November 2018
NOW YOU SEE IT, NOW YOU DON’T… THEN YOU DO!
Here we are referring to the A.T.O. practice of writing an individual’s tax debt off as “uncollectable”, only to re-instate it at a later date.
This may have been done by A.T.O. in an arbitrary fashion to tidy up their debtors’ figures. Taxpayers need to be aware that the A.T.O. are reinstating
these tax debts, typically when taxpayers get their taxation obligations up to date.
The reasoning appears to be that if the taxpayer is earning a decent income, then they may well have the capacity to pay the old debt. Of course, any potential
current tax refunds will be offset against the debt.
However, we note that the A.T.O. are applying interest and penalties to the old debt which we suggest can be negotiable depending on the circumstances.
FAST TRACKING TAX RELIEF FOR SMALL AND MEDIUM BUSINESS
The Federal Government has announced it is delivering its tax relief five years earlier than planned.
This aims to produce more investment, more jobs and higher wages.
Legislation will be introduced during the next session of Parliament, fast-tracking business tax relief for more than three million businesses that employ
nearly seven million Australians.
This means businesses with a turnover below $50 million will face a tax rate of just 25 per cent in 2021-22 rather than from 2026-27 as currently legislated.
Similar timing changes will apply to the roll out of the 16 per cent tax discount for unincorporated businesses.
This means that a small business, such as an independent supermarket or a pub, that makes $500,000 profit, will have an additional $7,500 in 2020-21 and
$12,500 in 2021-22 to invest back into the business or staff, or help to manage cash flow.
This builds on the first stage of company tax relief that the Government delivered in May 2017.
The Government sees this fast tracking of tax relief for small and medium businesses as an important investment in future economic growth.
Corporate |
18-19 |
19-20 |
20-21 |
21-22 |
22-23 |
23-24 |
24-25 |
25-26 |
26-27 |
Existing |
27.5% |
27.5% |
27.5% |
27.5% |
27.5% |
27.5% |
27% |
26% |
25% |
Fast-tracked |
27.5% |
27.5% |
26% |
25% |
25% |
25% |
25% |
25% |
25% |
Unincorporated |
18-19 |
19-20 |
20-21 |
21-22 |
22-23 |
23-24 |
24-25 |
25-26 |
26-27 |
Existing |
8% |
8% |
8% |
8% |
8% |
8% |
10% |
13% |
16% |
Fast-tracked |
8% |
8% |
13% |
16% |
16% |
16% |
16% |
16% |
16% |
HOW TO AVOID AN UNFAIR DISMISSAL CLAIM WHEN CARRYING OUT AN EMPLOYEE REDUNDANCY
Under the provisions of the Fair Work Act and the NES (The National Employment Standards)there has been a widening and consolidation of the application of redundancy pay and provisions for Australian workers.
The NES provides for up to 4 weeks’ notice of termination (5 weeks if the employee is over 45 and has been in the job for at least 2 years) and up to 16
weeks redundancy pay.
However, as a rule, unless there is a contract or agreement to the contrary, employers with less than 15 employees do not have to provide redundancy pay
(notice periods do still apply) but they must follow the Small Business Dismissal Code when making an employee redundant.
Copies of the Small Business Dismissal Code can be found on the FWA website at www.fwc.gov.au.
To avoid an unfair dismissal claim when carrying out an employee redundancy, the following steps are advised:
- The employer should ensure that the employee’s position is no longer required and the job they were performing is no longer needed or to be done by
any other employee or worker or where through no fault of the employee the duties of the role have changed to the point that the original role
no longer exists.
- Once this has been established, employees can be selected for retrenchment by seniority, job performance potential or voluntary redundancy.
- The consultation process requires the employer to:
- Notify the affected employee/s of the decision to introduce major change in the workplace which will have significant effects on their employment
and provide in writing the details of the proposed change;
- Discuss with the affected employee/s (and their union if applicable) the likely effects of the change and any measures to mitigate these effects;
- Give prompt consideration to any suggestions raised by the employee/s or their union, such as redeployment and retraining options.
- Notify the affected employee/s of the decision to introduce major change in the workplace which will have significant effects on their employment
- The employer has a responsibility to the employee and also to avoid unfair dismissal or adverse action claims, to consult with the affected employee
as Section 389 (1) (b) of the Fair Work Act will only recognise a ‘genuine redundancy’ which is exempt from unfair dismissal protection where the
consultation process has been followed. - If there are more than 15 employees to be made redundant, Section 530 of the Fair Work Act requires that the employer notifies Centrelink in writing
of the proposed redundancies. Section 531 of the FWA also requires that notice be provided to the appropriate union and the consultation process
to be followed under these circumstances.
The redundancy pay provisions are as follows:
Redundancy pay period
At least 1 year but less than 2 years – 4 weeks |
At least 6 years but less than 7 years – 11 weeks |
At least 2 years but less than 3 years – 6 weeks |
At least 7 years but less than 8 years – 13 weeks |
At least 3 years but less than 4 years – 7 weeks |
At least 8 years but less than 9 years- 14 weeks |
At least 4 years but less than 5 years – 8 weeks |
At least 9 years but less than 10 years-16 weeks |
At least 5 years but less than 6 years- 10 weeks |
10 years and over – 12 weeks |
The reason that the redundancy pay provisions at 10 years or more are less than the amount for ‘9 years but less than 10 years’ is that the government
assumes that an employee is also entitled to long service leave pay at this point.
These provisions do not apply where an employee has had less than 12 months continuous service on termination.
6. Where the employer has fewer than 15 total employees at the earlier time that the employee was given notice or dismissed (this includes part-time
and casuals who are regular casuals and any other business entities) they are generally not entitled to the redundancy, but the consultation process
contained in the Small Business Dismissal Code should be adheared to.
7. Notice periods on termination apply to all employees and are as follows:
Employee’s period of continuous service with the employer at the end of the day the notice is given.
Termination Notice Periods
Not more than 1 year |
1 week |
More than 1 year but not more than 3 years |
2 weeks |
More than 3 years but not more than 5 years |
3 weeks |
More than 5 years |
4 weeks |
Then increase the period by 1 week if the employee is over 45 years old and has completed at least 2 years of continuous service with the employer
at the end of the day the notice is given.
8. If the new employer and the old employers are associated entities then under Section 22(5) Transfer of Employment of the FWA, the new employer must
recognise the employee’s service with the old employer.
9. If the transfer of business is between two non-associated entities, under Section 122 of the FWA redundancy payments do not apply and any accrued
entitlements are usually paid out as part of the business sale.
Dismissal of an employee for disciplinary or inefficiency matters or where the employee is replaced by another employee carrying out the same duties
is not considered a genuine redundancy.
LEGISLATING A FAIRER WAY TO DISTRIBUTE THE GST
The Federal Government will legislate what it sees as a fairer and more sustainable GST deal for between the States and Territories.
In July, the Government announced their intention to change the way GST revenue is shared.
As the Productivity Commission outlined, the effects of the mining boom created extraordinary volatility in the GST distribution that tested community
confidence in the system.
To address these shortcomings the Federal government will:
- Introduce a new Horizontal Fiscal Equalisation (HFE) benchmark
- Introduce a permanent in-system GST relativity floor
- Provide transitional assistance
All states and territories will be better off under these changes with an additional $9 billion over the next ten years. This is on top of the extra
$6.5 billion in GST revenue the Federal Government will deliver states and territories to 2021-22 as a result of policy decisions taken since the
2015-16 Budget.
The F.D. will now introduce legislation that locks these reforms into place, providing the certainty needed for the new GST distribution system. It
aims to prevent the system becoming a political football.
The Government is not going to get into running multiple GST arrangements. The new system is fairer and because of the $9 billion over the next ten
years in additional contributions by the Federal Government, all states and territories benefit.
Both the Commonwealth Grants Commission Act 1973 and the Federal Financial Relations Act 2009 will be amended, with legislation introduced as a priority.
PRIMARY PRODUCER – INSTANT DEPRECIATION FOR FODDER STORAGE ASSETS
As announced on 25.9.2018, Australian farmers can now access tax relief sooner, as a part of the Government’s $1.8 billion plan to help drought-affected farmers.
Under legislation which passed through the Senate last week, primary producers can now immediately deduct the cost of fodder storage assets, such as
silos and hay sheds, used to store grain and animal feed.
The changes, effective from 19 August 2018, will assist primary producers, by making it easier to stockpile fodder. They will no longer have to track
the depreciation of fodder storage assets for more than one year for tax purposes.
This initiative complements the $20,000 instant asset write-off already available for small businesses. Unlike the write-off for small businesses,
there is no dollar cap on the cost of fodder storage assets that can be instantly depreciated by primary producers.
This tax relief is one of several measures forming part of the plan to provide more help for drought-affected farmers. It brings the total of Commonwealth
assistance to $1.8 billion.
Initiatives include:
- additional funding for the Drought Communities Program;
- extending drought loans through the Regional Investment Corporation; and
- creating a dedicated drought preparedness round for the National Water Infrastructure Development Fund.
The Government intends to continue to engage with farmers and communities in drought-affected areas to ensure the response meets their needs, including
through the National Drought Summit which was held on 26 October 2018.
MAKING SURE FOREIGN INVESTORS AND MULTINATIONALS PAY THEIR FAIR SHARE OF TAX
The Federal Government will protect the integrity of Australia’s tax system, with the introduction of two bills that will further ensure that those who do business in Australia, pay tax in Australia.
The introduction of Treasury Laws Amendment (Making Sure Foreign Investors Pay their Fair Share of Tax in Australia and Other Measures) Bill 2018 and Treasury Laws Amendment (Making Sure Multinationals Pay their Fair Share of Tax in Australia and Other Measures) Bill 2018 intends
to make foreign investors and multinationals pay their fair share of tax.
The first bill will crack down on foreign investors using complex arrangements known as stapled structures and accessing broader tax concessions on
income from Australian investments, so it is taxed at very low tax rates and, in some cases, almost tax-free.
Foreign investors include foreign sovereign wealth funds and pension funds as well as those who invest in Australian agriculture and residential property.
The measure will see hundreds of millions of dollars of revenue being kept in Australia. Left as is, the amount of revenue being foregone could
grow to billions of dollars.
The second bill helps ensure that rules tackling multinational tax avoidance, such as the Diverted Profits Tax and the Multinational Anti-Avoidance
Law, apply to all relevant entities.
It will also prevent multinationals from manipulating the values of their assets to increase their debt deductions and reduce their tax payable in
Australia as well as level the playing field for Australian hotel bookings by ensuring offshore sellers of hotel accommodation in Australia calculate
their GST turnover in the same way as local sellers.
SMALL BUSINESS AND START-UPS GAIN ACCESS TO CROWDFUNDING
Small businesses and start-ups will have easier access to funding they need to grow, with the Federal Government passing new laws that extend crowdfunding eligibility.
The Coalition Government understands that different forms of finance are particularly important for innovative, early-stage businesses that may have
difficulty accessing funding from traditional sources.
Crowdfunding allows investors to make small investments in companies, helping them grow and create more jobs.
As part of the changes, proprietary companies wanting to access equity crowdfunding will no longer have to convert to a public company entity. Instead
founders will be able to crowdfund while retaining the greater flexibility of the corporate model.
This aims to create a policy framework that encourages innovation and supports small businesses to grow.
The extension will also increase the ability of individuals to access early-stage investment opportunities.
$20,000 instant asset write-off extension passes Parliament
In September Senate passed legislation to extend the $20,000 instant asset write-off.
The legislation delivers on the Coalition Government’s 2018-19 Budget announcement to extend the $20,000 write-off for a further 12 months to 30 June
2019.
Across Australia, there are around 3.3 million small businesses with an annual turnover of less than $10 million that are eligible to access the
write-off.
This is a timely reminder that this concession has been extended to 30 June 2019 and should be used in financial year end tax planning.
R&D TAX INCENTIVES
There is ongoing uncertainty over what qualifies as “research and development” for tax purposes and current legislation does nothing to help matters.
More than $2.4 billion of savings from changes to the research and development tax incentive program were outlined in the May Federal budget.
These changes are now before parliament.
The tax offsets scheme came under review after a treasury report suggested placing caps on the amounts that could be claimed.
For companies with turnover of $20 million or less, it caps the cash refunds available for research and development at $4 million. It also changes
the tax offset rate for these companies from a flat 43.5 per cent to their corporate tax rate, plus 13.5 per cent.
Prior to this, businesses with turnover of $20 million or less could apply for an unrestricted cash refund of 43.5 cents for every dollar spent on
research and development activities.
Under the legislation before parliament, Innovation and Science Australia will have determine what is and isn’t a research and development activity.
Those in research heavy sectors such as Biotech, really need clarity on which expenditure is eligible and we will keep you informed on any developments.
CHECK NOW FOR YOUR SHARE OF $17.5B IN LOST SUPER
New data released by the Australian Taxation Office (A.T.O.) reveals the total amount of lost and unclaimed super was reduced by over $420million in 2017-18 but there is still $17.5billion waiting to be found.
Assistant Commissioner Graham Whyte said one of the A.T.O.’s priorities is to reunite people with their lost super which is spread across more than
6.2 million accounts.
According to Mr, Whyte, The A.T.O. is:
- determined to help people find their super and that in the past financial year more than $3 billion was consolidated into active super accounts
across the country
- data shows there are some large amounts still lost. For example, one New South Wales account has over $2.2 million waiting to be found.
If you believe you may have some lost super, this can be investigated online www.ato.gov.au.
SHIFTY SALES SUPPRESSION TOOLS NOW AGAINST THE LAW
It is now illegal to manufacture, distribute, possess, use or sell electronic sales suppression tools (ESSTs).
Taxpayers can now face financial penalties of up to 5,000 penalty units, which currently equates to over $1 million depending on the
offence and severity of the crime.
According to A.T.O. Assistant Commissioner Matthew Bambrick:
- These tools serve no purpose other than intentional tax evasion. They can be used to delete, change or falsify electronic point of sales (POS)
records and are often referred to as ‘phantom ware’ or ‘zappers’.
- These tools are being used by dodgy businesses, and now that legislation has been passed that specifically sets out sanctions, the A.T.O. can also
go after the manufacturers and suppliers.
- Businesses using legitimate POS software shouldn’t be concerned – it is easy to tell the difference between a salesperson correcting an error when
ringing up a sale and the deliberate manipulation of sales data.
- The A.T.O. will be working closely with businesses that may have inadvertently purchased software with an ESST function.
Businesses that have acquired an ESST on their software before the legislation was first announced on 9 May 2017 have a six-month transitional
period until 3 April 2019 to let the A.T.O. know about it without any penalty being applied.
The A.T.O. will be sending letters to businesses who we believe may have an ESST in their POS system to inform them to take action.
The A.T.O. urges all businesses to keep detailed records of every transaction so you can explain any adjustments or calculations for tax purposes.
Example of ESST use:
After looking into a number of community concerns about a hospitality company, the A.T.O. found they weren’t keeping accurate records. It was established
the business was:
- using an ESST and deliberately not reporting all their cash income
- falsely reporting regular losses
- not managing their employee obligations properly.
The audit identified omitted income of $2.73 million, resulting in a shortfall in GST payable of $354,000 as well as $1.5million in penalties
related to the deliberate manipulation of tax records.
Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.