am and 6.00pm, Monday to Friday; or
▪ by completing the Application to cancel registration (NAT 2955) through online ordering and posting it to the ATO.

Note! GST adjustments to previous input tax credits claimed may be required on cancellation of your GST registration for certain acquisitions. Talk to your tax adviser for more information.

COVID-19, FBT, RATs and other acronyms!

You may provide your employees with benefits you do not usually provide as a result of the COVID-19 pandemic.

For example, you might provide non-cash benefits to employees for getting COVID-19 vaccinations. Other benefits could be provided to help employees work from home, to protect employees from COVID-19 or to help them recover from COVID-19.

FBT and RATs: Protecting employees from COVID-19

You may need to pay FBT on items you give your employees to help protect them from contracting COVID-19 while at work. These include rapid antigen tests (RATs), gloves, masks, sanitisers and antibacterial spray.

However, these benefits are exempt from FBT under the emergency assistance exemption if you provide them to employees who:

▪ have physical contact with – or are in close proximity to – customers or clients while carrying out their duties; or
▪ are involved in cleaning premises.

Examples of this type of work include:

▪ medical (such as doctors, nurses, dentists and allied health workers);
▪ cleaning;
▪ airline;
▪ hairdressing and beautician;
▪ retail, café and restaurant.

Minor benefits exemption

If your employees’ specific employment duties are not of the kind described above, the minor benefits exemption may apply (for minor, infrequent and irregular benefits under $300).

Providing COVID-19 tests to employees is exempt from FBT, if both of the following two conditions are met:

▪ Testing is carried out by a legally qualified medical practitioner or nurse; and
▪ Testing is available to all employees.

Note:

▪ If only some of your employees get COVID-19 tests, the tests are still exempt from FBT as long as they are offered to all employees.
▪ If the tests you provide or reimburse do not meet these requirements, you may need to pay FBT unless the minor benefits exemption or ‘otherwise deductible rule’ apply.

Working from home

You may have provided employees with items to allow them to work from home (or from another location) due to COVID-19.

Some items will usually be exempt from FBT if they are primarily used by your employees for work. The items include laptops, portable printers and other electronic devices.

The minor benefits exemption (for minor, infrequent and irregular benefits under $300) or the otherwise deductible rule may apply if you:

▪ allow your employee to use a monitor, mouse or keyboard they otherwise use in the workplace; or
▪ provide them with stationery or computer consumables or pay for their phone and internet access.

The ‘otherwise-deductible rule’ allows you to reduce the taxable value of benefits by the amount that your employee can claim as a once-only deduction (if they can claim a deduction).

Emergency health care

Benefits you provide by way of emergency health care are exempt from FBT if the health care is provided:

▪ by an employee of yours (or of a related company) – e.g. a company doctor;
▪ on your premises (or on the premises of a related company); or
▪ at or near an employee’s worksite.

If you pay for your employee’s ongoing medical or hospital expenses, FBT will apply. However, if you pay to transport your employee from the workplace to seek medical help, the cost is exempt from FBT.

Tip! Talk to your tax adviser about the FBT consequences of providing benefits, in particular non-cash benefits, to employees.

Rewarding staff for getting their COVID-19 vaccination

If you’ve provided incentives or rewards to your employees for getting their COVID-19 vaccination or booster dose, it’s important to understand what your tax and superannuation obligations are.

Incentives and rewards may include cash payments, paid leave, non-cash gifts, such as vouchers and gift cards, and transport to and from the vaccination site.

If you’ve provided your employees with a cash payment, you must:

▪ report the payment via Single Touch Payroll (STP) as part of the employee’s salary and wages;
▪ withhold tax from the payment amount under the PAYG withholding rules; and
▪ include the amount in your employee’s ordinary time earnings. This is for the purpose of determining your superannuation guarantee contributions for your employee.

If you’ve already made a cash payment and did not withhold tax, you should contact the ATO (or your tax adviser) straight away so that the ATO can consider the remission of any applicable failure-to-withhold penalties.

If you provide or pay for an employee’s transport to and/or from a place to get their COVID-19 vaccination, the travel is associated with work-related preventative health care and is exempt from FBT.

Do you employ working holiday makers?

In November last year, the High Court ruled in the ‘backpacker tax case’ (Addy v Commissioner of Taxation) that a British working holiday maker – Ms Addy – who was a tax resident of Australia, should be taxed at the rates that apply to residents and not at the ‘backpacker tax’ rates.

The resident rates include the tax-free threshold ($18,200) whereas the backpacker tax taxes the first $45,000 (or in Ms Addy’s case due to the timing of when she earned the income, the first $37,000) at 15%. The High Court’s decision reduced her tax bill.

The High Court reached that conclusion because of the terms of the double tax agreement (DTA) between Australia and the UK.

What does the High Court’s decision mean?

The decision means that a working holiday maker from the UK, or from Chile, Finland, Germany, Israel, Japan, Norway or Turkey (those countries have DTAs with Australia that are similar to the UK DTA), may be taxed the same as an Australian resident if they are an Australian resident for tax purposes (which is unlikely – Ms Addy’s case was somewhat unusual).

The ATO has advised employers that they need not do anything if they employ a working holiday maker from one of those eight countries. They should continue to withhold 15% tax from the working holiday maker’s pay – unless the ATO sends them a PAYG variation notice.

It will be up to the working holiday maker to claim a tax refund if they are entitled to one.

JobMaker Hiring Credit

There are four periods left for claiming the JobMaker Hiring Credit. The most recent period ended on 28 January 2022.

Note: Remember, you can only claim payments relating to employees hired up until 6 October 2021. Employees hired after that date are not eligible employees.

The scheme will end on 6 October 2022.

JobMaker period Single Touch Payroll (STP) reporting due date Claim period
7 January 2022 – 6 April 2022 28 July 2022 1 May 2022 – 31 July 2022
7 April 2022 – 6 July 2022 28 October 2022 1 August 2022 – 31 October 2022
7 July 2022 – 6 October 2022 28 January 2023 1 November 2022 – 31 January 2023

Do you have your Director identification number?

A Director identification number (Director ID) is a unique identifier that a director applies for once and keeps forever. All directors, including alternate directors, are required to have a Director ID.

Who needs a Director ID?

You will need a Director ID if you are a director or an alternate director (acting in that capacity) of:

▪ a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act). This includes the director of the corporate trustee of a self-managed superannuation fund (SMSF);
▪ an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

Applications for a Director ID are available at the new Australian Business Registry Services (ABRS) website. You’ll need a myGovID with a Standard or Strong identity strength to apply for a Director ID online.

Note! You will need to apply for your Director ID yourself to verify your identity. Your authorised tax, BAS or ASIC agent cannot apply for you.

When to apply?

When you must apply for a Director ID depends on the date you become (or became) a director.

Corporations Act directors

Date you became a director Date you must apply
On or before 31 October 2021 By 30 November 2022
Between 1 November 2021 and 4 April 2022 (and not already a director at close of 31 October 2021) Within 28 days of appointment
From 5 April 2022 (and not already a director at close of 31 October 2021) Before appointment

CATSI Act directors

Date you became a director Date you must apply
On or before 31 October 2022 By 30 November 2023
From 1 November 2022 (and not already a director at close of 31 October 2021) Before appointment

Tip! Although your tax adviser cannot apply for a Director ID on your behalf, they can guide you through the process.

Protect your business from cyber scams

The ATO has warned businesses that cybercriminals are targeting them with business email compromise scams.

Cybercriminals send fraudulent emails posing as a legitimate business contact or staff member. They typically request a change in bank account details for a deposit, wages or invoice payment. Victims then unknowingly send money to the cybercriminal.

These fraudulent emails may come from hacked email accounts, or cybercriminals might register domain names that are similar to legitimate companies. ACCC Scamwatch reported that more than $132 million was lost as a result of business email scams in 2019 alone.

The ATO advises that you can protect yourself, and the reputation of your business, by taking a few simple steps.

▪ Verify payment details: If you hold sensitive financial records, ensure you confirm the identity of anyone who requests changes to their information.
▪ Alert your staff: Train your employees to identify suspicious requests or emails that may link to fake websites built to capture passwords.
▪ Secure your email account: Use multi-factor authentication or, if this is not possible, a strong unique passphrase that would be difficult to hack.

Tax crime prosecution

From failing to lodge tax returns to submitting false work-related expenses, the ATO has made is clear that it will not tolerate any form of tax crime.

The ATO has reported a number of their latest prosecution outcomes.

Failure to provide documents

This case involved a well-known company, McDonald’s Australia.

On 26 July 2019, the ATO issued a formal notice requiring McDonald’s Australia to produce documents with a compliance date of 30 August 2019. However, the formal notice was not complied with, and the company was prosecuted.

McDonald’s Australia pleaded guilty to one count of failing to comply with an information gathering notice and they were subsequently convicted and fined. In delivering his sentence, the Magistrate commented that general deterrence was important for this kind of offending.

In its media release, the ATO said that instances where taxpayers have failed to comply with requests for information rarely result in criminal convictions, as most work with the ATO to meet their obligations. However, the ATO said it will initiate prosecution action where taxpayers hold back necessary information or documents.

Jail time for phoenix operators

Three men have been jailed for orchestrating an elaborate illegal phoenix operation that saw them pocket more than $4.6 million.

The men established multiple labour hire companies, providing workers to vineyards, meat processers, and fruit and vegetable growers across South Australia and in Queensland.

But despite charging their clients GST, the companies didn’t remit these funds to the ATO, either failing to lodge the required BAS or lodging them as ‘nil’. They also included PAYG withholding on the workers’ payslips, but never passed these funds on to the ATO.

Significant debts were raised after the companies were audited. But because the men were withdrawing funds from company accounts on a regular basis, there were insufficient funds to cover the debts.

To continue the operation, they would simply create new companies, often appointing straw directors to cover their tracks.

The architect and instigator of the scheme was sentenced to eight-years’ jail. The other two were sentenced to four- and five-years’ jail, respectively. The trio were also ordered to pay back the full amount.

False claims catch up with tradie

A former painter and decorator – Mr K – who made a series of false claims in relation to his income and deductions has been handed a criminal conviction.

When Mr K lodged his 2018 income tax return, he received a warning that his claims were unusually high compared to other people with a similar income and occupation, but he proceeded with them anyway.

Later that month, he took it a step further, increasing his tax withheld and work-related expenses by more than $5,000. He then made another five amendments, exaggerating his claims further and further each time to generate higher refunds.

The first few refunds were paid out, but the remaining four were stopped pending the result of an audit.

Mr K later admitted he didn’t have any documents to substantiate the claims. As such, everything except a $150 laundry deduction was disallowed.

Mr K was ordered to pay $16,560 including fines. In delivering the sentence, the Magistrate commented that these were very serious charges, adding that everyone is expected to be truthful when submitting returns.

Refund and identity fraud

A payroll officer – Mr R – who tried to obtain more than $180,000 by exploiting his colleagues’ identities has been sentenced to four years’ jail.

In his capacity as a payroll officer, Mr R had access to confidential employee information. He used this information to lodge 29 false income tax returns in the names of 28 different people. He tried to cover his tracks by using a false identity to withdraw the funds, but the ATO soon caught up with him.

In total, Mr R obtained $64,541 in fraudulent refunds. He attempted to get his hands on an additional $117,824, but the ATO stopped those refunds before they reached his bank accounts.

Corporate tax transparency report 2019–20

In December last year, the ATO published on its website the Corporate tax transparency report 2019–20. This is the 7th annual report on corporate tax transparency.

The report analyses aggregated data from the 2019–20 income tax returns of some of the largest corporations operating in Australia:

▪ Australian public and foreign-owned corporate tax entities with total income of $100 million or more;
▪ Australian-owned resident private companies with total income of $200 million or more;
▪ entities that have petroleum resource rent tax (PRRT) payable.

The ATO takes data from three labels in the tax return – total income, taxable income and tax payable. The data does not reflect any intervention or compliance work after lodgment of the returns. Nor does it provide additional detail on recipients of JobKeeper or other COVID-19 stimulus payments.

Data highlighted by the ATO includes:

▪ the data covers 2,370 entities (an increase of 59 on 2018–19);
▪ total income increased to $2,184.5 billion (an increase of 2.6%);
▪ taxable income increased to $208.4 billion (an increase of 0.1%).
▪ tax payable increased to $57.2 billion (an increase of 2%);
▪ foreign-owned entities account for 58.2% of the corporate transparency population in 2019–20 and 28.9% of tax payable;
▪ Australian public entities account for 21.6% of the population and 62.8% of tax payable;
▪ Australian private entities account for 20.2% of the population and nearly 8.3% of tax payable;
▪ tax payable in the corporate tax transparency population was again dominated by the mining, energy and water segment. The share of tax payable attributable to that segment was again higher than in previous years, primarily due to high iron ore prices; and
▪ 33.0% of the population did not pay any tax (782 entities).

What’s in the pipeline?

Federal election 2022

As we all know, there will be a Federal election in a few months. The ‘pundits’ seem to think it will be in May (it must be held by 21 May 2022).

If the pundits are right, Parliament is likely to sit only in February and March. Five days have been set aside for the House of Representatives and the Senate, and the House of Representatives only will sit for an additional five days – not much time to pass legislation!

Parliament is not likely to sit again once the election is called until 9 August 2022. This means that there are minimal opportunities for the Government to pass its legislative agenda before the election, and there can be ongoing uncertainty in relation to measures that have been announced but are not yet enacted.

The two major tax measures contained in bills that are still before Parliament are:

▪ the extension of temporary full expensing (for depreciating assets) by 12 months to 30 June 2023 – your business will be able to claim an outright deduction for the cost of depreciating assets you acquire (and install ready for use) before 1 July 2023 (this includes second-hand assets if your business has an aggregated turnover less than $50 million); and

▪ the extension of the loss carry back measure for companies to include the 2022–23 income year (a loss can be carried back as far as 2018–19).

Other tax-related measures before Parliament include:

▪ removing the superannuation guarantee $450 monthly income threshold;

▪ a change to the taxation of employee share scheme interests subject to deferred taxation; and

▪ making permanent some of the company administration related measures that were implemented to accommodate COVID-19 related lockdown restrictions – e.g. hybrid meetings and using technology in relation to company documents.

Cyclone Seroja grants

Qualifying grants made to small businesses and primary producers affected by Tropical Cyclone Seroja will be tax-free. The Government announced this measure in the 2021–22 Mid-Year Economic and Fiscal Outlook (MYEFO) last December.

Tip! Now is a good time to talk to your tax adviser if you think any upcoming measures might affect you.

Key tax dates

Date Obligation
21 Feb 2022 • January 2022 monthly BAS due
28 Feb 2022 • December 2021 quarterly BAS due
• Pay December 2021 quarterly instalment notice
• Annual GST return due (if no income tax return due)
• December 2021 SG charge statement due (if required due to an SG shortfall for the December 2021 quarter)
• SMSF 2020–21 annual return due (unless first return or late with return for previous financial year)
21 Mar 2022 • February 2022 monthly BAS due
21 Apr 2022 • March 2022 monthly BAS due
28 Apr 2022 • March 2022 quarterly BAS due
• Pay March 2022 quarterly instalment notice
• Employee superannuation guarantee contributions due
21 May 2022*    • April 2022 monthly BAS due
• Lodge and pay annual FBT return (if your business lodges one)
28 May 2022* • March 2022 SG charge statement due (if required due to an SG shortfall for the March 2022 quarter)

* Next business day applies instead

Director identification number: A unique way to i-DIN-tify yourself

You may have heard or read about the new Director identification number (commonly referred to as DIN or Director ID – these terms seem to be quite interchangeable!). So, what exactly is a DIN or Director ID, who needs one and when are you required to apply?

Some background

As part of the Digital Business Plan announced in the Federal Budget 2020–21, the Federal Government announced the full implementation of the Modernising Business Registers (MBR) Program. This program unifies the Australian Business Register and 31 business registers administered by ASIC into a single platform and introduces the DIN initiative.

The Australian Business Registry Services (ABRS) – a newly established function of the ATO – will administer the platform and deliver its initiatives.

What is the purpose of DINs?

DINs are intended to prevent the use of false and fraudulent director identities, and make it easier for external administrators and regulators to trace directors’ relationships with companies over time.

DINs also help detect and eliminate director involvement in illegal phoenixing activities. Illegal phoenixing activity is when a company is liquidated, wound up or abandoned to avoid paying its debts. A new company is then started to continue the same business activities without the debt.

What is a DIN?

A DIN is a unique 15-digit identifier given to a director who has verified their identity with the ABRS.

If you are a director, here are some things to note:

▪ You need to apply for your own DIN;
▪ It is free to apply and you will only need to apply once;
▪ You will have your DIN for life, even if you change companies, stop being a director or move countries.

Who needs a DIN?

You will need a DIN if you are a director or an alternate director (acting in that capacity) of:

  • a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act). This includes the director of the corporate trustee of a self-managed superannuation fund (SMSF);
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

Note! If you are a director, you must apply for your own DIN because you will need to verify your identity. No one else can apply on your behalf.

Who doesn’t need a DIN?

You don’t need a DIN if you are:

  • a company secretary but not a director;
  • running a business as a sole trader or partnership;
  • referred to as a ‘director’ in your job title but have not been appointed as a director under the Corporations Act or the CATSI Act;
  • a director of a registered charity with an organisation type that is not registered with ASIC to operate throughout Australia;
  • an officer of an unincorporated association, cooperative or incorporated association established under state or territory legislation, unless the organisation is also a registered Australian body.
When and how to apply

You will be able to apply for a DIN from November 2021 on the new ABRS website. The easiest way to apply for a DIN is to do so electronically using the myGovID app (this is different to the myGov app), but telephone and paper alternatives will also be available.

When you must apply for a DIN depends on the date you become (or became) a director.

Corporations Act directors

Date you became a director Date you must apply
On or before 31 October 2021 By 30 November 2022
Between 1 November 2021 and 4 April 2022
Within 28 days of appointment
From 5 April 2022 Before appointment


CATSI Act directors

Date you became a director Date you must apply
On or before 31 October 2022 By 30 November 2023
From 1 November 2022 Before appointment

Tip! Although your tax adviser cannot apply for a DIN on your behalf, they can guide you through the process.

Single Touch Payroll Phase 2 starts 1 January 2022

If your business has employees, you are probably using Single Touch Payroll (STP) to report payroll and superannuation information to the ATO.

Note! Certain employers can apply for an exemption from using STP, for example, small employers (1-19 employees) with no or low digital capacity or no or unreliable internet service.

STP Phase 2: Expansion of STP

The Government announced in the Federal Budget 2019–20 that STP would be expanded to include additional information. This expansion is known as STP Phase 2.

STP Phase 2 reduces the reporting burden for employers who need to report information about their employees to multiple government agencies. It will also help Services Australia’s customers, who may be your employees, get the right payment at the right time.

The mandatory start date for Phase 2 reporting is 1 January 2022.

What does STP Phase 2 mean for your business?

STP Phase 2 reporting means changes to the way you report:

  • Amounts paid to staff – Instead of reporting a single gross amount, you’ll separately show items such as overtime, paid leave, bonuses and commissions;
  • Income types – You’ll include information such as whether a payment is regular salary and wages or income for working holiday makers;
  • Employment conditions – You’ll provide additional information such as whether your employee is full-time, part-time or casual and if they leave, the reason they stop working with you;
  • Employees’ TFN declarations – You’ll no longer have to send declarations to the ATO. The employee will provide it to you, and you’ll need to keep it with your employee records.

Note! The ATO has said penalties will not be imposed for genuine mistakes for the first year of STP Phase 2.

What if I need more time to transition to STP Phase 2?

STP Phase 2 is due to start on 1 January 2022.

The ATO has advised that their approach to STP Phase 2 will be flexible, reasonable and pragmatic based on your business readiness and/or individual circumstances.

Digital service providers (DSPs) who need more time to make changes and update their solutions to support STP Phase 2 can apply for a deferral for their customers. If your DSP has a deferral, they will let you know. If you need more time in addition to your DSP’s deferral, you must apply.

Tip!

  • You should follow your DSP’s instructions to upgrade your solution. Your DSP will tell you if you need to take any other steps, such as re-mapping pay codes.
  • Your tax adviser can help you prepare for STP Phase 2.

Note!

  • If your solution is ready for 1 January 2022, you should start STP Phase 2 reporting.
  • You will be considered to be reporting on time if you start STP Phase 2 before 1 March 2022. You won’t need to apply for more time.

Making a Jobmaker Hiring Credit claim

Don’t forget that if you hired a new employee aged 35 or younger between 7 October 2020 and 6 October 2021, you may be able to claim the JobMaker Hiring Credit.

To receive JobMaker Hiring Credit payments, you must:

  • hold an active Australian business number (ABN);
  • be registered for pay as you go (PAYG) withholding;
  • be up to date with lodging your income tax and GST returns for the two years up to the end of the JobMaker period for which you are claiming.

You may be able to get payments of:

▪ up to $200 a week – for each eligible employee aged 16 to 29 years old;
▪ up to $100 a week – for each eligible employee aged 30 to 35 years old.

Note! JobMaker Hiring Credit payments are made every three months in arrears.

When to claim JobMaker

You make a claim for each JobMaker period you are eligible.

You can do this through ATO online services, the Business Portal or your registered tax or BAS agent.

Claims open on the first day of the month after the JobMaker period ends. They remain open for three months.

The table below shows various key dates.

JobMaker period STP reporting due date Claim period
7 July 2021 – 6 October 2021 28 January 2022 1 November 2021 – 31 January 2022
7 October 2021 – 6 January 2022 27 April 2022 1 February 2022 – 30 April 2022
7 January 2022 – 6 April 2022 28 July 2022 1 May 2022 – 31 July 2022
7 April 2022 – 6 July 2022 28 October 2022 1 August 2022 – 31 October 2022
7 July 2022 – 6 October 2022 28 January 2023 1 November 2022 – 31 January 2023


Tip! Talk to your tax adviser if you have any questions about the JobMaker hiring credit scheme and how to claim it.

JobKeeper statistics

There has been a fair amount of discussion in the media recently about the extent to which JobKeeper was ‘overpaid’. Treasury released a report last month, titled Insights from the first six months of JobKeeper, that throws some light on that issue.

This report presents Treasury’s analysis on the first six months of the JobKeeper Payment (to 27 September 2020), reflecting on the design and initial impacts of JobKeeper as a key element of the Government’s macroeconomic response to COVID-19.

The report is divided into five sections:

  • Section 1 outlines the development of JobKeeper, including the economic and health context in which JobKeeper was developed, JobKeeper design features, and changes made to the policy over time;
  • Section 2 provides updated summary program data on JobKeeper recipients;
  • Section 3 provides analysis on the economic effect of JobKeeper;
  • Section 4 discusses analysis on JobKeeper and business-level performance;
  • Section 5 outlines future evaluation and audit activities planned for JobKeeper.

What are some of the more interesting statistics revealed by the report?

  • 99% of entities receiving JobKeeper had a turnover of less than $50 million or were not-for-profits, and over 80% of JobKeeper payments went to these entities.
  • Large businesses with a turnover of more than $250 million made up 0.2% of JobKeeper entities and received around 11% of payments.
  • Payments totalling $11.4 billion and $15.6 billion in the June and September 2020 quarters were paid to businesses whose turnover did not decline by 30% (the threshold for businesses with $1 billion or less in aggregated annual turnover) or 50% (the threshold for businesses with more than $1 billion in turnover) compared with a year earlier. JobKeeper payments to these businesses covered, on average, around 1.45 million individuals.
  • Payments of around $6.8 billion and $6.4 billion in the June and September 2020 quarters were paid to businesses whose turnover fell, but not by 30% or 50% (as appropriate).
  • Payments of around $4.6 billion and $9.2 billion in the June and September 2020 quarters were paid to businesses with a turnover increase compared with a year earlier.
  • Estimates suggest that at least $4.9 billion of the $13.8 billion paid to businesses with higher turnover through the year went to growing or changing businesses.
  • Of the businesses ($1 billion or less in aggregated annual turnover) that did not experience the minimum 30% decline in turnover, 99% were small (having a turnover of less than $50 million), and $22.5 billion in payments went to these businesses. These businesses had, on average, around four employees.
  • Small businesses accounted for $12.1 billion (88%) of JobKeeper payments that were made to businesses that had increased turnover.

Fuel tax credits: Getting your claim right

Fuel tax credits provide businesses with a credit for the fuel tax (excise or customs duty) that’s included in the price of fuel used in:

  • machinery
  • plant and equipment
  • heavy vehicles
  • light vehicles travelling off public roads or on private roads.

The amount depends on when you acquire the fuel, what fuel you use and the activity you use it in. Fuel tax credits rates also change regularly so it’s important to check the rates each time you prepare your business activity statement (BAS).

Some fuels and activities are not eligible, including fuel you use in light vehicles of 4.5 tonnes gross vehicle mass (GVM) or less, travelling on public roads.

The ATO states that the easiest and safest way to get fuel tax credit claims right is to use:

  • the simplified methods – such as the basic method for heavy vehicles, which provides certainty and protection for claims less than $10,000 each year;
  • a global positioning system (GPS) or telematics technology product that has a current product ruling. This provides certainty, regardless of the size of the claim, provided the product is used as set out in the product ruling.

Tip! Your tax adviser can advise whether you are eligible to claim fuel tax credits and can help you claim credits.

Small businesses tax concessions: The aggregated turnover test

The small business entity (SBE) aggregated turnover test is used to determine a business’ eligibility for a range of tax concessions. The test requires the annual turnovers of the business and its affiliates and any entities connected with it (if any) to be aggregated.

However, the applicable turnover threshold varies depending on the particular tax concession. For example:

Tax concession Aggregated turnover threshold (less than)
Small business CGT concessions $2 million*
Simplified depreciation rules $10 million
Simplified trading stock rules $50 million
Lower corporate tax rate (for base rate entities) $50 million
Temporary full expensing of depreciating assets $5 billion
Company loss carry back $5 billion


* The $6 million maximum net asset value test is an alternative test to the $2 million turnover test.

The ATO recently issued one Taxation Determination, three Draft Taxation Determinations and an Addendum to a Law Companion Ruling discussing aspects of the SBE aggregated turnover test.

According to the ATO, the relevant income year for calculating aggregated turnover is the income year of the business claiming the tax concession (ie the taxpayer) – thus only the annual turnovers of entities that are affiliates or entities connected with the taxpayer for the period that matches the taxpayer’s income year are included.

Example!

If the taxpayer has a 30 June year end while an entity connected with the taxpayer has a 31 December year end, the annual turnover of the entity connected with the taxpayer will have to be calculated as if it were a June balancer.

As regards to qualifying for the 25% corporate tax rate, the relevant year for calculating a company’s aggregated turnover is the income year in which its status as a base rate entity is being determined. The entity’s aggregated turnover for any earlier income year is irrelevant for this purpose. However, for franking purposes, the aggregated turnover for the income year immediately prior to the year in which the tax rate is being determined is instead used to determine the company’s franking rate.

Tip! Talk to your tax adviser about the tax concessions available to your business.

Are you operating your business through a ‘family trust’?

Have you considered operating your business through a ‘family trust’ (if you don’t already do so)?

What is a ‘family trust’?

A ‘family trust’ for tax purposes is one whose trustee has made a valid family trust election (FTE). It is not sufficient to simply include the words ‘family trust’ in the trust’s name.

A valid FTE can only be made if the family control test is satisfied. This test means that only a trust that is not widely held and is effectively controlled by a specific family can make a valid FTE.

An FTE must be in writing in the approved form. Once the election has been made, it cannot be varied or revoked except in limited circumstances.

The ATO has listed on its website the 5 main reasons to become a family trust.

Five reasons to become a family trust

1. Trust loss measures

A family trust only has to satisfy one test (the income injection test) to utilise tax losses or debt deductions, and it becomes easier to pass the income injection test. Trusts that have not made an FTE have to satisfy additional tests and it is more difficult to satisfy the income injection test.

2. Company loss tracing concession

Broadly, if a company has a non-fixed trust as a shareholder and the trust is a family trust, a single notional entity that is a person will be taken to own the interests. This means that there is no need to trace past the family trust. This makes it easier for the company to recoup its tax losses.

3. Access to franking credits

A concession makes it easier for franking credits to pass through to beneficiaries of a family trust where the trust has received franked distributions from a company or another trust.

4. Trustee beneficiary reporting rules

Generally, these rules require the trustee of a closely held trust to advise the ATO of certain details about each beneficiary of the trust that is also the trustee of another trust (a trustee beneficiary). Family trusts are excluded from having to comply with the rules (although trustee beneficiary non-disclosure tax may be payable in certain circumstances).

5. Small business restructure roll-over

Small business entities can restructure their business by moving active assets into, or out of, a trust, company, partnership, or a combination, without adverse capital gains tax (CGT) consequences. This is called CGT roll-over relief. One of the requirements to be met to access the CGT roll-over relief is that there is no material change in the ultimate economic ownership of an asset. Special rules apply in this context to family trusts.

What are the pitfalls of a family trust?

  • Family trust distribution tax (FTDT) is imposed when distributions are made outside the family group. The rate is 47%. The meaning of ‘distribution’ for this purpose is very broad and includes the transfer of property, the use of an asset and debt forgiveness.
  • The trustee of a family trust will be liable to pay trustee beneficiary non-disclosure tax if it makes what is called a ‘circular trust distribution’. The rate is 47%.

Tip! Talk to your tax adviser about operating a business through a family trust.

Superannuation guarantee penalties: What happens if your business doesn’t meet its employer obligations

If your business does not meet its superannuation guarantee (SG) obligations, it may have to pay additional penalties or charges on top of the superannuation guarantee charge (SGC).

Note! SG contributions are payable (that is, they must be received by the superannuation fund) by the 28th day of the month following the end of a quarter. If this is not done, the SGC is payable, and an SG statement must be lodged with the ATO, by the 28th day of the second month following the end of a quarter.

What are the penalties?

The ATO recently published on its website an overview of the additional penalties and charges.

  • Failure to provide an SG statement when required – The maximum penalty is 200% of the SGC. This penalty cannot be remitted to less than 100% if the SG shortfall relates to a quarter in the period from 1 July 1992 to 31 March 2018.
  • False or misleading statement – If your business pays less of the SGC than it should because it made a false or misleading statement, the ATO can impose an administrative penalty. The base penalty amount can be up to 75% of the shortfall, depending on the particular circumstances.
  • Avoidance – If your business made arrangements to avoid its SG obligations, an additional penalty may be imposed (on top of the SGC avoided).
  • Director penalties – If you are a director of a company, you need to make sure the company pays the SGC in full by the due date. If it does not, you’ll be liable for a penalty equal to the unpaid amount. The penalty is reduced if the company pays the outstanding amount at any time. Under some conditions, it may be reduced if the company goes into voluntary administration or liquidation.
  • General interest charge (GIC) – This is applied if an SGC assessment is made and the SGC is not paid by the due date. The GIC is calculated on a daily compounding basis.
  • Choice shortfall – If your business does not comply with the choice of fund obligations, it could receive a ‘choice shortfall’ penalty. The penalty increases the SGC.
  • Failing to keep adequate records – The maximum fine for an individual convicted of failing to keep records is 30 penalty units (a penalty unit is $222 where the infringement occurred on or after 1 July 2020).
  • Failing to provide employee’s TFN to their superannuation fund – a penalty (10 penalty units) may be imposed if an eligible employee has provided a TFN to your business and your business does not provide it to the employee’s superannuation fund or retirement savings account within the required time.

Tip! Discuss your business’ SG and choice of fund obligations with your tax adviser to make sure the business is fully compliant.

New stapled superannuation fund rules started on 1 November 2021: What employers need to do

From 1 November 2021, if you have new employees start and they don’t choose a superannuation fund, you may have an extra step to take to comply with the choice of fund rules. You may need to request their ‘stapled superannuation fund’ details from the ATO.

If you are an employer, here is everything you need to know about the new rules. The ATO has also published a handy Reference guide for employers, which contains a summary of the new rules.

What is a stapled superannuation fund?

A stapled superannuation fund is an existing superannuation account that is linked, or ‘stapled’, to an individual employee so it follows them as they change jobs. This aims to reduce account fees and avoid new superannuation accounts being opened every time an employee starts a new job.

Note! If you don’t meet your choice of superannuation fund obligations, additional penalties may apply.

When to request stapled superannuation fund details?

The new stapled superannuation fund rules commenced on 1 November 2021.

You will need to request stapled superannuation fund details for new employees who start on or after 1 November 2021, when:

  • you need to make superannuation guarantee (SG) payments for that employee;
  • they are eligible to choose a superannuation fund, but don’t. This includes contractors who you pay mainly for their labour and who are employees for SG purposes.

You may need to request stapled superannuation fund details for some employees who aren’t eligible to choose their own superannuation fund. This includes employees who are:

  • temporary residents
  • covered by an enterprise agreement or workplace determination made before 1 January 2021.

Note!

  • If your new employee chooses a superannuation account they already have, or chooses your default fund, you do not need to request stapled superannuation fund details for them.
  • Once an employee tells you their choice of superannuation fund, you have 2 months to start paying contributions into that fund.

Further information! To better understand the due dates for payments of SG contributions, speak to your tax adviser.

Things to do before you request stapled superannuation fund details

Before you request stapled superannuation fund details from the ATO, you will need to:

  • check that your authorised representatives in ATO online services have the Employee Commencement Form permission so your payroll and onboarding staff can make stapled superannuation fund requests;
  • establish an employment relationship link with your new employee by offering all eligible employees a choice of superannuation fund and submitting a tax file number (TFN) declaration or Single Touch Payroll (STP) pay event.

Note! There may be circumstances where you won’t have an employment relationship recorded in ATO systems before you need to request stapled superannuation fund details.

How to request stapled superannuation fund details

To request a stapled superannuation fund, you (or your authorised) representative, need to:

  1. Log into ATO online services
  2. Navigate to the ‘Employee superannuation account’ screen via the ‘Employees’ menu and select ‘Request’ to open the form
  3. Enter your employee’s details
  4. Read and click the declaration to sign it.
  5. Submit your request.

Tip! There is no limit to the number of requests you can make. However, a bulk request form is available when requesting large numbers of employees.

What happens once the request is made?

To avoid additional penalties, you must pay SG contributions to a stapled superannuation fund if:

  • you have requested stapled superannuation fund details for your employee; and
  • the ATO has provided these to you.

There may be circumstnaces where you won’t have an employment relationship recorded in ATO systems before you need to request stapled superannuation fund details.

If the stapled superannuation fund account provided by the ATO:

  • can’t accept contributions for the employee, you should make another request for the employee’s stapled superannuation fund via ATO online services;
  • is a self-managed superannuation fund (SMSF), you should get the electronic services address and bank account details from your employee.

Tip!

To avoid the choice shortfall penalty, make sure:

  • you request the stapled superannuation fund details for your employee as soon as possible if they have not provided you with their choice of fund;
  • you pay the employee’s full SG contribution to the stapled superannuation fund the ATO returns to you in the request;
  • you pay the SG contribution to the stapled superannuation fund by the quarterly due date.

What has the ATO been up to?

Lodge online to save time

Are you still lodging your business activity statement (BAS) on paper? The ATO wants you to save time and switch to online.

The ATO states that lodging online is quick, easy and secure. You:

▪ can view your account and lodge when convenient;
▪ may receive an extra two weeks to lodge and pay;
▪ can review and check your BAS before lodging to help you correct errors
▪ may receive quicker refunds.

In addition, when you lodge online and provide your email address, the ATO will send you a lodgment reminder 3 weeks before your due date.

Options to lodge online include:

▪ Online services for individuals and sole traders (accessed through myGov) – allows you to manage your tax and superannuation in one place.
▪ Online services for business – a secure ATO website to manage your business tax affairs.
▪ SBR-enabled software – allows secure lodgment from financial, accounting or payroll software, often integrated with tailored business software.

Tip! Remember your BAS can also be lodged through a registered tax or BAS agent.

Private company directors: Lodge or review your returns

The ATO has advised private company directors to speak to a trusted adviser and lodge any overdue tax returns or correct any returns that did not report all of their income.

By matching data across a range of sources, the ATO has noticed that some directors of private companies received income but haven’t lodged a tax return or reported all their income in a tax return. The ATO will soon be commencing reviews on lodgment and correct reporting for those company directors and their connected entities.

If a company director voluntary discloses unreported income to the ATO, they can generally expect a reduction in the penalties that would normally apply.

Advising businesses through early engagement

The ATO recommends that you engage early with them to avoid mistakes if entering into complex tax and superannuation arrangements. The ATO will work with you and your tax adviser to:

▪ explore your tax arrangement;
▪ provide advice to help you arrive at the right outcome; and
▪ request a draft application for a ruling (if relevant).

Shareholder loans – minimum yearly repayments

If you have a loan from a private company you control (or from an interposed entity) and there is a complying loan agreement in place, you must make the minimum yearly repayment by the end of the company’s income year. Failure to do so may result in your being taken to have received an unfranked dividend.

The ATO realises that, as a result of the COVID-19 situation, some borrowers are facing difficult circumstances beyond their control. If you are in that situation, and you could not make the minimum repayment for 2020–21 by the due date (30 June 2021 in most cases), the ATO will look favourably on a request to extend the repayment period (up to 30 June 2022).

You can request an extension by completing a streamlined online application form.

A similar extension was also available for the 2019–20 minimum yearly repayment. The shortfall for that year had to be made up by 30 June 2021.

Ban on electronic sales suppression tools

Businesses must keep and retain accurate records to meet their tax, superannuation and employer obligations.

While most people try to do the right thing, a small percentage are deliberately under-reporting their income. One of the ways they have been doing this is by using electronic sales suppression tools (ESSTs).

What is an ESST?

ESSTs are designed to interfere with electronic sales records; that is, they can falsify, manipulate, hide, obfuscate, destroy or prevent the creation of electronic sales records, often without an audit trail showing the interference.

ESSTs can take various forms and are constantly evolving, but some examples include:

  • software that deletes or modifies point of sale (POS) records;
  • storage devices (such as back-up drives) containing software that deletes or modifies records;
  • POS devices with software that deletes or modifies records.

Penalties set to kick in for using ESSTs

Did you know that it is now illegal to manufacture, supply or possess an ESST, or to incorrectly keep or make tax records using an ESST? Penalties will apply for these activities, as well as aiding or abetting another to engage in these activities.

Instead of prosecuting an offender, the ATO may impose an administrative penalty. The ATO has now released draft guidelines (PS LA 2021/D2) on the application and remission of administrative penalties for ESSTs.

The draft guidelines state that it would not generally be appropriate to remit an administrative penalty if the offender has deliberately destroyed or omitted records within the period during which they were required to be kept.

The draft lists a range of factors that may be taken into account in deciding whether to remit a penalty, including:

  • whether the offender expected any benefit as a result of using the ESST;
  • the offender’s compliance history;
  • whether the offender took any remedial action and whether there was cooperation with the ATO’s investigations; and
  • whether the offender is a repeat offender.

Note! If you discover an entity has possession of or is using an ESST, in addition to considering if a penalty applies, you should work with the entity to ensure that the ESST is removed so the entity will no longer engage in conduct that can attract a penalty.

Key tax dates

Date Obligation
21 Nov 2021* October monthly BAS due
28 Nov 2021* Lodge and pay September quarterly SGC (if required)
1 Dec 2021 Full self assessment companies – pay 2020–21 income tax
21 Dec 2021 Non-full self assessment companies – lodge 2020–21 tax return
21 Jan 2022 Lodge and pay November monthly BAS
28 Jan 2022 Lodge and pay December monthly BAS
28 Jan 2022 Superannuation guarantee payment due date for December quarter
21 Feb 2022 Closely held trust – lodge December quarterly TFN report
28 Feb 2022 Lodge and pay January monthly BAS
Lodge and pay December quarterly BAS
Pay second quarterly PAYG instalment for 2021–22
Lodge annual GST return (if no tax return due)
Lodge and pay December quarterly SGC (if required)
Lodge and pay SMSF annual return for new SMSFs (unless otherwise advised)


* These dates fall on a Sunday, so the due date is the next business day.

DISCLAIMER
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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