ATO is increasing its spot inspections on SMEs
Armed with the extra $1.2 Billion in funding made available in the 2019 budget, The Australian Taxation Office (ATO) is rolling out various recovery processes to collect unpaid tax debt and superannuation, particularly from small to medium businesses.
This is being rolled out, region by region – for example the ATO has recently visited over 400 small businesses on the Sunshine Coast and is rolling out visits to 10,000 businesses per year across Australia over the next three (3) to four (4) years.
The ATO is usually the largest creditor for any business, and the most recent reported statistics indicate that approximately $24 billion is owed to the ATO, with $15.1 billion of this debt relating to small businesses.
The ATO’s database matching software has been tested and is now being used
The ATO has been spending hundreds of millions on software designed to detect anomalies, so they can effectively target their audit activity. This has proven very successful and we have seen a huge increase in this working for the ATO. A simple example: the software identifies luxury car and boat purchases to see if the declared tax income from that taxpayer makes sense.
Increased use of garnishees
There has also been a marked increase in the use of garnishee notices by the ATO to recover debts owed, which can have a crippling effect on cash flow and working capital.
Single Touch Payroll gives the ATO real time access to wage, PAYG, & superannuation details
Since 1 July 2019, single touch payroll (STP) is now compulsory for all Australian employers, which will crank the pressure on small businesses, from a cost compliance perspective, whilst also allowing the ATO to have real-time access to information regarding wages, allowances, deductions, PAYG withholding and superannuation payable. Basically, the ATO will be able to identify and take steps to recover debt quicker than ever.
Increased superannuation monitoring and enforcement
Since March 2019 the ATO has enjoyed increased powers to recover unpaid superannuation for Company debts from Directors under the Director Penalty Notice (DPN) regime. Unpaid superannuation amounts must be reported by their due date for the Director to have any opportunity to avoid personal liability, that is, within 28 days of the end of each quarter and not the former three (3) months from the due date.
Increased phoenix action
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Phoenixing Bill) which has now been reintroduced into Parliament proposes to give ASIC, liquidators and the ATO significant powers designed to help curtail phoenix activities and prosecute culpable directors and associated persons. The reform extends to director liability provisions for unpaid PAYG withholding amounts and superannuation guarantee charges to GST. The ATO would also obtain more power to withhold tax refunds providing there are other outstanding ATO lodgements or disclosures.
What can you do?
- Ensure that you are compliant with STP, BAS and superannuation reporting, even if you cannot pay it. This can help mitigate personal risk and penalties.
- With superannuation it also ensures the superannuation is deductible as payments made more than 3 months late are not a tax deduction.
- With tax matters, we can help negotiate a payment plan and the remission of interest and penalties – and it is our view that the old days (where you could negotiate a deal over then phone with no evidence) are over….you may still get a deal through but these days you only get a decent deal if you quote ATO policy, and provide evidence as to why they should give you a long time to pay.
- protect your assets – we know how to do this cost effectively, and quickly. The two golden rules in asset protection are this: it is never too late, and the sooner the better.
- If you are having issues, talk to us – we are experienced in helping clients navigate cash flow “troughs”, and in protecting the directors from being personally liable for their company’s debts.
- There may also be safe harbour protections available to you.
- Many businesses and people are struggling with the pressure of debt, including unpaid tax and superannuation debts. This has a significant impact on their health and wellbeing.
Much of the stress and anxiety comes from not knowing how to tackle the debt problems, not knowing the options available to them or the impact an insolvency can have on them, including what happens to assets (including business, personal and family assets), their income, etc.
Early intervention is crucial to help clients. It is important as professional advisors that we identify clients that may be struggling with debt and provide advice, solutions and strategies to assist them through difficult situations.
At Irish Bentley, we specialise in assisting businesses and people understand their options when facing financial pressure, which often helps alleviate stress and pressure upon them. We are only a phone call away from a free, confidential meeting to discuss any financial difficulties your clients may be experiencing.