23rd Oct, 2023
The ATO has advised that new and ongoing subscription costs can also qualify as eligible expenditure for the purposes of the digital adoption boost. This was not specified in the ATO’s original release on the measure.
The additional 20% tax deduction applies to eligible expenditure incurred by small and medium business entities between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. The boost is for business expenses and depreciating assets and is capped at $100,000 of expenditure per income year. Eligible claimants can receive a maximum bonus deduction of $20,000 per income year.
In its latest release, the ATO states that a good rule of thumb is to consider “if the small business would have incurred the expense if they didn’t operate digitally. That is, if they hadn’t sought to adopt digital technologies in the running of their business”.
Using this rule of thumb, the ATO confirms that these costs are eligible:
Whether some expenditure is eligible for the boost will depend on its purpose and its link to digitising the operations of the specific small business. For example, “the cost of a multifunction printer would not be eligible if it were intended to only make copies of paper documents. However, it would be claimable if being used to convert paper documents for digital use and storage”.
Importantly, the ATO states that new and ongoing subscription costs can also qualify as eligible expenditure if it relates to a taxpayer’s digital operations; for example, an ongoing subscription to an accounting software platform for the business would qualify, as would a new subscription for digital content that is used in developing web content to advertise the business.
23rd Oct, 2023
A recent Inspector-General of Taxation and Taxation Ombudsman (IGTO) report has recommended improvements to the small business litigation funding program, aimed at delivering better access to justice and fairness for small businesses.
The original intention of the funding program was to mitigate the disadvantage that small business taxpayers face against the ATO, which is a well-resourced and experienced litigant in proceedings which are often complex and costly.
Taxpayers that are self-represented in the Administrative Appeals Tribunal Small Business Taxation Division in disputes with the Commissioner of Taxation are generally eligible for litigation funding where the ATO engages external legal representation. Eligible small business taxpayers will have reasonable costs of engaging an equivalent level of legal representation covered.
The report from the IGTO was mainly based on two completed dispute investigations, where taxpayers expressed concerns that the ATO had attempted to cap the funding to levels below that necessary to run their matter.
There were also questions as to the ATO’s calculation basis for reimbursements which taxpayers were not made aware of when entering these agreements, and the ATO’s “numerous emails to the taxpayers’ legal representatives questioning the bills which … detracted from case preparation”.
The IGTO notes that without the adoption of its suggested improvements to litigation funding by the ATO, further dispute investigations should be expected. Meanwhile, in response, the ATO considers itself to be no longer bound by the original policy intent of the program, and has continued to confine the findings of the report to the two cases investigated, notwithstanding similar ATO actions and decisions that have been subject to further complaints to the IGTO.
However, it is understood that the ATO does intend to consult with stakeholders before committing to any improvements and that the IGTO recommendations contained in the report will be considered as a part of this process. While changes may not be forthcoming for the small business litigation program, the takeaway for taxpayers is that they can always turn to the IGTO, which provides an independent body to investigate the ATO’s decisions.
23rd Oct, 2023
The ATO has ramped up compliance activity in the self managed super fund (SMSF) space in response to an increasing number of funds that have been identified as not complying with superannuation obligations. For the 2023 year, the ATO says it has issued double the amount of tax and penalties when compared with the 2022 income year, and the number of disqualifications has tripled.
For the 2023 year, ATO compliance actions included issuing an additional $29 million in income tax liabilities, administrative and tax shortfall penalties, and interest on SMSF trustees and/or members, which is double the amount of tax and penalties the ATO issued in 2022. In addition, a total of 753 trustees were disqualified in the 2023 income year, and that is more than triple the amount of disqualifications in the 2022 income year.
According to the ATO, the most common reason for applying penalties was the illegal early access of super benefits by fund members. It reminds SMSF trustees that they have a responsibility to ensure that members have met a condition of release before any funds are released. Trustees should also be aware that some conditions of release have cashing restrictions which restrict the form of benefit (ie lump sum or pension) or the amount of benefit that can be paid.
Common conditions of release include the fund member having reached preservation age and retired, or commenced a transition-to-retirement income stream; ceasing an employment arrangement on or after the age of 60; being 65 years old even though they haven’t retired; or having died.
If the common conditions of release aren’t met, where a member meets eligibility requirements under certain special circumstances, they are able to have at least part of their super benefits released before reaching preservation age. These special circumstances include that the fund member:
Besides targeting illegal early release, the ATO has reminded trustees of SMSFs that their fund must be audited every year by a suitably qualified auditor and an annual return must be lodged by the due date. This blitz on the SMSF compliance is set to continue all through until the end of the 2024 income year, with the ATO explicitly stating it will take “firm action” against trustees who persistently fail to comply with their obligations and seriously breach the superannuation laws.
23rd Sep, 2023
The ATO has given the green light for taxpayers with uncomplicated financial affairs to lodge their returns. It says that the information it collects from employers, banks, private health insurers, share registries and other institutions has now been pre-filled and is ready to go on either myTax (accessed through myGov) if you’re lodging your own return, or through tax portals of registered agents, if you’re using those services.
The ATO notes that income such as amounts from rental properties, government payments, capital gains from the sale of investments, or other income from “side hustles” – in particular sharing economy platforms and any cash received for work performed – can’t be pre-filled, so will need to be manually entered. There are multiple current ATO data-matching programs running, for example in the areas of residential property and ride-sourcing, so it’s important to get your income reporting right the first time this year.
You should also be aware of some changes this year which may negatively affect the amount of refund you receive, and in some cases may result in tax amounts payable. These include the cessation of the low and middle income tax offset (LMITO), and the replacement of the “shortcut” method for calculating working from home (WFH) with the revised fix rate method, which allows claiming 67 cents per hour instead of 80 cents for each hour you work from home.
Due to these and other changes, the ATO reminds that the initial tax estimate you receive from myTax or your registered tax agent may not match the final tax outcome. It’s best to wait for your finalised notice of assessment before making any plans for spending an anticipated tax refund.
23rd Sep, 2023
This tax time, the ATO is cracking down on taxpayers not lodging their taxable payments annual report (TPAR) on time. It has recently issued more than 16,000 penalties for businesses who failed to lodge their TPARs for previous years despite receiving multiple reminders. The average penalty for non-lodgment was approximately $1,110.
As a reminder, the TPAR applies to businesses in the building and construction industry as well as businesses that provide cleaning, courier and road freight, information technology and security, investigation or surveillance services and have paid contractors in relation to those services.
Businesses that may have received a reminder from the ATO to lodge a TPAR but do not actually need to lodge still need to submit a TPAR non-lodgment advice form to avoid an unnecessary follow-up. The form allows entities to notify the ATO about multiple years, as well as to advise that they will not need to lodge in the future.
Around $400 billion in payments made to almost 1.1 million contractors were reported in the TPAR system in the last financial year. The ATO uses the information obtained to check for red flags, including non-reporting of income, non-lodgment of tax returns or activity statements, overclaiming of GST credits or misusing of ABNs.
The ATO will also include information reported in the TPAR in its pre-filling service to help contractors get their income right in their tax returns. The pre-filled data will give taxpayers transparency about the data that has been provided to the ATO about their business transactions.
23rd Aug, 2023
The ATO has extended its motor vehicles data matching program once again to encompass the 2022–2023 to 2024–2025 financial years. For each financial year, the ATO will acquire information from all eight of the state and territory motor registries regarding where a vehicle has been transferred or newly registered during the applicable period, and where the purchase price or market value is $10,000 or more. Records relating to approximately 1.5 million individuals will be obtained each financial year.
While the program is being used to obtain intelligence about taxpayers that buy and sell motor vehicles so the ATO can identify risks and trends of non-compliance with various tax and super obligations, the ATO will also be using the data obtained as an indicator of risk. For example, the motor vehicle data (along with other data) will be used to identify taxpayers who have purchased vehicles with values that don’t align with the income they have reported.
Other uses of the data will include identifying taxpayers who may have not met their obligations in terms of GST, FBT, luxury car tax, fuel schemes and income tax.