ATO

Certificate awarded to Mawer Consulting from Australian Taxation Office for Lodgement Program 2018-19

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We are pleased to announce that Mawer Consulting met the ‘85% or more’ on-time lodgment performance requirement for Lodgment program 2018–19.

As a tax practitioner, the role we play is vital in supporting and influencing our clients to recognise and value the tax and superannuation system that underpins Australia’s economic and social well being.

Achieving the 85% on-time lodgment performance requirement indicates we are assisting our clients in meeting their tax reporting obligations in a timely manner.

Thank you to all our clients for making this possible.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

NEWS: ATO "puts the brakes" on dodgy car claims

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The ATO is making work-related car expenses a key focus again during Tax Time 2019.

Assistant Commissioner Karen Foat said over 3.6 million people made a work-related car expense claim in 2017/18, totalling more than $7.2 billion.

“We are still concerned that some taxpayers aren’t getting the message that over-claiming will be detected and if it is deliberate, penalties will apply,” she said.

“While some people do make legitimate mistakes, we are concerned that many people are deliberately making dodgy claims in order to get a bigger refund. We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for.”

One in five car claims are exactly at the maximum limit that doesn’t require receipts.

Under the cents per kilometre method, taxpayers don’t need to keep receipts, but they do need to be able to demonstrate how they worked out the number of kilometres they travelled for work purposes.

The ATO’s sophisticated analytics compares taxpayer claims with others earning similar amounts in similar jobs.

Where the ATO identifies questionable claims, they will contact taxpayers and ask them to show how they have calculated their claim, and in some cases the ATO may even contact employers to confirm whether a taxpayer was required to use their own car for work-related travel.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: ATO targeting false laundry claims

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The ATO will target false clothing and laundry work-related expense claims this Tax Time.

In 2018, around six million people claimed work-related clothing and laundry expenses totalling nearly $1.5 billion.

Assistant Commissioner Karen Foat said although many Australians can claim clothing and laundry expenses, it’s unlikely that half of all taxpayers are required to wear uniforms, protective clothing or occupation-specific clothing to earn their income.

“Last year a quarter of all clothing and laundry claims were exactly at the record-keeping limit", Ms Foat said.

"But don’t think that we won’t scrutinise a claim because we don’t require receipts”.

She also said the ATO does not ignore incorrect claims "just because they are small, because small amounts add up".

The ATO is also concerned about the number of people claiming deductions for conventional clothing, such as retail workers claiming normal clothes "because their boss told them to wear a certain colour, or items from the latest fashion clothing line", or others claiming normal clothes because they only wear them to work.

The ATO’s sophisticated data analytics is constantly improving and can identify unusual claims by comparing taxpayer claims to others in similar occupations.

Taxpayers who can’t substantiate their claims should expect to have them refused, and may be penalised for failing to take reasonable care when submitting their tax return.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Lifestyle assets data matching program

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The ATO has released details of their "Lifestyle assets 2013-14 and 2014-15 financial years data matching program protocol".

They will obtain information on insurance policies for certain classes of assets, including marine vessels, enthusiast motor vehicles, thoroughbred races horse, fine art and aircraft to improve their profiling of taxpayers and provide a more comprehensive view of their assets and accumulated wealth.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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RULING: Uber drivers not employees

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The Fair Work Ombudsman has completed its investigation relating to Uber Australia Pty Ltd and its engagement of drivers, concluding that the relationship between Uber Australia and the drivers is not an employment relationship.

The investigation found that Uber drivers are not subject to any formal or operational obligation to perform work.

Instead, Uber drivers have control over whether, when, and for how long they perform work, on any given day or on any given week, and, in particular, Uber Australia does not require drivers to perform work at particular times.

As a consequence, the FWO will not take compliance action in relation to this matter.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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‘Cash in hand’ payments to workers no longer tax deductible

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The ATO has reminded employers that any ‘cash in hand’ payments made to workers from 1 July 2019 will not be tax deductible.

‘Cash in hand’ refers to cash payments to employees that do not comply with pay as you go ('PAYG') withholding obligations.

Payments made to contractors where the contractor does not provide an ABN and the business does not withhold any tax will also not be tax deductible from 1 July.

In addition to the loss of a tax deduction, employers caught not complying with their PAYG withholding obligations may be penalised for failing to withhold and report amounts under the PAYG withholding system.

However, employers who mistakenly classify their employee as a contractor will not lose their deduction where their worker provides them with an ABN.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: New industries entering the taxable payments reporting system

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The ATO has reminded businesses that provide road freight, information technology ('IT'), security, investigation, or surveillance services that they need to lodge a Taxable payments annual report ('TPAR') each year to tell the ATO about the payments they make to contractors who use an Australian business number ('ABN') (even if these services are only part of their business activities).

Such clients' first TPAR will be due by 28 August 2020 for payments made from 1 July 2019 to 30 June 2020.

Editor: We can help with the lodgment of this report, but affected clients will need to keep records of the payments made to contractors.  The required information, including the contractor's ABN, name, address, and total amounts paid during the financial year (including GST) will normally be contained in the invoices received from the contractors.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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UPDATE: 2019/20 Budget

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The Government handed down the 2019/20 Federal Budget on Tuesday 2 April 2019.

Some of the important proposals include:

-      Increasing and expanding access to the instant asset write-off from 7:30 pm (AEDT) on 2 April 2019 (i.e., ‘Budget night’) until 30 June 2020, as follows:

       –     Increasing the instant asset write-off threshold from $25,000 to $30,000.  

       –     Making the instant asset write-off available to medium sized businesses (with aggregated annual turnover of $10 million or more, but less than $50 million).

Editor: The legislation to make the above changes to the instant asset write-off has already been passed and received Royal Assent.

-      Allowing individuals aged 65 and 66 years to:

       –     make voluntary superannuation contributions (both concessional and non-concessional) without meeting the work test from 1 July 2020; and

       –     make up to three years of non-concessional contributions under the bring-forward rule (without satisfying the work test).

-      Increasing the upper threshold of the 19% personal income tax bracket to $45,000 from 1 July 2022, and reducing the 32.5% marginal tax rate to 30% from 1 July 2024 (in addition to changes already legislated).

-      Increasing the Low and Middle Income Tax Offset (‘LAMITO’), with effect from the 2019 income year, to provide tax relief of up to $1,080 per annum, as well as an increased base amount of $255 per annum.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Latest ATO benchmarks released

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The ATO has released updated benchmark data drawn from over 1.5 million small businesses around the country to "help small businesses across the country . . . gauge the strength of their business and keep an eye on their competition".

Updated benchmarks for more than 100 industries are now available for the following categories:

-  Accommodation and food;

-  Building and construction trade services;

-  Education, training, recreation and support services;

-  Health care and personal services;

-  Manufacturing;

-  Automotive electrical services;

-  Machinery and equipment repair and maintenance;

-  Architectural services;

-  Veterinary services;

-  Retail trade; and

-  Transport, postal and warehousing.

The benchmarks are one of the tools the ATO uses to crack down on the black economy, along with data matching and referrals from the community.

“Businesses operating outside the benchmarks may trigger a red flag for businesses we suspect could be engaging in the black economy,” Mr Holt said.

“A frequent red flag is a business reporting minimal profit while the business owner seems to be maintaining a lifestyle far exceeding their personal income."

“If you use a registered tax professional, it’s also a good idea to have a chat with them about where your business sits in comparison with our benchmarks.  They might have some advice about steps you can take to improve your performance.”

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Continued focus on the cash economy

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ATO Assistant Commissioner Peter Holt has announced that, in the 2019/20 financial year, the ATO will be visiting a further 10,000 small businesses across the country, including up to 500 small businesses in Tasmania.

He further said that businesses that advertise as 'cash only' and businesses that are operating outside of the ATO's performance benchmarks for their industry will be especially targeted for a visit from the ATO.

“Businesses that pay cash in hand, or fail to lodge income tax or business activity statements, get an unfair advantage and make it harder for other businesses who are doing the right thing.  By detecting and addressing this behaviour, we’re helping ensure a level playing field for honest small businesses.”

Businesses in the following industries are most likely to get a visit from the ATO:

-  Restaurants and cafes;

-  Vehicle repairers;

-  Personal care businesses including hairdressers and nail salons;

-  Pharmacies;

- Construction businesses;

-  Clothing stores;

-  Grocery stores / small supermarkets; and

-  Butchers.

Whilst on the road, ATO officers will also be available to help those businesses that are trying to do the right thing.

Mr Holt said the ATO will not hesitate to take strong enforcement action against those deliberately avoiding their tax and super obligations and the visits may uncover this deliberate non-compliance.

“If businesses know they have made mistakes we encourage them to let us know and work with us or their tax professional.”

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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RULE CHANGE: Non-compliant payments to workers

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The rules for claiming deductions for payments to workers are changing.

From 1 July 2019, businesses can only claim deductions for certain payments made to workers where they've met the Pay As You Go (‘PAYG’) withholding obligation for that payment.

Specifically, a business can only claim a deduction for the following payments if it complies with the relevant PAYG withholding rules:

-    Salary, wages, commissions, bonuses or allowances to an employee.

-    Directors’ fees.

-    Payments to a religious practitioner.

-    Payments made under a labour hire arrangement.

-    Payments made for a supply of services (except from supplies of goods and real property) where the contractor has not provided their ABN.

Where the PAYG withholding rules require an amount to be withheld, the business must:

-    withhold the amount from the payment before they pay their worker; and

-    report that amount to the ATO.

Importantly, a deduction will not be lost if an incorrect amount is withheld (or reported) by mistake.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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UPDATE: What’s new for Australian business?

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The ATO has recently reminded small businesses of the expanded tax concessions potentially available to them, as outlined below:

-    The pending increase in the small business instant depreciating asset write-off to less than $25,000 (as discussed in further detail above).

-    Accelerated depreciation deductions for primary producers for eligible fodder storage assets, as well as for fencing and water facilities.

-    Assistance for primary producers impacted by drought at Drought Help, or by contacting the ATO on 1800 806 218.

-    A lower company tax rate of 27.5% for companies qualifying as a Base Rate Entity ('BRE').

-    Increased Small Business Income Tax Offset (‘SBITO’) for eligible sole traders and individual partners and beneficiaries.

Finally, the ATO has reminded taxpayers that more businesses are now eligible for most small business tax concessions.

Specifically, from 1 July 2016, a range of small business tax concessions became available to all businesses with an aggregated turnover of less than $10 million (i.e., the turnover threshold).

Previously the turnover threshold was less than $2 million.  The $10 million turnover threshold applies to most concessions, except for:

-    the SBITO – which has a $5 million turnover threshold from 1 July 2016; and

-    the small business CGT concessions – which continue to have a $2 million turnover threshold.

Note: The relevant turnover threshold for accessing the lower company tax rate is $50 million from  the 2019 income year (increased from $25 million in the 2018 income year).

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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Alert: Christmas Gifts and Fringe Benefits Tax

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Editor:  With the holiday season approaching, many employers and businesses want to reward their staff and loyal clients/customers/suppliers.

Again, it is important to understand how gifts to staff and clients, etc., are handled 'tax-wise'.

 Gifts that are not considered to be entertainment

These generally include, for example, a Christmas hamper, a bottle of whisky or wine, gift vouchers, a bottle of perfume, flowers, a pen set, etc.  

Briefly, the general FBT and income tax consequences for these gifts are as follows:

-   gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible; and

-   gifts to clients, suppliers, etc. – no FBT, and tax deductible.

 Gifts that are considered to be entertainment

These generally include, for example, tickets to attend the theatre, a live play, sporting event, movie or the like, a holiday airline ticket, or an admission ticket to an amusement centre.

Briefly, the general FBT and income tax consequences for these gifts are as follows:

-   gifts to employees and their family members – are liable to FBT (except where the 'less than $300' minor benefit exemption applies) and tax deductible (unless they are exempt from FBT); and

-   gifts to clients, suppliers, etc. – no FBT and not tax deductible.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Ban on electronic sales suppression tools

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From 4 October 2018, the Government has banned activities involving electronic sales suppression tools (‘ESSTs’) that relate to people or businesses that have Australian tax obligations. 

The production, supply, possession or use of an ESST (or knowingly assisting others to do so) may attract criminal and administrative penalties.

ESSTs can come in different forms and are constantly evolving, some examples include:

-   An external device connected to a point of sale (‘POS’) system.

-   Additional software installed into otherwise-compliant software.

-   A feature or modification that is a part of a POS system or software.

An ESST may allow income to be misrepresented and under-reported by:

-   deleting transactions from electronic record-keeping systems;

-   changing transactions to reduce the amount of a sale;

-   misrepresenting sales records (e.g., by allowing GST taxable sales to be re-categorised as GST non-taxable sales); or

-   falsifying POS records.

Transitional arrangements are in place for six months starting from 4 October 2018 to 3 April 2019 for possessing an ESST.

Taxpayers may avoid committing an offence for possessing an ESST if they:

-   acquired it before 7:30pm 9 May 2017; and

-   advise the ATO that they possess the tool.

Importantly, the transitional provisions do not apply to the manufacture, development, publication, supply or use of an ESST.

Depending on the offence and severity of the crime, taxpayers can face financial penalties of up to 5,000 penalty units, which currently equates to over $1 million.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Proposed expansion of STP to smaller employers

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Single Touch Payroll (‘STP’) commenced on 1 July 2018 for approximately 73,000 employers who have 20 or more employees.

There is currently legislation before Parliament to expand STP to all employers from 1 July 2019 and it is estimated that there will be more than 700,000 employers who will enter STP as a result.

Even though the proposed expansion is not yet law, the ATO recommends that smaller employers consider voluntarily opting-in to STP early.

The ATO acknowledges there is a large number of very small employers who have less than five employees (‘micro-employers’) who do not currently use a payroll product and has indicated that they are not looking to force them to take up a product to do STP.

Efforts are being made to work with industry to look at some alternate reporting mechanisms.

It is being reported that software developers, and even some of the larger banks, have shown an interest in developing some kind of product that would enable micro-employers to provide the necessary data to comply with STP at a low cost.

Employers who are in an area that has internet issues or challenges are reminded that there are potential exemptions available under STP.

The ATO is currently consulting with focus groups to look at flexible options to transition micro-employers to STP over the next couple of years.

Assuming the relevant legislation passes, the ATO does not realistically expect that everyone will start STP from 1 July 2019 and has indicated that it will be flexible with the commencement date, including the provision of deferrals to help stagger the uptake.

Editor: This is a very positive message from the ATO, particularly for micro-employers.  Hopefully, together with the relevant software developers, they are able to come up with a low-cost and simple alternative for those who do not currently use payroll software to comply with their STP obligations.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Legislation to combat illegal phoenix activity

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The Government has announced a package of reforms to tackle illegal phoenix behaviour. 

By way of background, phoenixing occurs when the controllers of a company strip the company's assets and transfer them to another company, to avoid paying the original company's debts. 

The proposed measures will deter and disrupt the core behaviours of phoenix operators by:

-   creating new criminal and civil offences, attaching the highest penalties available under the law, to target those who engage in and facilitate illegal phoenix transactions;

-   preventing directors from backdating their resignations to avoid personal liability;

-   preventing sole directors from resigning and leaving a company as an empty corporate shell with no directors;

-   restricting the voting rights of related creditors of the phoenix company at meetings regarding the appointment or removal and replacement of a liquidator;

-   making directors personally liable for GST liabilities, as part of extended director penalty provisions; and

-   extending the ATO's existing power to retain refunds where there are outstanding tax lodgments.

A new Phoenix Hotline is also being established, which will make it easier to report suspected phoenix behaviour. 

Editor: According to the Government, the proposed measures are tightly targeted at those who misuse the corporate form, while minimising any unintended impacts on legitimate business restructuring.  Whether they will be able to achieve this goal or not is yet to be seen…

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Increased scrutiny of home office claims

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Last year, 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, which includes home office expenses.

Reportedly, due to a high number of mistakes, errors and questionable claims for home office expenses, the ATO has recently advised that it will be increasing attention, scrutiny and education on these claims this tax time.

In particular, the ATO has flagged their concerns relating to taxpayers who are claiming:

-   expenses they never paid for;

-   expenses that their employer has reimbursed them for;

-   private expenses; and

-   expenses with no supporting records.

Whilst additional costs incurred as a direct result of working from home can be claimed, care must be taken not to claim private expenses as well.

The ATO has indicated that one of the biggest issues they face is people claiming the entire amount of expenses (e.g., their internet or mobile phone), rather than just the extra portion relating to work.

Provided the taxpayer is able to demonstrate that they have incurred additional costs of running expenses (e.g., electricity for heating, cooling and lighting), then these are generally deductible.

In contrast, employees are generally not able to claim any portion of occupancy-related expenses (e.g., rent, mortgage repayments, property insurance, land taxes and rates).

Taxpayers are warned that the ATO may contact their employers to verify expenses claimed for working from home.

In addition, the ATO expects to disallow a lot of claims where the taxpayer has not kept adequate records to prove that they have legitimately incurred the relevant expense and that the expense was related to their work.

As with the claiming of deductions in general, supporting records must be kept when claiming work-from-home expenses, which may include receipts, diary entries and itemised phone bills. 

Importantly, only the additional work-related portion of the relevant expense is deductible.

Advancement in technology has allowed the ATO to deploy sophisticated systems and analytics to spot claims that do not ‘add up’ and claims that are out of the ordinary compared to others in similar occupations, earning similar income.

Finally, the ATO has reminded taxpayers of the ‘three golden rules’ to follow when claiming work-from-home deductions, being:

-   the taxpayer must have spent the money themselves and have not been reimbursed;

-   it must be directly related to earning the taxpayer’s income, not a personal expense; and

-   the taxpayer must have a record to prove the expense.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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NEWS: Black economy recommendations will impact day-to-day business

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Editor: Recently issued draft legislation has focused on introducing new measures to manage the growing cash economy (i.e., the ‘black economy’) in light of the Black Economy Taskforce recommendations and recent Federal Budget announcements. 

Two of these key recommendations are outlined below.

Removing tax deductions for PAYG failure

The Government is currently considering removing tax deductions where businesses fail to comply with their PAYG withholding obligations for payments to employees and contractors from 1 July 2019.

Specifically, deductions are proposed to be denied for these types of payments where the payer has failed to either:

-   comply with their obligations in relation to withholding from these payments; or

-   notify the ATO of the withholding amount (i.e., via their BAS).

Interestingly, deductions will only be denied if no withholding took place or no notification has been made. 

That is, incorrect amounts withheld or reported to the ATO will not impact a taxpayer’s entitlement to deductions.

Further expansion of the taxable payments reporting system (‘TPRS’)

The TPRS was introduced for the first time in the 2013 income year with respect to businesses in the building and construction industry, requiring the reporting of total payments made to contractors for building and construction services each year.

The taxable payments annual report is due by 28 August each year.

Legislation is currently being considered by Parliament to extend the TPRS to the cleaning and courier industries from the 2019 income year.

Furthermore, draft legislation has now been released to further expand the TPRS to the following industries from the 2020 income year:

-   security providers and investigation services;

-   road freight transport; and

-   computer system design and related services.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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The Company Tax Rate Saga

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In the last week of the August Parliamentary sittings, the controversial corporate tax cut plan for the big end of town (i.e., companies with an aggregated turnover of over $50 million) was defeated.

In addition, long-awaited legislation impacting the company tax and franking rates for small to medium companies (i.e., introducing a new ‘base rate entity passive income test’ from the 2018 income year to qualify for the lower 27.5% tax rate) was passed.

This legislation was particularly relevant for company rates applicable to passive investment and ‘bucket’ companies, which may now need to reconsider earlier lodged 2018 company tax returns, as well as the amount of franking credits attached to dividends paid from 1 July 2017.

Additionally, consideration may also need to be given to the company tax rates (and in certain circumstances, the franking rates) previously applied with respect to the 2016 and 2017 income years. 

This is in light of the recently issued ATO compliance and administrative approaches for the 2016, 2017 and 2018 income years.

Editor: Unfortunately, the recent Government delays have created much confusion in this area, and in certain cases, a review and possible amendments may be required for previously lodged returns.

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www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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ALERT: Suburban scammers pushing illegal early access to super

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The ATO has become aware of people in some suburban areas of major cities attempting to encourage others to illegally access their super early (generally for a fee) to help them to purchase a car, to pay debts, to take a holiday, or to provide money to family overseas in need.

The ATO advises that anyone approached by someone telling them that they can access their super early, or anyone hearing about it from family, friends or work colleagues:

-   should not sign any documents nor provide them with any personal details;

-   stop any involvement with the scheme, organisation or the person who approached them; and

-   seek advice from a professional advisor.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

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