Client Alert for September 2012

Company tax rate cut comes with compromises

ATO compliance activities

• incorrect claims for work-related expenses. In particular, the ATO says it will focus on claims made by plumbers, IT managers and defence force personnel. Taxpayers must keep written records for all their work-related expenses if their claims total more than $300;
• unrecorded and unreported cash transactions in the cafe and plastering industries. Note, the ATO is stepping up its use of third party information, such as information from suppliers, to identify under-reporting of income;
• incorrectly treating employees as contractors, particularly in the construction industry. In addition, the ATO notes that from 1 July 2012, businesses that make payments to contractors in the building and construction industry are required to report the payments to the ATO each year;
• treatment of private company profits, particularly in relation to loan arrangements; and
• superannuation obligations of employers, with a focus on cafes and restaurants, real estate businesses and carpentry businesses in home building or construction.
  
  

TIP: The ATO's main tool for detecting non-compliance is matching information reported to it by taxpayers and third parties, such as financial institutions both in Australia and overseas. The ATO says its matching capabilities have grown strongly over the years. This financial year, the ATO expects to match over 600 million transactions.

ATO small business benchmarks

TIP: According to the ATO, the benchmarks may also prompt taxpayers to consider whether they have forgotten to claim any relevant deductions if they report significantly more net income than their industry peers. Please contact our office if you have further questions

TIP: There are currently benchmarks covering over 100 industries including: accommodation and food services; building and construction trade services; education, training, recreation and support services; health care and personal services; manufacturing; professional, scientific and technical services; retail trade; and transport, postal and warehousing.

ATO alert on "dividend access share arrangements"

Taxpayer fails to prove bank deposits were loans

Amended assessment issued four years later was within time

Illegal early super release promoters to face penalties

TIP: Early release of super is not always illegal. There are very limited circumstances in which members can legally access their super savings early, such as on compassionate grounds or where members experience severe financial hardship. There are very strict conditions to be met, and they include some restrictions.