According to Australian Taxation Office (ATO), the top 100 population consists of entities that have substantial economic activity related to Australia and form the largest contributors to corporate income tax, excise, GST, and other tax revenue sources. Consisting predominantly of public and multinational businesses and superfunds, they have a significant impact on the health of the Australian Taxation system and the ATO engages with them on a one-to one basis to help manage their compliance and assure their tax performance.
The ATO’s purpose and vision for this risk management model is for Australians to value their tax and superannuation systems as community assets, where willing participation is recognised as good citizenship. The ATO is excepting the outcome to build confidence in the aspects of Australia’s tax system through helping people understand their rights and obligations, managing non-compliance and improving ease of compliance and access to benefits.
The ATO risk assesses each large public and multinational business at an economic group level. It includes all Australian based entities under direct or indirect Australian or foreign majority controlling interest and the businesses are initially identified based on the size of their Australian operations. Additional factors the ATO consider in identifying the top 100 is the amount of GST, income tax, or excise paid and also the influence the business may have on the market segment.
The top 100 clients are then provided a risk categorisation on income, goods and services, excise and petroleum resource rent taxes. They will receive an annual letter from the Commissioner to advise them of their risk categorisation. The letter clearly outlines the basis and categorisation for each applicable tax and how the ATO intends to engage with them over the next year and what this will mean for them.
The ATO use three risk categories as follows:
This taxpayer is rated at a lower risk level compared to other clients in the top 100 population, with this taxpayer having no significant history of adjustments from the ATO. However, this does not mean that they have no risks and that the ATO would not have any disputes or differences of opinion on the tax outcomes intended by law.
A key taxpayer would be proactive in advising the ATO about their issues, looking to work on possible resolutions compare to higher-risk clients. They would provide true and full disclosure of potential and significant controversial tax positions and would not seek to conceal issues. The ATO is expecting this taxpayer to engage cooperatively to seek a resolution and keep them informed with their decisions and actions. The ATO would work with them to resolve any issues and evaluate their compliance with tax law should a potential contestable mater arise.
This taxpayer may have multiple identified risks and/or have economic outcomes that may not be reflected in their tax outcomes. They will have more complex risks, with larger amounts of tax at risk compare to clients with the key taxpayer category. The ATO will work closely with these clients to improve their risk categorisation and would meet to discuss a treatment plan to lower their risk rating. The ATO would expect the relationship with this taxpayer to be positive.
This taxpayer may have structural and multiple complex risks over different parts of the tax law. They would exhibit behaviours that include poor and inconsistent engagement with the ATO, failure to meet deadlines on information requests and are occasionally late with meeting their tax obligations.
This higher risk taxpayer would not tend to seek the ATO’s advice on major transactions with significant tax obligations. More often their governance of tax risk is poor and would use tax outcomes as a dominant factor in making business decisions.
The ATO would conduct comprehensive audits and other intensive risk assessment approaches and would continuously review this type of higher risk taxpayer. Also, the ATO would communicate their concerns as early as possible in an aim to identify and understand the risk. This approach allows the clients to make informed choices about their compliance approach. Should they fail to be opened and transparent, the ATO would use their formal powers in gathering information.
Source: Australia Taxation Office
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Due to the large number of claims seen last year for clothing & laundry expenses, the Australian Taxation Office (ATO) will focus with the WRE claims for this coming tax time 2018.
According to Chris Jordan, the ATO Commissioner, almost half of the population claimed the $150 for laundry expenses which has to be related to either protective clothing or uniform. With Jordan’s assumption, they could not conclude that 50 percent of the population are actually wearing protective clothing or a uniform.
Following his public statement made, he stated that incorrect claiming was more prevalent in agent-prepared tax returns than the self-prepared tax returns. He stated that some agents display lack of competence, are outdated in practices and knowledge, while others are deliberately cheating the system.
As a result, the ATO will increase its attention in several areas as part of improving the integrity of the system this coming tax season, which will include the following:
In addition, the ATO will also focus again on work-related expenses which include the following:
The ATO insisted that there are a number of cases related to tax practitioners where they over claimed work-related expenses for their clients. Mr Taylor reiterated that any agent found guilty for this practice will face sanctions from the tax practitioner board (TPB).
The TBP will issue the following actions should agents fail to comply with the Code of Professional Conduct.
This coming tax season, ATO reminds tax practitioners to be alert with their clients who are confused with their WRE entitlement.
Remember that clients are not automatically entitled to claim any standard deductions. They should be able to show how they calculated their claims, which is why it is very important that they keep records on their expenses or provide evidence to prove their claims.
Clients may use the myDeductions tools available from the ATO app to track their deductions and keep accurate records including photos of receipts.
If you are located on the Gold Coast or surrounding areas Contact Us at Solve Business Accountants if you need help with your business tax.
As part of Stay Smart Online week, The Australian Taxation Office (ATO) is guiding taxpayers with some simple measures to help protect themselves from scammers. It is important for taxpayers to remember to stay attentive and cautious of phone calls, emails, and text messages (SMS) during tax time that claim to be from the ATO, even if they seem legitimate.
These scams can be very convincing and many individuals fall victim to these each year. The ATO has confirmed scammers are predominantly active during tax time due to the large number of people lodging their tax returns. In 2014-15, 32,110 cases of identity theft were reported to the ATO. Of these, 22,200 were reported during the peak processing months from July to November.
The ATO has been working with a number of organisations including some major retailers and the Australian Competition and Consumer Commissioner to warn people about purchasing gift cards to pay for alleged tax debts, which some scammers have been requesting as form of payment.
The most common scams reported to the ATO are phone calls where a scammer will demand payment for a fake tax debt, or will email and request personal identifying information or a fee to release a tax refund. These scammers use a variety of techniques to try and legitimise the interaction such as ‘spoofing’ telephone numbers and replicating the ATO branding in emails.
Scam communications:
In 2015 almost 87,000 phone and email scams were reported to the ATO, an increase of over 90 percent from 2014. From January to May this year, the ATO has received over 40,500 phone scam reports. Of these, 226 Australians handed over $1.2 million to fraudsters and over 1900 gave out some form of personal information, including tax file numbers.
You will receive an email claiming to be from the ATO, stating that your income tax refund had been recalculated and that you are entitled to an additional $250. All you have to do was click on a link in the email, provide some details, and you could expect the extra money in a few days.
Once you have completed the online form and click the print button, not only does it print out the claim form but it also unknowingly sends your full identity and credit card details electronically to an organised criminal syndicate, where it is then sold on the black market.
There are a few simple steps you can take to protect yourself from scammers, including only giving out personal details to people you trust and keeping tabs on your tax affairs so you know what you should be expecting. Also, as a general rule, you should be cautious about the personal information that you share, especially on social media.
1) Know what to protect: Personal information that is sought after by scammers including your full name, date of birth, current address, tax file number, bank account and credit card details, drivers licence and passport details, and any of your passwords.
2) Keep their personal information safe and secure: If personal information is stolen it can be very difficult to get back. It’s best to store things like a tax file number or birth certificate somewhere safe and secure – for example, don’t save it on your phone or carry it around in a wallet or handbag.
3) Do not share too much information on social media: Scammers can use information published on social networking sites to steal identities. If you see friends or family sharing personal information online, remind them that they could be putting themselves at risk of targeted attacks. It’s also a good idea to ensure online profiles are set to private and to be cautious about accepting friend requests.
4) Be suspicious of requests for personal information: If you receive a request for personal information, treat the request with caution. Scammers can be believable and will sometimes quote personal information to sound authentic, so consider the possibility that it may be a scam. To check if a call, email, SMS is actually from the ATO, you can call them on 1800 008 540 to confirm.
5) Know legitimate ways to make payments: Scammers may use intimidating tactics to get their victims into paying false tax debts with pre-paid gift cards or by sending money to non-ATO bank accounts. To check that a payment method is legitimate, the ATO list on their website all methods of accepted payment when dealing with them.
The ATO warned taxpayers to protect their personal and financial details following an increase in reports of tax-related email scams. It said since June 2013 to September, reports of phishing scams have quadrupled to 15,441 compared to 3,586 during the same period last year, with the scams becoming more sophisticated. The Commissioner urged taxpayers to be vigilant of emails that mimic the ATO’s online publications especially those with links and attachments or those asking taxpayers to confirm or disclose confidential personal.
If a scammer or someone claiming to be from the ATO calls you and you are unsure of their validity, you should:
Source: Australian Taxation Office
Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.
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.
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.
In the 2016–17 Budget, the Government announced that it intended to progressively reduce the corporate tax rate from 30 per cent to 25 per cent. These changes to the corporate tax rate for small business entities have resulted in the necessity to re-consider whether your company is in fact carrying on a business.
The Australian Taxation Office (ATO) interpretation of whether a company is carrying on a business or a not came into the limelight recently, with confusion over whether the corporate tax rate cuts will apply to passive investment companies, as generally in the past the receipt of passive investment income has not been regarded as enough for an individual taxpayer to be able to demonstrate that they are carrying on a business.
In regards to this issue, the ATO has stated on its website that it is not possible to definitively state whether a particular company is carrying on a business, rather it is always a question of fact. This is based on the overall impression of the activities of a company and the relevant indication of whether a business is being carried on.
The ATO went on to state that where a company is established and maintained to make a profit for shareholders and invests its assets in gainful activities that have a prospect of profit, then it is likely to be “carrying on business”. This is so even if the company’s activities are relatively passive and the activities consist of receiving returns on investments or rent and distributing to shareholders.
Consequently, it is likely that the reduced corporate tax rate will apply to a much broader range of private companies than had been expected.
While most companies will carry on a business in a general sense, this does not mean that every gain made by a company will be ordinary income. It is still necessary to determine the scope and nature of that business, in order to determine whether a gain will be an ordinary incident of that business and therefore assessable as ordinary income rather than a capital gain.
The ATO is currently consulting through the Tax Practitioner Stewardship Group on this issue and is expecting to provide guidance on this matter in the future. The form in which this guidance will be provided has not yet been determined.
Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.
From 1 July 2017, the Australian Taxation Office (ATO) is reducing the amount of information required for the business activity statement (BAS) to simplify GST reporting. Simpler BAS will be the default GST reporting method for Small Businesses Entities (SBE’s) with a GST turnover of less than $10 million. From 1 July 2017, SBE’s will only need to report:
– Total sales
– GST on sales
– GST on purchases.
The following GST information is no longer required:
– Export sales
– GST-free sales
– Capital purchases
– Non-capital purchases.
This however, will not change their reporting cycle, record keeping requirements, or how they report other taxes on their BAS.
The ATO’s goal for Simpler BAS is to make it easier to classify transactions, make it easier to lodge your BAS and to reduce the time spent on form-filling and making changes that don’t impact the final GST amount. Simpler BAS will reduce the complexity of GST bookkeeping and reporting, and in doing so will reduce compliance costs and make GST account set-up, ongoing bookkeeping, and BAS preparation and lodgment simpler.
– If your GST turnover is $10 million or more, you report GST using the Full reporting method.
– If your GST turnover is less than $10 million, you report GST using the Simpler BAS reporting method.
– If your GST turnover is less than $10 million and you currently use the GST instalment method, you will generally continue to use it. If the instalment method is available to you, a GST instalment amount will show on your BAS.
The GST turnover figure used to determine the GST reporting method to be used will be obtained from ATO records and will be rolled over at the end of financial year based on your current year’s reported GST turnover.
The ATO will automatically transition eligible SBE’s GST reporting methods to Simpler BAS from 1 July 2017. You don’t need to do anything to access Simpler BAS reporting. If you lodge online and are eligible for Simpler BAS, the ATO will automatically send you a BAS requiring less GST information. To access the full GST bookkeeping benefits of Simpler BAS, SBE’s may be able to also look at changing their GST bookkeeping software settings to reduce the number of GST tax classification codes.
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 issued a warning that it will be paying extra attention to people claiming higher than expected deductions during tax time this year. It will focus on taxpayers claiming work-related deductions that are higher than usual compared to other taxpayers in similar industries, particularly deductions for travel, car expense claims for transporting bulky tools, internet, mobile phone and self-education expenses.
With over eight million Australians claiming work-related deductions each year, the Australian Taxation Office (ATO) Assistant Commissioner Graham Whyte is prompting people to make sure they are claiming the correct deductions this tax time.
From 2016 the ATO has been able to check taxpayers deductions in real-time as they complete their online return. It also takes a closer look at any unusual deductions and contacts employers to validate these claims. From 2016 there have been changes in the rules for calculating car expenses and taxpayers need to use a logbook or the cents per kilometre method to support their claims.
“Australians claim over $21 billion in work-related expenses each year, and we want to support taxpayers to claim what they are entitled to – no more, no less,” Mr Whyte said. The ATO acknowledges that most taxpayers want to do the right thing, but mistakes are constantly being discovered and while the amounts at an individual level are relatively small, collectively the overall impact is significant.
Mr Whyte said in 2014-15, the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to revenue adjustments of over $1.1 billion in income tax.
He went on to state “Deliberately making incorrect claims is an easy way to get into some serious trouble. It’s just not worth it.”
The ATO has the capability to scrutinise each tax return lodged using increasingly sophisticated tools and data matching analytics. This means the ATO can identify and review income tax returns that may omit information or contain unreasonable deductions. When a red flag is raised, the ATO will investigate further and if your claims seem unusual they will either check them with your employer or ask you to substantiate your claims.
To assist taxpayers making claims for work-related expenses, the ATO has a series of occupation guides and other general advice available on its website to help people in specific industries understand and correctly claim the expenses they may be entitled to.
1) must have spent the money yourself, not been reimbursed
2) it must be related directly to earning income
3) must keep a record to prove it.
If taxpayers are using myTax to lodge their tax returns, they will receive a real-time warning if their claims for work-related deductions are unusually high compared to other taxpayers in similar occupations.
1) make sure your claims are justified
A dairy farm employee claimed deductions totalling almost $19,000. When the ATO spoke to his employer, they said that the employee was provided with all the tools and work gear he needed to undertake his duties. The employee’s deductions were disallowed in full.
2) make sure you weren’t reimbursed already
A business analyst who travelled between Shanghai and Australia for work, claimed over $46,000 in travel expenses. When the ATO contacted the employer, they were advised that this employee was reimbursed for the cost of all his meals, accommodation and travel within Australia and internationally. Consequently, the claims were disallowed.
3) make sure you are getting good advice
A tiler lodged his tax return using a registered tax agent and claimed over $4,000 in deductions that related to his car, based on transportation of bulky equipment to/from work. The ATO contacted his employer who confirmed he was not required to transport any such bulky equipment to work and also advised that secure lockers were provided at work to store tools. His claim was disallowed and tax agent was reminded to undertake proper enquiries to determine his clients’ eligibility to deductions.
4) make sure you have evidence to support your claims
A sales consultant claimed over $38,000 for car and other work-related expenses. When asked to provide evidence to support her deductions it became apparent that she had overstated her expenses as she could not provide receipts to substantiate her claims. After discussions with the ATO, she agreed to substantially reduce her expense claims and she was asked to pay a tax shortfall of over $8,000 plus penalties.
5) make sure your claims are related to your work
A computer network engineer claimed over $4,000 in deductions relating to car, travel, clothing and other work-related expenses, as well as the cost of managing his tax affairs. When queried, the engineer told the ATO he travelled interstate for both work and private purposes, his clothing expenses were for the purchase of general business attire and his claims for managing tax affairs related to managing the family trust. The engineer’s claims were disallowed by the ATO because they appeared to be of a personal nature and he was unable to substantiate his claims with written evidence.
6) make sure you know what is and isn’t deductible
A factory meat processing worker claimed $12,800 for various deductions. When the ATO requested evidence of his claims, the taxpayer was unable to produce receipts with the exception of the donations which were automatically deducted from his pay. Also, when ATO contacted his employer, they were advised that the worker was not required to travel for work purposes and that all protective gear and tools required to perform his duties were supplied by the company. The worker’s deduction claims were disallowed except for the gifts and donations which he was able to verify.
7) make sure you back up your data
A soldier from Canberra claimed $1,500 for self-education expenses and $5,000 for gifts and donations. When the ATO requested evidence to substantiate these claims, the soldier said all his receipts were stored as images on his tablet, which had fallen into his child’s bathtub and no longer worked. The claims were disallowed.
8) make sure you were at the conference/course
A medical professional made a claim for attending a conference in America and provided an invoice for the expense. When the ATO checked, they found that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.
9) incorrect log book
A taxpayer claimed deductions for car expenses using the logbook method. The ATO found they had recorded kilometres in their logbook on days where there was no record of the car travelling on the toll roads, and further enquiries identified that the taxpayer was out of the country. Their claims were disallowed.
Source: Australian Taxation Office
Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.
Tax time can be daunting; it’s that time of year when you look at income for the last year and think- did I really earn that much? The term ‘you gotta spend money to make money’ can often be more apparent than ever during tax season. The Australian Taxation System luckily enough does align itself with this ideology, and can allow deductions that that you may not have considered. Other deductions can be misleading and often taxpayers suffer simply from not knowing what the rules are.
Having a tax agent prepare your tax return not only ensures accuracy, but it is a tax deduction.
Tax agents are able to assess your claims, which reduce the chances of being penalised for submitting incorrect information.
This will ensure that you don’t miss any possible deductions. It is also a requirement to keep them for at least 2 years from the date of lodgement for any deductions $300 and over that are claimed in case of an ATO audit.
As mentioned earlier, the ATO recognises that there are some costs of working that are difficult to track such as; laundry, costs of running a car & home office expenses.
You may use your car for work-related trips throughout the year. So long as this travel is legitimate, you can claim this travel using the cents per km method. Always seek advice if you are unsure what is considered work-related travel.
Home Office Expenses can also be claimed at a cents per hour method. This is handy for numerous dedicated workers who find themselves bringing their work home, to avoid having to move into their workplace permanently.
Laundry claims can be quite contested, so it is good to be sure before you claim. If there is a visible logo on your company uniform, you are safe. Other claimable clothing items can include protective wear & occupation specific clothing. Up to $150 of laundry expenses can be claimed in one financial year and is claimed at $1 per load.
This is unless your employer has already reimbursed you.
You’ll never know unless you ask, and whilst some authentic charities are not listed DGR’s; it’s a good practice to investigate what your hard earned dollars are being used for. Political parties, for example are one of the many non-DGR’s that receive donations- however these can often be claimed (so long as they are a registered Australian political party). If you receive anything in return for your donations; it is not deductible (for example raffle tickets).
Like any other business, a rental property must have appeal to be successful, and you may spend thousands of dollars sprucing it up or even just making it liveable. For essential plant and equipment over $300, unfortunately, it cannot be expensed as it is then considered an asset. Which brings us to tip # 7; assets can be depreciated. Your tax agent will advise on the most appropriate depreciation rates.
Their fees are deductible and what’s more you don’t have the stress of managing it. Agents will keep details of your expenses and send you an end of year statement which makes it simple to add up your deductions.
Wherever your business is facing a task that should be completed by an industry professional, listen to your gut. Be safe and get the job done properly and add this to your list of deductions.
The Australian welfare state serve’s it’s citizens well with provisional healthcare, education and welfare payments (to name a few). Exuberance is expressed where people are self-sufficient, so if you can afford private health insurance or even income protection it pays! The less you access public funds & services, the more you are rewarded.
Saving for your retirement decreases your need to access welfare payments in your old age. Always check with your tax agent as these amounts are capped and are forever changing.
Do your research and make conscious decisions.
However, it is important to understand that they reduce your taxable income. Deductions aren’t refunded, they simply lower the amount of income you are taxed on. This usually means that you will be assessed in a lower tax bracket.
Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.
The ATO has seen a rise in claims for ordinary business activity expenses, or for large parts of projects that do not correspond to the scale or scope of experimental activities. Ordinary business activities are not generally carried out with a purpose of generating new knowledge. The ATO is increasingly seeing issues including claims that encompass whole projects and where the activities use existing knowledge and expertise.
In another two separate alerts, the ATO has issued warnings to not claim the R&D tax incentive for software development and agricultural activities that are ineligible. AusIndustry and the ATO are reviewing company arrangements that claim the R&D tax incentive for agricultural activities and software development projects, where some/all of the incurred expenditure is for activities that are not eligible R&D activities. The ATO thinks there are examples in these sectors where companies are claiming ordinary business activities incorrectly as research activities. The ATO taxpayer alert specifies the ATO’s concerns regarding R&D claims and the types of arrangements that are under review.
The ATO is undertaking a range of compliance activities to address the businesses and advisors who are intentionally doing the wrong thing. Legal action will be taken against those who knowingly misuse the R&D Tax Incentive.
Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.
The Australian government has revealed enhancements to the WET (Wine Equalisation Tax) rebate to assist wine-making, grape growing and tourism associated with regional Australia. These reforms come after extensive discussions with the wine industry. The WET rebate was originally intended to support small wine producers in rural and regional Australia. However, the wine industry claims the rebate has contributed to excessive wine grape production resulting in low-value wine and urgently needs reform.
– eligible producers must own a minimum of 85% of grapes at the crusher used in making the wine and also maintain ownership throughout the entire wine-making process;
– the rebate is limited to packaged, branded wine in containers less than 5 litres and must be branded with the registered trademark for retail domestic sale;
– the rebate claim must be linked better to WET paid.
The WET rebate cap to be reduced to $350,000 from $500,000 with effective from 1 July 2018 (a year later) and a is a higher cap than what was previously announced in 2016 Budget. To encourage more wine tourism, up to a further $100,000 per year will be available to wine producers who exceed the rebate cap using a new Wine Tourism & Cellar Door grant.
The changes to the WET rebate are estimated to raise $300m in revenue over the next four years. The changes will apply equally to producers of cider, perry, sake and mead. The changes will also apply to New Zealand wine producers who claim the rebate under trade agreements.
Contact Solve Business Accountants located on the Gold Coast, Qld Australia if you need help with your business tax.
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