Small businesses are likely to find themselves kept busy with the progressive transition to the Single Touch Payroll system and new rules designed to beat Australia's 'black economy'. Here's a round up of the latest tax news:
New rules cast a wide net
Even businesses not seeking to avoid tax could find themselves affected by a new Bill designed to curtail Australia's 'black economy'.
The Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018 was introduced into the House of Representatives in late September. If passed, the Bill will deny a tax deduction for employee/contractor payments if a business is not seen as complying with its obligation to withhold PAYG tax.
Although the Bill provides safeguards for errors, businesses will need to carefully review their internal systems to ensure they are capturing all payments likely to require PAYG withholding. Unusual payments - such as bonuses or commission payments - that are not properly identified as being subject to withholding, could have their tax deduction denied.
The new Bill also requires businesses providing road freight, information technology or security, investigation or surveillance services to report annually to the ATO under the Taxable Payment Reporting System (TPRS). The TPRS was first introduced to the building and construction industry and requires a business to report any payments made to contractors, as the Government believes contractors servicing these industries are at high risk of not disclosing income.
Avoiding common GST reporting errors
To help small business owners ensure they meet their GST requirements, the ATO has released a list of five of the most common errors made when reporting GST.
To avoid these common errors, you need to ensure :
- your business reports for the correct tax period;
- avoids accidental miscalculations and simple transcription errors;
- can substantiate any claims for GST credits;
- does not claim GST for goods purchased for personal use;
- and charges GST when required, particularly if your business does not normally reach the $75,000 GST threshold.
More than half of all corrections to GST reports relate to these five issues.
Employers get behind STP reporting
The new Single Touch Payroll (STP) system is proving popular, if its quick take-up rate is any guide. Around 40,000 employers sent tax and super information directly to the ATO from their payroll software in the system's firs quarter of operations.
Employers with 20 or more employees began transitioning to the system from 1 July 2018, while those with fewer staff have another year before they need to start reporting.
Non-compliance penalties do not apply during the transition year and employers who need additional time can apply online with the ATO or through their tax agent.i
Small business audit review extended
The ATO's pilot audit review scheme for small businesses in Victoria and South Australia has been extended nationally. Under the scheme, small businesses can seek an independent review of the ATO's audit of their tax affairs.
During the review, an independent technical officer from outside the audit area reviews the merits of the ATO's audit position before a tax assessment or amended assessment is issued.
The pilot scheme is limited to disputes involving income tax audit not related to GST, superannuation, fringe benefits tax, fraud and evasion findings, or penalties and interest.
Review into tax residency rules
The Board of Taxation (BoT) has announced plans to hold yet another consultation into the existing rules on income tax residency for individuals. The tax residency rules were previously reviewed in both 2016 and 2017.
The aim of the consultation is to determine whether reforms are needed. It will look at the potential for a 'two-step model' for individual tax residency, the risks posed by 'residents of nowhere' and schemes to get around tax residency rules, and whether the superannuation test needs updating.