Foreign resident capital gains withholding (FRCGW) of 12.5% applies for all property sales of AUD$750,000 or more.
At a minimum, that is AUD$93,750 being withheld from the sale and paid to the Australian Tax Office, unless there is an approved variation.
The most common reasons why a seller may apply for a variation include:
making a capital loss
not having an income tax liability
foreclosure.
In 2023 over 60% of applications for variations were lodged late, affecting settlement. When clients are too late in applying, the conveyancer or solicitor has no choice but to withhold 12.5%.
Tips
Include the sales contracts with the variation application
Variations must be lodged online at least 28 days before property settlement to ensure processing time
The main residence exemption doesn’t apply to foreign residents
Australian residents for tax purposes must have a clearance certificate before settlement to prove their residency for tax purposes, so no withholding occurs.
ATO update introduces SMSF bank account validation aimed at improving the precision and security of superannuation contributions
Given the proximity of the next SG contribution deadline on 28 April 2024, it is important to take action ahead of this date to prevent potential compliance issues.
Key points
The ATO implemented a pivotal update within the Small Business Superannuation Clearing House (SBSCH) on 15 March 2024
This new system feature affects all small employers who use the SBSCH to pay superannuation to employee SMSFs
The ATO’s validation process requires small employers using the SBSCH to ensure perfect alignment between their employees’ SMSF bank account details and the corresponding fund bank account details recorded by the ATO
The validation focuses on the BSB and account number as registered under the SMSF’s Superannuation Role within ATO systems. For any employee where there is no exact match, the SBSCH will not process their superannuation payment.
Action Required: Review Employee Records
The ATO is contacting small employers likely to be impacted by the new SBSCH SMSF bank account validation process.
However, with SG obligations for the March 2024 quarter due no later than 28 April 2024, it is important for small businesses to act proactively.
If you are a small business using the SBSCH, it is important that you contact your employees to confirm that the SMSF bank account they pay superannuation contributions to, is the same as the SMSF bank account registered against the superannuation role with the ATO.
Where employees are unsure how to check if the bank account their employer makes super contributions to is the same as the one registered with the ATO, please contact Allan Hall for assistance on 02 9981 2300.
Should there be a need for an employee to amend SMSF bank details held by the ATO, it is crucial to communicate these changes to all fund members as the ATO will issue email or text alerts to ensure all fund members are informed.
Small employers delaying the review and update of their employees’ SMSF bank records risk facing SG shortfalls and potential penalties as there may be insufficient time to rectify a discrepancy.
The rising number of older individuals managing their own Self-Managed Superannuation Funds (SMSFs) highlights the importance to address potential issues related to incapacity within this demographic.
The Auditors Institute has stressed the likelihood of an increase in conversations about capacity issues, in particular about establishing processes to address scenarios proactively such as:
SMSF members expressing concerns about their own or their spouse’s ability to comprehend complex superannuation concepts should prompt advisers to consider incapacity safeguards
The importance of having mechanisms such as a well-defined trust deed, enduring powers of attorney (EPOA) and legal representatives in place to mitigate risks associated with potential incapacity among SMSF members.
The substantial size of SMSF portfolios, with an average balance of approximately $1.39 million, and the collective responsibility held by over a million SMSF members, with an average balance of $745,000, underscores the necessity for proactive discussions surrounding incapacity.
ATO data has shown that approximately 42% of all SMSF members are aged 65 or older, with almost equal representation between males and females.
The need to consider incapacity issues in SMSF management, especially with nearly half of SMSF members being over the age of 65, was emphasised by the ATO’s SMSF statistics for the 2021-22 financial year.
Audit Insurance: A different perspective on a wise investment
In the dynamic world of business, facing an Australian Taxation Office (ATO) audit can be a daunting and costly experience for both business owners and individual taxpayers alike.
However, did you know that already 15% of Allan Hall business clients have chosen to secure their financial well-being by opting for audit insurance?
This strategic decision is not just about protecting finances; it’s about ensuring peace of mind during potential ATO reviews.
The Cost of an ATO Audit
The average cost for professional fees associated with a standard ATO review of a proprietary limited (Pty Ltd) company can be as high as $18,000. This figure includes the expenses incurred in navigating through the intricacies of tax regulations, responding to ATO queries, and addressing any discrepancies that may arise during the audit process.
The Affordable Solution
Enter audit insurance — a financial safety net designed to alleviate the burden of exorbitant audit-related expenses. For an average annual cost of around $600, businesses can secure comprehensive coverage that not only shields them from the financial impact of an ATO audit but also allows them to navigate the process with professional support.
Why Choose Audit Insurance?
1. Cost Mitigation:
Shield your business from hefty expenses associated with ATO audits, including accounting and legal fees.
The annual investment in audit insurance is minimal compared to the potential costs of an unexpected ATO review.
2. Peace of Mind:
Focus on running your business without fear of unexpected financial setbacks due to audits.
Audit insurance provides peace of mind, allowing you to concentrate on growth and development rather than compliance concerns.
3. Professional Support:
Freedom to access our team of experts to assist in handling ATO audit queries ensures that your business is in capable hands.
Receive guidance throughout the audit process, ensuring compliance and minimising the risk of financial penalties.
Being prepared for unforeseen challenges is a mark of a prudent entrepreneur. Audit insurance emerges as a sensible investment, providing a safety net against the potential financial impact of ATO audits.
With an average annual cost that pales in comparison to the potential expenses of an initial review or an extensive audit, business owners can make an informed decision to safeguard their financial health. In the end, the choice is yours but with audit insurance, you can make that choice with confidence and financial security.
The ATO is in the process of removing hyperlinks from all outbound unsolicited SMS by Tax Time 2024.
Removing hyperlinks is a scam-preventative measure. It will help protect the community by making it easier to identify legitimate ATO SMS interactions and provide trust and confidence in the ATO’s tax, superannuation and registry systems.
There has been significant growth in the use of SMS by cybercriminals.
Throughout the 2022–23 financial year, SMS scams impersonating the ATO brand, products, services and employees increased by over 400%.
Cybercriminals often use hyperlinks in targeted SMS phishing scams. The hyperlinks take individuals to highly sophisticated fraudulent websites (such as a fake myGov sign-in page) designed to steal their personal information or install malware.
The ATO may use SMS to contact you, but will never include links to log-in pages. If you want to access the ATO’s online services, always type my.gov.au or ato.gov.au into your internet browser yourself.
This change also serves as a timely reminder to protect your information. Do not give out your TFN, date of birth or bank details unless you trust the person you are dealing with, and they genuinely require these details.
If you think communication such as a phone call, SMS, voicemail, email or interaction on social media claiming to be from the ATO is not genuine, do not engage with it. You should either:
Clock ticking on small business lodgement penalty amnesty
Small businesses have until the end of December 2023 to get back on track with overdue forms via the small business lodgement penalty amnesty.
Late lodgement penalties will be remitted under the amnesty which ends on 31 December 2023 for small business income tax returns, fringe benefits tax (FBT) returns and business activity statements (BAS) originally due between 1 December 2019 and 28 February 2022.
More than 14,000 small businesses have taken advantage of the amnesty since it kicked off on 1 June 2023, with more than $48 million in failure to lodge (FTL) penalties remitted.
Directors who bring their company lodgements up to date can also have FTL penalties remitted if they rely on company lodgements to finalise their tax affairs. This applies to eligible lodgments made between 1 June and 31 December 2023.
The amnesty provides an opportunity for small businesses to re-engage with their tax affairs and get back on track with their lodgement obligations without penalties.
If a small business has ceased trading, they need to advise their registered tax professional or contact the ATO directly to seek assistance with finalising their tax obligations, which may include lodging overdue returns, cancelling their ABN and paying any amounts overdue.
While penalties will be remitted under the amnesty, if a business finds themselves with a tax debt after their overdue forms are lodged, they must pay in full to avoid further interest charges or check the ATO website to see if they are eligible for a payment plan.
If you use money or assets from your company or trust for private purposes and don’t account for the transactions correctly, there can be tax consequences.
That’s why it’s important to get it right.
Business money and assets you take or use for private purposes can include:
salary and wages
director fees
fringe benefits, such as an employee using the company car
dividends paid by the company to you as a shareholder (that is, distribution of the company’s profits)
trust distributions if your business operates under a trust and pays you as a beneficiary
loans from a trust or company
ad hoc drawings or takings
allowances or reimbursements of expenses you receive from a trust or company.
If you’ve used business money or assets from a company or trust for private purposes, follow these steps to avoid unintended tax consequences:
Keep accurate records of the transactions, and
Account for the transactions in the company or trust tax return and your individual tax return, if applicable.
Remember, there are different reporting and record-keeping requirements for each type of transaction, so make sure you know how to keep accurate records to suit your circumstances.
You can also practise good record-keeping habits by regularly cross-checking your records against the original documents so you can fix mistakes earlier and monitor your business’s cash flow.
Taxpayers are ultimately responsible for keeping business records and what you claim in your tax returns, however Registered Tax or BAS Agents like Allan Hall on the Northern Beaches can help and advise on your tax.
Clothing, jewellery, gaming products, flights and crypto assets are just some of the things you might have to account for in your tax return as part of your business income.
If you received these or any other non-cash benefits instead of money for your goods or services, or as a tip or gift – you must record them as income at their market value.
This means you record the cash price that you would normally have to pay for those goods or services.
You may be able to reduce the assessable amount of a non-cash benefit you’ve received, by the amount you would have been able to claim as a deduction if you had purchased the item to be used in carrying on your business.
It’s important to report your regular forms of income
Such as:
cash and digital payments
vouchers or coupons
business investments
online and overseas business activities
services you provide using your personal effort and skills (personal services income)
the sharing economy, such as ride-sourcing
assessable government grants and payments
the value of trading stock you take for your own use
payments from insurance claims.
There are some payments that aren’t assessable income, so you don’t need to include them on your return, such as:
non-assessable non-exempt (NANE) government grants
bona fide gifts or inheritance
GST you’ve collected
money you’ve borrowed or contributed as the business owner.
Always keep accurate and complete records to prove the income you report and the expenses you claim as deductions.
Remember, registered tax professionals like Allan Hall in Brookvale can help and advise on your tax.
In the complex territory of tax obligations, the Australian Taxation Office (ATO) is actively deploying Director Penalty Notices (DPN) at an average rate of 60 per day, as revealed by the ATO themselves.
A DPN does not confer liability upon directors for outstanding company debt, as directors are inherently liable by law. Rather, it serves as a formal notification that initiates a countdown, compelling directors to either remit the debt promptly or confront the ensuing consequences.
There are imperative steps for directors to take in response to a DPN:
Complete business lodgements even if there is an inability to pay associated liabilities such as PAYG, GST and superannuation
Ensure business address accuracy on ASIC’s register
Seek advice from a liquidator if you are unable to meet the DPN amount.
Lockdown DPNs
A lockdown DPN comes into play when a company fails to lodge Business Activity Statements (BAS) and Instalment Activity Statements (IAS) within three months of the due date or Superannuation Guarantee Charge (SGC) statements within one month and 28 days after the quarter’s end to which the superannuation charge contribution relates. In such cases, directors face automatic and permanent exposure to penalties, with the sole remedy being full payment of the debt.
Non-lockdown DPNs
Conversely, a non-lockdown DPN provides directors with a 21-day window to consider options for remitting the applicable tax (penalty). The available choices include paying the debt, appointing a voluntary administrator, engaging a small business restructuring practitioner or appointing a liquidator. Failure to act within this timeframe results in the penalty becoming permanent, empowering the ATO to initiate debt recovery proceedings.
Adding a layer of complexity, the ATO now issues DPNs that break down amounts owed into lockdown (monthly unremitted amounts) and non-lockdown (monthly remitted amounts) columns.
Navigating the intricacies of DPNs can be challenging for directors, so engaging with a qualified tax advisor is crucial to gaining the necessary support and understanding:
Explaining the mechanics of DPNs
Reviewing individual circumstances to provide tailored assistance and outlining options based on unique circumstances
Offering support throughout the decision-making process.
In essence, understanding and responding to Director Penalty Notices requires a comprehensive approach, combining intricate tax knowledge and strategic insights, ensuring directors are well-equipped to address these ATO enforcement measures.
