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Budget 2018 update – Black Economy – increase in ATO funding

The Government will provide $318.5 million over 4 years to implement additional strategies to combat the black economy.

As part of this, the Tax Office will:

  • implement new “mobile strike teams”;
  • increase its audit presence;
  • start a Black Economy Hotline (that will allow for the community to report black economy and phoenix activities);
  • improve government data analytics and data matching;
  • increase information sharing between government enforcement agencies; and
  • enhance educational activities.

By way of background, the Tax Office currently receives funding through a terminating program called the “Black Economy Taskforce: one year extension of funding for ATO audit and compliance activities” – which ceases on 30 June 2018.

The Budget papers state that feedback from industry, business and community stakeholders “supported additional resourcing to the ATO in recognition of the enforcement challenges due to the size and clandestine nature of the black economy”.

There are no details in the Budget papers and media release as to the increased audit presence. The media release does indicate, however, a desire for a more visible and targeted enforcement.

The revenue expectations linked with this expenditure are certainly impressive, namely $3 billion over the forward estimates period (ie the next 4 years).

Date of effect

The funding will commence on 1 July 2018.

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Budget 2018 update – No tax deduction for non-compliant PAYG and contractor payments

Measures will be enacted to ensure that taxpayers will not be able to claim deductions for payments to their employees such as wages where they have not withheld any amount of PAYG from these payments, despite the PAYG withholding requirements applying.

Similarly, the Government intends to remove deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (again despite the withholding requirements applying).

This was recommended by the Black Economy Taskforce.

The revenue expectations linked with this expenditure is quite modest, ie “a small unquantifiable gain to revenue over the forward estimates period”.

Date of effect – The measure will commence on 1 July 2019 (ie next year).

Source: Budget Paper No 2 [p 24]

 

Beware of scammers impersonating energy and telecommunications companies

The ACCC is warning consumers to beware of scammers impersonating energy and telecommunications providers and demanding payments.

Scamwatch has received 5000 reports of fake billing scams in the last 12 months, with reported losses of close to $8000.

“The scammers typically impersonate well known companies such as Origin, AGL, Telstra and Optus via email, to fool people into assuming the bills are real,” ACCC Deputy Chair Delia Rickard said.

“They send bulk emails or letters which include a logo and design features closely copied from the genuine provider. The bill states the account is overdue and if not paid immediately the customer will incur late charges or be disconnected.”

“Alternatively, the bill may claim that the customer has overpaid and is owed a refund or it may simply say the bill is due and ready to pay,” Ms Rickard said.

New South Wales residents reported the highest number of incidents of the fake billing scam, with 1779 households reporting being victims, compared to 1275 in Queensland and 1245 in Victoria, 485 in Western Australia, 462 in South Australia, 132 in the ACT, 117 in Tasmania and 38 in the Northern Territory.

“Older Australians should particularly be wary of emails pretending to be from utility companies, with people over 65 reporting the most fake utility billing scam incidents,” Ms Rickard said.

“I advise consumers to contact their communications or energy provider directly via the company’s official channels to verify that the email or letter is actually from them.”

“Customers should never use the contact details provided on the suspicious email or letter but instead use an independent source to locate contact details such as a past bill or the phone book.”

In one case reported to the ACCC, a customer received a fake Telstra bill in the mail. The bill stated the customer’s account was overdue and immediate payment was needed. The customer dialled the phone number provided and was asked for his date of birth and driver’s licence number to confirm his identity.

“If customers are duped into phoning scammers they will then attempt to steal as much personal information as they can,” Ms Rickard said.

Other tips on how consumers can protect themselves:

  • If you receive a bill outside of your normal billing cycle, or don’t expect to receive an overdue notice, call your provider to check whether it is legitimate.
  • If you are not a customer of the company simply delete the email.
  • Never click on links or open attachments in an email from an unverified sender – they may contain a malicious virus.
  • Never send money or give credit card details, online account details or personal information to anyone you don’t know or trust and never by email or over the phone.
  • Keep your computer secure – always update your firewall, anti-virus and anti-spyware software, and only buy from a verified source.

ATO data matching – Motor Vehicles

The ATO will acquire information for the 2016/17, 2017/18 and 2018/19 financial years, on vehicles that have been transferred or newly registered where the purchase price or market value is equal to or greater than $10,000. Data will be acquired from the eight state and territory motor vehicle registry authorities.

It is estimated that records of 1.5 million individuals in each year will be electronically matched with ATO data holdings to identify non-compliance with obligations under tax and superannuation laws.

The Gazette notice for the data matching program notes the objectives which include:

  • • obtaining intelligence about taxpayers buying and selling motor vehicles to identify risks and trends of non-compliance with tax and super obligations
  • • identifying and addressing taxpayers buying and selling vehicles who may not be meeting their obligations to register and lodge returns (including activity statements) and ensure the correct reporting of income and entitlement to deductions and input tax credits
  • • identifying taxpayers of interest for investigation, such as sellers, licenced dealers, fleet managers, leasing companies or representatives of these taxpayers to determine if interposed proxy ownership is used to conceal the real accumulation of wealth
  • • identifying taxpayers who have not met obligations regarding GST, fringe benefits tax, luxury car tax, fuel schemes and income tax.

Source: Commonwealth Government Gazette C2018G00277, 13 April 2018.

Almost $18 billion of super waiting to be claimed

The ATO today announced its latest figures on lost and unclaimed superannuation accounts.

As at 30 June 2017, there are over 6.3 million lost and ATO-held super accounts with a total value of almost $18 billion.

The figures show that super funds are holding $14.12 billion of lost super, with a further $3.75 billion of unclaimed super held by the ATO.

Assistant Commissioner Debbie Rawlings said the easiest way for people to keep track of their super, find lost or unclaimed super, or combine their accounts is by using ATO online services through myGov.

“Over the past four financial years we’ve reunited 1.68 million accounts worth $8.12 billion with the account owner, and there’s plenty more to be found,” Ms Rawlings said.

“By using myGov to track down your super, the money will be transferred to your preferred fund, generally within three working days.

“More people are finding their lost and unclaimed super through our online services every year, but these figures show there are many people who still may not realise how quickly and easily they can check their super accounts.

“Once you have linked your myGov account to ATO online services, you will be able to view all your super account details, including any that have been lost or forgotten, and you can choose to claim or transfer your super online. Alternatively you can call the ATO Super Helpline on 13 10 20 to request direct claim or transfer paper forms, or speak to your super fund.

People can lose contact with their super funds when they change jobs, move house, or haven’t updated their details with their super fund. They may also lose track of their super from accounts established earlier in their career. While the number of people with multiple accounts has been falling, there are still almost 2.3 million Australians with three or more super accounts.

“You might choose to keep multiple accounts, but if you consolidate your multiple super accounts into the one you prefer, you’ll avoid paying multiple sets of fees and charges. If you’re not sure whether to consolidate your accounts, check with your super fund who can advise you on issues such as insurance that may be attached to your accounts.” Ms Rawlings said.

When is super considered to be ‘lost’?

The term ‘lost superannuation accounts’ is used to refer to accounts held by super funds where they have lost contact with the fund member. By law, after a period, ‘lost super accounts’ and balances are transferred to the ATO and are then considered to be ‘unclaimed super’ held by the ATO.

Unclaimed super

For the first time, the ATO is publishing unclaimed super accounts, in addition to lost super accounts held by funds.

These accounts are held by the ATO where the fund is unable to contact the member or the member’s account has not received contributions for five years. Accounts of this nature are transferred to ATO to protect the funds from ongoing fees.

More information

To find out how to manage your super and view all your super accounts, including lost and unclaimed super accounts, visit ato.gov.au/checkyoursuper

Spell out who gets our Super – to avoid problems

Binding Death nominations in Superannuation Funds are time limited, not a ‘Set and Forget’ decision.

Why it is important? Changes in Life circumstances, family death, remarriage etc may impact of the effectiveness of your Binding Death Nomination [BDN].

If you don’t have one, then who gets you Super is usually at the Trustees discretion. This is not much of a problem if you are married and want your Super to pass to your spouse.

But if you have remarried and have a blended family, the person specified in the BDN might not be the person you want your Super to pass to. Without a valid Binding Death Nomination, how can the Trustee really know where you wanted your Super to?

There are a number of issues to be aware of:

  • Timing – Binding Death Nominations generally have a 3 year time limit.
    • A number of cases have resulted from lapsed BDNs where the member didn’t realise that the nomination had lapsed.
  • Beneficiaries – Check that the beneficiaries named in the BDN are valid under super law
    • Super law says you must nominate a ‘dependent’ which includes
      • spouse,
      • child of any age,
      • someone financially dependent on you or in an interdependent relationship and/or
      • your legal personal representative – often executor of your will

YOU SHOULD UPDATE YOUR BDN AS YOUR FAMILY CIRCUMSTANCES CHANGE

Make sure that the beneficiary is valid. A young single persona may want to nominate their parents, but is unable to as parents would not be a dependent under super law.

In this case, and if no person can be found to fit the definition of dependent, then you are probably better to nominate you Legal Personal Representative and make any distribution arrangements via your will.

This is especially important if you move in with a new partner. The super benefit may not be much, but the death benefit may be substantial. If the new partner can prove being a spouse, any benefit may flow to the partner. This can be overcome by directing the Binding Death Nomination to the Legal Personal Representative for distribution via the will.

This plan would also effective if you have had a change in family arrangements, and you want your super to go to particular people.

  • Be consistent – In IOPPOLO’s case [Iopollo v Conti (2013) WASC 389. The member had her will prepared by her solicitor and her BDN was completed by the financial planner. In her will she gave everything to her husband and in the BDN gave her super to her kids. The trust deed of her SMSF required the BDN to be renewed every 3 years. She died just after the BDN had lapsed and the husband (not the father of the children) became the trustee of the Fund and gave himself the super.

 

  • Income stream – if you are receiving a super pension, consider seeking advose whether a reversionary pension is appropriate, where you income stream automatically continues to be paid to your beneficiary; rather than a BDN where there may be issues around the transfer balance cap under the new super rules.

If you have accumulation and pension interests in super, you will now need BDN that deal with both interests

Finding your lost super now that Superseeker decommissioned

The ATO has decommissioned the SuperSeeker online service for individuals.

The system was due to be decommissioned April 2017. However, due to recent system outages which began in December 2016, the ATO has decided not to revive this system.

Individuals can manage their super using ATO online services through myGov.

Who can have lost super?

Your super fund will report you as a lost member if either:

  • they have not been able to contact you
  • they have not received any contributions or rollover amounts for you in the last five years
  • your account was transferred from another fund as a lost member account and no new address has been found.

The ATO maintains a register of reported lost members but the super fund still holds your monies.

Who can have unclaimed super?

Super funds are required to report and pay unclaimed super money to us twice a year. The following are the unclaimed monies that we may hold on your behalf:

  • unclaimed super money for
    • a member 65 years old or older
    • a non-member spouse
    • a deceased member.
  • unclaimed super money of former temporary residents
  • certain accounts belonging to lost members
    • lost accounts with balances of less than $6,000 (small lost member accounts)
    • lost accounts which have been inactive for a period of five years and have insufficient records to ever identify the owner of the account (insoluble lost member accounts).

 

More information at ATO Website – Lost Super page

Commissioner’s statement on ATO systems

The Commissioner has said that claims made in media that Tax Time 2017 is under threat due to the ATO’s recent system outages were “completely without foundation”. He said that the ATO is “absolutely confident that taxpayers will be able to lodge their returns and receive refunds on time from 1 July”.

According to the Commissioner, initial indications are that there has been a failure by Hewlett Packard Enterprise (HPE) to provide contracted services in a reliable way and ensure stability of the ATO systems. The cause of the failures will be informed by the review led by PwC that the ATO commissioned after the first outage in December 2016. The ATO technicians are working with HPE’s global team of experts to fully replace the affected hardware.

Source: ATO website, 8 February 2017.

Working Holiday makers

The Australian Governement has recently changed the way that Working Holiday makers are taxed.

From 1 January 2017 – as a working holiday maker – the first $37,000 of your income is taxed at 15%, with the balance taxed at ordinary rates.

You are a working holiday maker if you have a visa subclass:

  • 417 (Working Holiday), or
  • 462 (Work and Holiday).

As a working holiday maker your employer also has to pay super for you if you are eligible. When you leave Australia you can apply to have your super paid to you as a Departing Australia Superannuation Payment (DASP). The tax on any DASP made to working holiday makers on or after 1 July 2017 is 65%.

Most people who come to Australia for a working holiday or to visit will remain foreign residents for tax purposes. This includes people on visa subclass 417 (Working Holiday) or 462 (Work and Holiday) (backpackers).

EMPLOYERS ARE REQUIRED TO REGISTER

Only employers of working holiday makers are required to register with the ATO as employers of working holiday makers. Working holiday makers do not register.

If your employer is registered with the ATO they will withhold tax from your pay at 15% on the first $37,000 of income.

Example 1

Gorge is on a 417 Working Holiday visa and has started work for Paul’s pickles. As Paul is a registered employer of working holiday makers, 15% tax will be withheld from Gorge’s pay.

Gorge earned $500 in the first week and had $75 tax withheld.

If your employer is not registered with the ATO as an employer of working holiday makers they must withhold tax from your pay using foreign resident tax rates. Foreign resident tax rates start at 32.5%.

Example 2

Aleks is on a 417 Working Holiday visa and started working for Pamela’s berries. As Pamela is not registered as an employer of working holiday makers, Pamela will withhold tax at the foreign resident tax rates starting at 32.5%

Aleks earned $500 in the first week and had $162.50 tax withheld.

 

Impact on the tax free threshold

Most working holiday makers will be foreign resident taxpayers and not be eligible for the tax free threshold.

If you are a resident, you will be eligible for the tax free threshold but it will be impacted by any working holiday maker income you earn. Any working holiday maker income is dealt with first and effectively reduces your tax free threshold.

Departing Australia Superannuation Payments (DASP)

Employers are required to make super contributions on behalf of their eligible employees to fund retirement.

If you worked and earned super as a working holiday maker, your super will be taxed at 65% when it is paid to you. This DASP tax rate for working holiday makers is effective from 1 July 2017.

You can apply for the DASP after you left Australia and met all eligibility.

 

Federal Court rules that Uber is a taxi Service – ATO reaction

The Federal Court  in the case Uber BV v FCT 2017 – 2017 ATC 20-608 stated that the ride sharing services offered by an Uber driver constituted a supply of “taxi travel” under the GST Act.

This confirms that ATO’s previously held view, and the ATO will contrinue to administer the law according to its previously published advice until there is a different decision.

Clients are operating a ride-sourcing enterprise are reminded that they will have to:

  • keep records,
  • have an Australian Business Number (ABN),
  • register for GST regardless of how much they earn,
  • pay GST on the full fare received from passengers for each trip they provide,
  • lodge activity statements and
  • include income from ride-sourcing in their income tax returns.

Drivers are also entitled to claim income tax deductions and GST credits for GST paid on expenses apportioned to the ride-sourcing services they have supplied.

Taxpayers are reminded that the ATO using data matching, and where it matches people who provide ride-sourcing through data matching, it will continue to write to them to explain their tax obligations.