Reportable Tax position (RTP) schedule is a schedule of the company income tax return which requires large companies to disclose their most contestable and material tax positions.

The RTP disclosure requirement has been significantly broadened for income years ending on or after 30 June 2018. It includes companies in public and international economic groups with a turnover greater than AUD 250 million and they are notified by the Australian Taxation Office (ATO). These companies are required to lodge an RTP schedule. RTP regime is expected to cover approximately 1,100 taxpayers.

ATO use schedule disclosures to:

• tailor their engagement where they focus and work with taxpayers on complex high-risk arrangements
• identify areas where they need to provide further clarification / certainty on the correct treatment of transactions and complex high-risk tax arrangements
• better understand tax risk for taxpayers, industries and the large market
• improve dialogue with large businesses about their risk profile and corporate governance
• allow taxpayers to make informed decisions about positions they have taken or are considering taking that are considered to be high risk arrangements.

A reportable tax position fall into three (3) different types of categories:

• Category A: this is a position that is about as likely to be correct as incorrect, or less likely to be correct than incorrect. This does not include a position where you have exercised reasonable care and concluded in the circumstances, having regard to relevant authorities, that what is argued for is more likely to be correct than incorrect.

 

• Category B: this is a position in respect of which uncertainty about taxes payable or recoverable is recognised and/or disclosed in the taxpayer’s financial statements or a related party’s financial statements. Uncertainty about taxes payable or recoverable exists where there is a difference between your position and the measurement and/or recognition of the taxes payable or recoverable in respect of that position as adopted in your or a related party’s financial statements. A Category B RTP is material if this difference is equal to or exceeds your materiality amount. Taxes payable or recoverable exist where an income tax-related provision, current tax liability (asset) and/or contingent liability (asset) is recognised and/or disclosed in accordance with accounting principles in your or a related party’s financial statements.

 

• Category C: this is a reportable arrangement. You must disclose a Category C RTP if you answer yes to any of the questions covered by Category C. Note, there are no materiality thresholds for Category C RTPs. Unless otherwise specified, the questions refer to the arrangements and/or transactions taking place in the income year covered by the tax return that your RTP schedule accompanies. RTP Category C is updated throughout the year. We recommend you use the electronic version of this document to ensure that you are reporting on the most up to date list of RTP Category C questions.

 

ATO have enabled RTP schedule lodgement through the tax agent and business portals. Printing and signing of RTP schedule is not needed when lodge through the portal and a receipt is provided once RTP schedule is lodge.

A webinar on RTP schedule was also prepared by ATO. It provides a concise explanation on how to complete and lodge it. You may click here to access it.

Contact Solve Accountants located on the Gold Coast, Qld Australia if you need help with your RTP disclosure requirements

Source: Australian Taxation Office

The government has announced a range of reforms to crack down on illegal phoenix activity. The Phoenix Taskforce will comprise over 20 State, Territory and Federal government agencies, including the Australian Taxation Office (ATO), Department of Employment, Australian Securities & Investments Commission (ASIC), and the Fair Work Ombudsman. Sophisticated data matching tools have been developed to identify, manage and monitor suspected illegal phoenix operators.

Illegal phoenix activity is when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts. Illegal phoenix activity poses substantial risks to employee entitlements, revenue, and to the integrity of the corporate system. It imposes an unfair burden on honest Australians and businesses and is estimated to cost the Australian economy over $3 billion a year.

The reforms include the proposed introduction of a Director Identification Number (DIN) and a range of other measures to deter and penalise phoenix activity. It is proposed that the DIN will allow authorities to track the activities of individual directors through various government databases and map their relationships with other directors and companies.

As well as the DINs, the Government will consult on a range of other possible measures to combat phoenix operators, including:

• introducing specific phoenixing offences
• preventing directors from backdating resignation to avoid personal liability or from resigning and leaving a company with no directors
• making directors personally liable for GST liabilities as part of extended director penalty provisions
• extending the penalties that apply to tax avoidance scheme promoters to advisers assisting phoenix operators
• increasing the powers of the ATO to recover a security deposit from suspected phoenix operators

The government will also look at how to identify high-risk individuals, who in turn will be subject to early intervention tools and new preventative measures.

Source: Australian Taxation Office

Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.

 

The Australian Taxation Office (ATO) has outlined the behaviours of privately-owned groups that attract its attention in relation to a wide range of tax issues, including Capital Gains Tax (CGT), private company profit extraction (including Division 7A), consolidation, and Fringe Benefits Tax (FBT). The ATO will focus on a number of tax aspects of entities within this sector such as exaggerated capital losses, incorrect use of carried forward tax losses and a failure to have complying Div 7A loans in place.

The ATO has broadly stated that the following characteristics and behaviours may attract their attention:

– economic or tax performance that is not comparable to businesses that are similar

– low transparency relating to your tax affairs

– unusual, one-off or large transactions, including shifting or transfer of wealth

– historical aggressive tax planning

– tax outcomes that are inconsistent with the tax law intent

– taking controversial interpretations or choosing non-complicance of tax law

– if your after-tax income does not support your personal lifestyle

– treatment of private assets as business assets

– accessing business assets for private tax-free use

– poor risk-management and governance systems

In addition to the above, the ATO has stated that there are specific characteristics and behaviours in relation to the following tax issues that can attract their attention:

Capital Gains Tax

The ATO will focus on capital losses, particularly where those losses appear to be exaggerated, fabricated or misclassified to ultimately reduce taxable income. In particular, large capital losses attract the attention of the ATO, so it is important to be able to substantiate the capital loss reported. The ATO will also focus on CGT reporting and payment obligations resulting from a disposal of a capital asset. They are particularly concerned where the amount of net capital gain reported is less than what it should be based on their estimates using external data matching sources.

Private company profit extraction (including Division 7A)

The ATO will focus on arrangements designed to extract profits from private companies while avoiding tax on the amounts being distributed. This may include the application of Division 7A deemed dividend rules or the potential application of anti-avoidance rules. In particular, the following behaviours and characteristics may attract the ATO’s attention:

– amounts are not repaid after being taken from a company

– no complying loan agreement has been put in place

– yearly minimum repayments not made on a loan

– the company income tax return does not declare interest income

– a company asset for private use

– attempts to avoid application of Division 7A to transactions between a private company and a shareholder or their associate

Consolidation

Consolidation allows wholly-owned corporate groups to operate as a single entity for income tax purposes.

The ATO will focus on the correct implementation of the following consolidation tax rules:

– available fraction rules

– cost-setting rules

– consolidation exits

– consolidation membership rules

Fringe Benefits Tax

The ATO has stated that it will focus on the correct application of the following FBT rules:

– FBT motor vehicle rules, particularly where an employer-provided motor vehicle is used or available for use for the private travel of employees

– FBT employee contribution rules, particularly where employee contributions that have been paid by an employee to an employer are declared in both the FBT return and the employer’s income tax return.

– FBT employer rebate rules, particularly focusing on the eligibility of the employer to claim a FBT rebate

– FBT living-away-from-home allowance rules, particularly focusing on employers applying the new tax laws correctly.

Source: Australian Taxation Office

Solve Accountants are Gold Coast Business Accountants  and here to help you achieve your goals. If you have any questions or need help please contact us now.

The end of financial year is upon us, which imposes quite a few business responsibilities. Wrapping up the accounts for end of Financial Year can be a messy task, with lots of reports to generate and deadlines to be met. With this in mind, it’s important to not forget about your employees.

Here is a handy checklist to help employers meet the payroll obligations for 30 June.

PAYG payment summaries are to be issued to employees before 14th July and to be lodged with ATO before 14th August. All records must be kept for a minimum period of 7 years to support declarations. ATO forms to lodge are:

• PAYG payment summary statement- (form ID) NAT 3447-02.2014
• PAYG payment summary – individual non-business form- (form ID) NAT 0046-02.2014 (one form required for each individual employee)

Throughout employment, ensure your employees’ details are up to date and correct for accurate information sharing with ATO. Details needed:

• First and Surname (and any name changes)
• Tax File Number (TFN)
• Current Residential Address
• Date of Birth (DOB)

Employers are to report their employee’s gross earnings and tax withheld. Also any FBT and RESC payments.

FBT (Fringe Benefits Tax) – Any amounts in excess of $2000 are to be reported. Fringe benefits include:

• Provision of work vehicle that the employee also uses for private purposes
• Loans provided to employee at zero or low interest rates
• Supplementary income for unrelated employment costs of goods like health insurance
• Recreational or entertainment costs

RESC (any superannuation contribution that does not fall under the compulsory super guarantee). This can include:

• Salary Sacrifice
• Additional amounts (eg bonuses) that are paid directly into employee’s superannuation account
• Other agreements that are over the compulsory superannuation guarantee rate of 9.5%

It’s important that payroll information is accurate and it can be helpful to have a bookkeeper or payroll administrator to assist you with the regular processing. It is a crucial aspect to ensure accurate reports for end of financial year.

Solve Accountants are Gold Coast Business Accountants  and here to help you achieve your goals. If you have any questions or need help please contact us now.

FBT Exemption on Devices

It was announced in 2015–2016 Budget that the Government will give a FBT exemption from 1 Apr 2016 for small business with annual aggregated turnover that is less than $2 million which provide staff/employees with over one work-related, qualifying portable electronic device, even if the devices have similar functions.

Currently, FBT exemptions can only apply to multiple work-related portable electronic devices only when the devices perform different functions.

Removing the tax exemption restriction that is provided only for one work-related portable electronic device of each type, will remove any confusion where there functional overlap between products, like a laptop and a tablet.

This measure is now law and applies to all electronic portable devices provided to staff/employees of small business from 1 Apr 2016. If multiple portable electronic devices that are used primarily for work purposes were provided to staff/employees before 1 Apr 2016 and the devices functions are substantially identical then an exemption is available for one device only.

Employers can purchase the portable electronic devices at anytime, but cannot provide them to staff/employees until 1 Apr 2016 or they are liable for the FBT.

Contact Solve Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.

The government has announced that, in an endeavour to support innovative Australian companies starting up and to bolster entrepreneurship, it will reform the current treatment of tax on employee share schemes.

Employee share schemes give employees a financial share of the company’s potential success and can be used as an incentive by start-up companies to attract and retain high-quality staff.

Changes to the tax treatment of employee share schemes that were introduced by the Government in 2009 have effectively brought to a halt the use of such schemes for start-up companies in Australia. The Government plans to unwind the 2009 changes in regard to the tax point for options. The change applies to all companies, it means that discounted options will be generally taxed when exercised (share conversion), rather than when an employee receives the options.

Furthermore, the government stated it will also permit any employee share scheme options and/or shares provided with a small discount from eligible start up companies to not be subjected to the up front taxation, as long as the options or shares are held by employee for a minimum of three years.

Taxation will be deferred until sale of options under certain conditions.

Discounted shares will have the discount amount tax exempt.

Criteria for eligibility for the concessional treatment includes the company has an accumulated turnover of less than $50 million, the company is unlisted and has been incorporated less than 10 years.

In addition, to give start-ups more time to be competitive and succeed, the Government is extending the maximum time for deferral of tax from 7 years to 15 years.

The Government is updating the ‘safe harbour’ valuation tables.  These are used by companies to value the options, to reflect current market conditions.

The integrity provisions that were introduced in 2009 plus the $1,000 up front tax concession for employees earning less than $180,000 each year will remain.

The Treasurer will consult with the industry regarding draft legislation and the proposed changes to commence 1 July 2015. This initiative is estimated to cost around $200 million over four years.

Contact Solve Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.