ATO areas of interest for the coming year

Grahame Allen • December 15, 2023

As the year draws to an end, the focus of the ATO has moved to the 2024 year. At a recent conference, the Second Commissioner of Client Engagement, Jeremy Hirschhorn, highlighted three areas of focus for the ATO which it says are likely to impact suppliers and clients of all businesses. With the advent of increased cyber-crimes, scams and hacks in Australia in recent times, the ATO, like any other large organisation has taken additional steps to address cyber security and increased protection of personal data to deal with an unprecedented rise in identity-related fraud attempts. For all businesses, it has introduced “client-to-agent linking”, which requires all entities with ABNs (excluding sole traders) to digitally nominate their agent through ATO’s secure online services before the agent can access any data. This will cover approximately 4.7m businesses and will only apply if businesses engage a new agent, change their existing agent, or want to provide additional authorisation for their existing agent. For all individuals interacting with the tax system, the ATO encourages the use of myGovID. This coincides with the Government announcing a tightening of the way in which individuals access the myGov account. The Assistant Treasurer noted that individuals who use their myGovID to log into the ATO will need to use that myGovID for future logins from now on. In other words, it will not be possible to access an ATO account without it. myGovID is an app that proves an individual’s digital identity., Once set up, the app can be used to access government online services without having to prove identity or remember passwords. This can be used for personal or business services, although the myGovID must be linked to an ABN through the relationship authorisation manager to allow users to act on behalf of the business. Anyone over 15 years who has access to a smart device and has a personal email address can set up the service. Protecting the system and taxpayers against fraud will continue to be a key theme in 2024 for the ATO. In 2024, the ATO will also be seeking to address the growth in the collectable debt book. Currently, the collectable component of debt sits at about $50bn and consists of mostly self-assessed debt, with small businesses owing 67% of this $50bn of collectable debt. This does not include disputed debt which is treated separately. According to the ATO, during the pandemic it took a different audit position, chased fewer lodgements, and recovered less debt. This has led to a concerning behavioural shift in businesses after the pandemic which de-prioritised paying tax and super and is increasing relying on unpaid tax and super to prop up the cashflow of some business. While the ATO notes that it is seeking to engage with those businesses to help them understand and pay tax debts and employee super, it is also using its full arsenal to protect employees, clients and customers. One of the ways the ATO is seeking to level the playing field on uncooperative businesses is the reporting of debt information to credit reporting bureaus. Since 1 July 2023, it has disclosed the debts of more than 10,500 businesses that have significantly overdue undisputed tax debts of at least $100,000. Staying on the topic of small businesses, the ATO will be seeking to improve tax performance in 2024. Even though the tax performance of small businesses is currently running at around 87%, the ATO notes that there is a small minority of dishonest businesses operating wholly or partly in the shadow economy that is contributing to the underperformance. To eliminate businesses operating in the shadow economy and reduce honest mistakes by small businesses, the ATO is seeking to build a digital-first ecosystem which will move tax reporting closer to the tax event and have seamless tax and reporting from business source to the ATO. The takeaway message for businesses, especially small businesses for the coming new year is to be proactive and engaged with the ATO in terms of any unpaid tax or super debts. Businesses in general should also be very careful with their data, and should use the most secure method to access government services to prevent financial losses.

Accessing super from age 60 to 65

By Grahame Allen • August 30, 2024
From 1 July 2024, the rules for accessing superannuation became somewhat simplified: the preservation age when you can begin to access your benefits is now effectively age 60. However, until you reach age 65, there are still potential restrictions on how you can access your super. You’ll need to “retire” before you can make lump sum withdrawals from your super account or move it into the favourable “retirement phase” when investment earnings within the fund become tax-free. If you’re aged between 60 and 65 and wish to access some of your super, now is a good time to re-examine the rules. 60 is the new threshold For anyone born after 30 June 1964, preservation age is simply age 60. You may recall that some members could previously begin to access their superannuation at various stages between 55 and 59 years. Those lower preservation ages applied for older Australians who are now all over 60 and who have already attained their preservation age. Therefore, those rules regarding ages 55 to 59 are no longer an active consideration. How much super can I access? If you are between 60 and 65 years old but haven’t yet retired, you can commence a transition to retirement income stream (TRIS). This allows you to receive a regular income of between 4% and 10% of your pension account balance each year. If you want to access more of your super, or withdraw it as a lump sum, you’ll need to satisfy a further condition of release. This includes: reaching age 65; or “retirement”. Meeting these conditions also becomes relevant for tax purposes. While TRIS payments to a person aged 60 or over are generally tax-free – regardless of whether they are retired or not – the TRIS itself does not move into the “retirement phase” until a further condition such as retirement (or reaching age 65) is met. This means that while you may start a TRIS, the TRIS will not qualify for the tax exemption on the investment earnings from fund assets that support the TRIS until you meet one of those further conditions. What does “retirement” mean? To satisfy the “retirement” condition, the first key requirement is that an arrangement under which you were gainfully employed must have come to an end. If you had already reached age 60 when that position of gainful employment ended, there are no further requirements, and your future work intentions are not relevant. However, if you had not yet reached aged 60 when that position ended, the trustee of your fund must be reasonably satisfied that you intend never to again become gainfully employed, either on a full-time or a part-time basis. For these purposes, “part-time” means working for at least 10 hours per week. This means you could intend to work for less than 10 hours per week and still meet the “retirement” condition. Planning is key Any withdrawal strategy should be carefully planned beforehand to ensure you understand the implications of accessing your super. There are many factors to consider, such as: the ongoing requirement to withdraw minimum pension amounts each year if you start a pension; implications for your transfer balance account; and interaction with the Age Pension. Contact our office if you need help understanding your eligibility for accessing your super, or to begin a discussion about your long-term retirement planning.

Super guarantee a focus area for ATO business debt collection

By Grahame Allen • August 16, 2024
The ATO has revealed its focus areas for this year, with business debt collection identified as a key strategic priority. In its Corporate Plan 2024–25, the ATO says that it will have “an increased focus on business debt including superannuation guarantee, pay as you go withholding and goods and services tax”. This is a timely reminder for all businesses to ensure they’re meeting their obligations. Superannuation guarantee (SG) remains an important compliance focus. The most recent ATO statistics show that although 94% of employers are meeting their SG obligations without ATO intervention, the ATO still raised over $1 billion in SG charge liabilities in the 2022–23 financial year. That figure reflects a lot of extra super liability for Australian businesses that could have been avoided if they had paid the required SG contributions on time. To ensure your business doesn’t incur these extra liabilities, you must pay SG contributions for your employees and eligible contractors on time and to the correct fund. The quarterly due dates are as follows: Q1 (1 July – 30 September): 28 October; Q2 (1 October – 31 December): 28 January; Q3 (1 January – 31 March): 28 April; and Q4 (1 April – 30 June): 28 July. Some important things to remember include: Some contracts and awards may require you to pay contributions more regularly than quarterly. If you make contributions to a commercial “clearing house”, the contribution is considered to be paid when it’s received by the employee’s fund, not by the clearing house. However, if you use the ATO’s Small Business Superannuation Clearing House, the contribution is “paid” when received by that clearing house. From 1 July 2026, employers will need to pay SG at the same time as salary and wages (commonly known as “payday super”). What if my business misses an SG payment? Taking action promptly is essential to accessing the ATO’s support services and minimising your exposure to penalties. The ATO says that it’s willing to work with employers who want to put things right. When you miss a payment, you must lodge an SG charge statement with the ATO within one month of the missed quarterly due date. Lodging on time is important, as failing to do so will incur a further penalty known as a “part 7 penalty”, which can be up to 200% of your SG charge liabilities. Also, when you lodge on time, you may then be able to set up a payment plan to pay your liabilities in instalments. You can ask the ATO for an extension to the lodgement date, but you must do this before the due date. You’ll also need to pay the SG charge. This charge is more than the amount of contributions you would have paid if you had paid them on time, and it’s not deductible. The charge comprises: the amount of the missed contributions (but calculated on salary and wages, including overtime, which is more than the usual “ordinary time earnings” basis for on-time SG contributions); interest of 10% pa (which accrues from the start of the relevant quarter); and an administration fee of $20 per employee, per quarter. This is paid to the ATO, not your employee’s fund. General interest charge will accrue on any outstanding SG charge, and the ATO may also issue a director penalty notice if it remains unpaid. We’re here to help Mistakes happen, but getting on top of problems early will lead to a better outcome for your business. Contact our office for expert assistance in addressing your business’s SG obligations.

Claiming the tax-free threshold: getting it right

By Grahame Allen • August 9, 2024
If you’re an Australian resident for tax purposes, you don’t have to pay income tax on the first $18,200 you earn each year, from any source. This is called the “tax-free threshold”. If you have multiple income sources, it’s important to consider which one you’ll claim it for. The ATO advises claiming the tax-free threshold once from your “main” payer – typically the job, gig or payment that pays you the most during the year. That payer will not withhold income tax from the first $18,200 they pay you but will withhold tax from payments once your earnings go over the threshold. At the end of the financial year, the ATO calculates your total income and tax withheld. If not enough tax has been withheld, you can expect a tax bill. If more tax has been withheld than you owe for your total earnings, you can expect a refund. Claim the tax-free threshold When starting a new job, your employer should ask you to complete a withholding declaration. To claim the tax-free threshold, you must be an Australian resident for tax purposes on the declaration and answer “yes” to the question “Do you want to claim the tax-free threshold from this payer?”. Where you answer “no”, tax will be withheld from all income from that payer. Avoid claiming the threshold from multiple payers simultaneously unless you’re sure you’ll earn less than $18,200 total for the year. Overclaiming might make your take-home pay higher each pay cycle but will likely mean a tax debt later. Changing jobs When changing jobs you can claim the threshold from your new payer even if you have claimed it from your previous one. If you add a job or side gig that will provide more income than your existing main payer, you can change your claim at any time. Altering your tax-free threshold claim Change your claim using ATO online services, via your myGov account: Sign in to myGov and access ATO online services Select Employment from the menu Choose either New employment (for a new job) or Employment details (for an existing employer) Update your tax and super details as needed. Don’t forget your side gig If you’re earning income outside of employment (eg as a sole trader) you’ll need to pay tax yourself on that income. Consider setting aside a percentage for tax or using pay as you go (PAYG) instalments each time you are paid.
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