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?
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.
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.
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.
You will need a DIN if you are a director or an alternate director (acting in that capacity) of:
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.
You don’t need a DIN if you are:
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
CATSI Act directors
Tip! Although your tax adviser cannot apply for a DIN on your behalf, they can guide you through the process.
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.
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.
STP Phase 2 reporting means changes to the way you report:
Note! The ATO has said penalties will not be imposed for genuine mistakes for the first year of 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.
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:
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.
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.
Tip! Talk to your tax adviser if you have any questions about the JobMaker hiring credit scheme and how to claim it.
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:
What are some of the more interesting statistics revealed by the report?
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:
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:
Tip! Your tax adviser can advise whether you are eligible to claim fuel tax credits and can help you claim credits.
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:
* 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.
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.
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.
Tip! Talk to your tax adviser about operating a business through a family trust.
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.
Tip! Discuss your business’ SG and choice of fund obligations with your tax adviser to make sure the business is fully compliant.
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.
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 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:
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:
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:
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:
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:
To avoid the choice shortfall penalty, make sure:
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.
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:
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:
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
* These dates fall on a Sunday, so the due date is the next business day.
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.