Important tax changes
As always, speak to us before you make any significant financial decisions:
email us or call (03) 8888 4000
Consultation on ‘protecting superannuation entitlements’
The Government has released draft legislation to protect workers’ superannuation entitlements and modernise the enforcement of the superannuation guarantee.
The draft laws will extend Single Touch Payroll to all employers from 1 July 2019 to improve the ATO’s ability to get real time information about an employer’s compliance. In addition, from 1 July 2018 superannuation funds will commence ‘event-based’ reporting to the ATO of payments they receive for employees from their employer. Combined, these measures provide the ATO with more timely information to support earlier detection and proactive prevention of non‑payment of superannuation owed to employees.
The Government’s commitment to a Director Identification Number will help identify those directors who are robbing their employees of their superannuation. There will now be serious consequences for employers who break the law. The ATO will have a suite of enforcement and collection tools, including strengthened arrangements for director penalty notices and security deposits for superannuation and other tax-related liabilities. And, in cases where employers defy directions to pay their superannuation guarantee liabilities, the ATO will be able (for the first time) to apply for court‑ordered penalties, including up to 12 months imprisonment.
To embed ongoing compliance, the ATO will also have the ability to require employers to undertake training.
GST withholding on residential property
The Government has introduced a Bill aimed at “strengthening compliance with GST law in the property sector”, as announced in the 2017/18 Federal Budget. Under the new arrangements, purchasers will withhold the GST on the purchase price of new residential premises and new residential subdivisions, and remit the GST directly to the ATO as part of settlement on the property.
The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said these changes will prevent tax evasion by unscrupulous property developers that fail to remit the GST on sales of these properties, despite having claimed GST credits on construction costs. This failure to remit GST is often associated with ‘phoenixing’ – where a developer dissolves their business and sets up a new entity to avoid remitting the GST to the ATO.
The measure has a two-year transitional arrangement to provide certainty for existing contracts. Contracts entered into before 1 July 2018 will not be affected by this change as long as the transaction settles before 1 July 2020.
The Bill also contains measures to:
- transfer the administration of early release of superannuation benefits on compassionate grounds from the Department of Human Services to the ATO;
- extend tax relief for merging superannuation funds until 1 July 2020;
- provide ongoing funding to the SuperStream Gateway Network Governance Body; and
- make regulatory improvements to Treasury portfolio legislation, including in superannuation and corporations law.
Fringe Benefits Tax: ATO areas of focus
The ATO has announced that it will be paying particular attention to the following FBT-related items in 2018:
- Cars valued under the statutory formula method – The ATO will be focusing on whether the car’s base value, reduction of days available for private use and application of employee contributions have been correctly calculated;
- Weekend conferences and staff retreats – In relation to offsite retreats and workshops, employers need to closely consider the activities undertaken to assess whether they have the character of recreation and whether meal entertainment benefits have been provided;
- Employer declarations – The ATO will be targeting employers claiming deductions under the otherwise deductible rule without complying with the documentation requirements;
- Benefits provided by contractors, clients and suppliers – An ongoing area of ATO focus is non-cash benefits provided to employees and / or associates by third parties (such as clients, suppliers or contractors). In many cases it may be difficult for, employers to argue that they were unaware of the benefits being provided. Employers need to consider their obligations in respect of these benefits;
- Amounts reported at certain labels of income tax returns and BAS such as Fringe Benefit employee contributions, contractor expenses, motor vehicle expenses, superannuation expenses and salary and wage expenses. Where no FBT return has been lodged, this may increase the risk that the employer entity is selected for an ATO audit or review.