February 2022 TaxWise® News

TaxWise® News_Business_Feb2022

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Small Business Updates

Welcome to 2022! January is traditionally a quiet time for many businesses, but the ATO hasn’t stopped providing useful information to help small business owners and workers navigate what is sure to be another busy year.

Here are the latest updates from the ATO.

ATO help for small businesses

The ATO has a range of support available for small businesses experiencing difficult

situations, such as natural disasters, mental health challenges or financial hardship. The

difficulties may be related to the COVID-19 pandemic.

Depending on your circumstances, the ATO may be able to:

• give you extra time to pay your tax;

• set up a payment plan tailored to your situation;

• re-issue tax returns, activity statements and notices of assessment (e.g. if you need to access government payments or concessions);

• help you reconstruct lost or damaged tax records;

• prioritise any refunds you are owed;

• remit penalties or interest charged during the time you have been affected.

Tip! Talk to your tax adviser if you are experiencing difficulties meeting your tax obligations.

They can contact the ATO on your behalf.

Do your employees travel for work? Is it a travel allowance or

LAFHA?

If you have employees who travel for work, the ATO has published new guidance (Taxation

Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food

and drink expenses travel allowances, and living-away-from-home allowances) to help you

determine whether to pay them a travel allowance or a living-away-from-home allowance

(LAFHA).

It is necessary to determine whether that allowance is a travel allowance or a LAFHA as they are subject to different tax treatments.

What is a travel allowance?

A travel allowance is an allowance that an employer pays to an employee to cover losses or

outgoings that:

• an employee incurs for travel away from their ordinary residence (either within or outside Australia) that they undertake in the course of their duties as an employee; and

• are incurred for accommodation or for food or drink expenses, or expenses that are incidental to the travel.

A travel allowance will need to be included as an amount in your employee’s assessable

income and may need to have tax withheld from it under the PAYG withholding rules.

What is a LAHFA?

A LAFHA fringe benefit may arise if you pay an employee an allowance to cover additional

expenses and any disadvantages suffered due to them being required to temporarily live

away from their normal residence to perform their employment duties. Additional expenses

are not considered deductible expenses.

A LAFHA payment you provide to your employee may be considered a LAFHA fringe benefit

and will need to be reported in your annual fringe benefits tax (FBT) return.

Note! As a rule of thumb, the ATO will treat an allowance as a travel allowance if the period

away from home does not exceed 21 days.

Cancelling your GST registration

You or your tax adviser must cancel your GST registration within 21 days of:

• selling or closing your business; or

• changing your business structure – this includes changing from a partnership to a company, unless the old entity carries on another business.

You can choose to cancel your GST registration if your GST turnover is below the threshold

for compulsory registration ($75,000) unless you:

• are a taxi driver (including ride-sourcing or chauffeur services);

• represent an incapacitated entity who is registered or required to be registered for GST – for example, an individual who is bankrupt or a company in liquidation;

• are an Australian resident who acts as an agent for a non-resident that is registered (or required to be registered) for GST.

The ATO advises on its website that the date you choose to cancel your GST registration

should be the last day you want to be registered. The ATO usually cancels your GST

registration from the date you choose. However, you cannot:

• cancel your registration retrospectively if you are still operating on a GST-registered basis after the date you choose;

• continue to operate on a GST-registered basis after your cancellation date; and

• cancel if you have already lodged an activity statement for the period containing the date of cancellation.

You can cancel your GST registration:

• through Online services for business;

• through your registered tax adviser;

• by phone on 13 28 66 – between 8.00am and 6.00pm, Monday to Friday; or

• by completing the Application to cancel registration (NAT 2955) through online ordering and posting it to the ATO.

Note! GST adjustments to previous input tax credits claimed may be required on

cancellation of your GST registration for certain acquisitions. Talk to your tax adviser for

more information.

JobMaker Hiring Credit

There are four periods left for claiming the JobMaker Hiring Credit. The most recent period

ended on 28 January 2022.

Note! Remember, you can only claim payments relating to employees hired up until

6 October 2021. Employees hired after that date are not eligible employees.

The scheme will end on 6 October 2022.

Do you have your Director identification number?

A Director identification number (Director ID) is a unique identifier that a director applies for once and keeps forever. All directors, including alternate directors, are required to have a Director ID.

Who needs a Director ID?

You will need a Director ID if you are a director or an alternate director (acting in that

capacity) of:

• a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act). This includes the director of the corporate trustee of a self-managed superannuation fund (SMSF);

• an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

Applications for a Director ID are available at the new Australian Business Registry Services

(ABRS) website. You’ll need a myGovID with a Standard or Strong identity strength to apply for a Director ID online.

Note! You will need to apply for your Director ID yourself to verify your identity. Your

authorised tax, BAS or ASIC agent cannot apply for you.

When to apply?

When you must apply for a Director ID depends on the date you become (or became) a

director.

Corporations Act directors

CATSI Act directors

Protect your business from cyber scams

The ATO has warned businesses that cybercriminals are targeting them with business email

compromise scams.

Cybercriminals send fraudulent emails posing as a legitimate business contact or staff

member. They typically request a change in bank account details for a deposit, wages or

invoice payment. Victims then unknowingly send money to the cybercriminal.

These fraudulent emails may come from hacked email accounts, or cybercriminals might

register domain names that are similar to legitimate companies. ACCC Scamwatch reported

that more than $132 million was lost as a result of business email scams in 2019 alone.

The ATO advises that you can protect yourself, and the reputation of your business, by

taking a few simple steps.

• Verify payment details: If you hold sensitive financial records, ensure you confirm the identity of anyone who requests changes to their information.

• Alert your staff: Train your employees to identify suspicious requests or emails that may link to fake websites built to capture passwords.

• Secure your email account: Use multi-factor authentication or, if this is not possible, a strong unique passphrase that would be difficult to hack.

Tax crime prosecution

From failing to lodge tax returns to submitting false work-related expenses, the ATO has

made is clear that it will not tolerate any form of tax crime.

The ATO has reported a number of their latest prosecution outcomes.

Failure to provide documents

This case involved a well-known company, McDonald’s Australia.

On 26 July 2019, the ATO issued a formal notice requiring McDonald’s Australia to produce

documents with a compliance date of 30 August 2019. However, the formal notice was not

complied with, and the company was prosecuted.

McDonald’s Australia pleaded guilty to one count of failing to comply with an information

gathering notice and they were subsequently convicted and fined. In delivering his sentence, the Magistrate commented that general deterrence was important for this kind of offending.

In its media release, the ATO said that instances where taxpayers have failed to comply with requests for information rarely result in criminal convictions, as most work with the ATO to meet their obligations. However, the ATO said it will initiate prosecution action where taxpayers hold back necessary information or documents.

False claims catch up with tradie

A former painter and decorator – Mr K – who made a series of false claims in relation to his

income and deductions has been handed a criminal conviction.

When Mr K lodged his 2018 income tax return, he received a warning that his claims were

unusually high compared to other people with a similar income and occupation, but he

proceeded with them anyway.

Later that month, he took it a step further, increasing his tax withheld and work-related

expenses by more than $5,000. He then made another five amendments, exaggerating his

claims further and further each time to generate higher refunds.

The first few refunds were paid out, but the remaining four were stopped pending the result of an audit.

Mr K later admitted he didn’t have any documents to substantiate the claims. As such,

everything except a $150 laundry deduction was disallowed.

Mr K was ordered to pay $16,560 including fines. In delivering the sentence, the Magistrate

commented that these were very serious charges, adding that everyone is expected to be

truthful when submitting returns.

Refund and identity fraud

A payroll officer – Mr R – who tried to obtain more than $180,000 by exploiting his

colleagues’ identities has been sentenced to four years’ jail.

In his capacity as a payroll officer, Mr R had access to confidential employee information. He

used this information to lodge 29 false income tax returns in the names of 28 different

people. He tried to cover his tracks by using a false identity to withdraw the funds, but the

ATO soon caught up with him.

In total, Mr R obtained $64,541 in fraudulent refunds. He attempted to get his hands on an

additional $117,824, but the ATO stopped those refunds before they reached his bank

accounts.

What’s in the pipeline?

Federal election 2022

As we all know, there will be a Federal election in a few months. The ‘pundits’ seem to think

it will be in May (it must be held by 21 May 2022).

If the pundits are right, Parliament is likely to sit only in February and March. Five days have

been set aside for the House of Representatives and the Senate, and the House of

Representatives only will sit for an additional five days – not much time to pass legislation!

Parliament is not likely to sit again once the election is called until 9 August 2022. This

means that there are minimal opportunities for the Government to pass its legislative agenda before the election, and there can be ongoing uncertainty in relation to measures that have been announced but are not yet enacted.

The two major tax measures contained in bills that are still before Parliament are:

• the extension of temporary full expensing (for depreciating assets) by 12 months to 30 June 2023 – your business will be able to claim an outright deduction for the cost of depreciating assets you acquire (and install ready for use) before 1 July 2023 (this includes second-hand assets if your business has an aggregated turnover less than $50 million); and

• the extension of the loss carry back measure for companies to include the 2022–23 income year (a loss can be carried back as far as 2018–19).

Other tax-related measures before Parliament include:

• removing the superannuation guarantee $450 monthly income threshold;

• a change to the taxation of employee share scheme interests subject to deferred taxation; and

• making permanent some of the company administration related measures that were implemented to accommodate COVID-19 related lockdown restrictions – e.g. hybrid meetings and using technology in relation to company documents.

Cyclone Seroja grants

Qualifying grants made to small businesses and primary producers affected by Tropical

Cyclone Seroja will be tax-free. The Government announced this measure in the 2021–22

Mid-Year Economic and Fiscal Outlook (MYEFO) last December.

Tip! Now is a good time to talk to your tax adviser if you think any upcoming measures might affect you.

Key tax dates