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Practice Update
November 2024
🔶 A NEW APPROACH TO COLLECTING UNPAID TAX AND SUPER 🔶
The ATO is refining its approach to focus on businesses that have not responded to previous engagement attempts and continue to ignore SMS and letter reminders. The goal is to support a fair environment for businesses that fulfill their obligations, while taking steps to address those that do not.
Unpaid taxes impact the entire community, affecting small businesses, employees, and the broader economy. Businesses that address their tax obligations early are better positioned to regain control of their finances and maintain sustainable operations.
The ATO is introducing new, targeted steps in tax collection:
- For businesses of any size that do not respond to communications or establish payment plans for outstanding GST, PAYG withholding, or employee super, the ATO may move more swiftly to firm actions, including Director Penalty Notices (DPNs) and garnishees.
- Directors overseeing multiple companies that fail to pay these obligations may receive DPNs reflecting the total debt across all entities. If they do not take corrective action, the ATO may recover these amounts directly from the directors, potentially putting their assets at risk.
This approach could impact those who have not responded to previous ATO reminders. To avoid escalation, it’s essential for businesses to take action by paying in full or setting up a payment plan.
How We Can Assist
If you can pay on time, it is encouraged to prioritize tax and super obligations to avoid interest charges or firmer collection actions by the ATO.
If you are facing difficulty in paying, it is important to note that there are available options such as payment plans.
If you are experiencing genuine financial hardship, the ATO offers additional support, including payment deferrals and interest remissions.
The key message to communicate is clear: if you are able to pay, please do so promptly, and if you need more time, please feel free to reach out early to explore payment options. Get in touch with us for assistance.
🔶 ATO CORPORATE TAX TRANSPARENCY UPDATE 🔶
The Australian Taxation Office (ATO) has released its tenth annual Corporate Tax Transparency (CTT) report, revealing that large corporates contributed a record $97.9 billion in corporate tax for 2022–23, up 16.7% from last year. Including additional revenue raised by the Tax Avoidance Taskforce, total collections reached approximately $100 billion.
A significant portion of the increased tax revenue was driven by the mining sector, particularly the oil, gas, and coal industries. The oil and gas sector alone contributed $11.6 billion, influenced by higher commodity prices and ATO compliance actions.
The 2022–23 report now includes data from 3,985 entities, an increase due to new reporting requirements for Australian-owned private entities with incomes between $100 million and $200 million. The report demonstrates ongoing improvements in corporate tax compliance, supported by the ATO’s Tax Avoidance Taskforce, which has secured an additional $33.2 billion in tax revenue since its inception in 2016.
This transparency initiative aims to enhance accountability and voluntary compliance, with a noted drop in the percentage of entities paying no income tax from 36% in 2013–14 to 31% in 2022–23.
🔶 SENTENCING IN $5.8M NDIS FRAUD CASE 🔶
In a joint investigation led by the Australian Federal Police, three individuals from New South Wales have been sentenced to a combined 12 years and 10 months in prison for defrauding the National Disability Insurance Scheme (NDIS) and the ATO. The trio, comprised of two men and one woman, have also been ordered to repay more than $575,700.
The group operated a network to submit false NDIS and GST refund claims. During the investigation, assets worth over $2 million, including gold bullion, cash, luxury vehicles, and cryptocurrency, were seized. Two additional members of the network were sentenced last year, while another is scheduled to appear in court in 2025.
This case underscores the commitment of government agencies to protecting taxpayer funds and ensuring NDIS benefits go to those who truly need them. The ATO and partnering agencies remain vigilant in detecting and combating fraud in government assistance programs.
🔶 UPDATE FOR NON-PROFIT ARTS, MUSIC,
AND CULTURAL ORGANISATIONS 🔶
If your organisation operates as a non-charitable, not-for-profit (NFP) with an active ABN, please note that your NFP self-review return is due by 31 March 2025 to assess income tax exemption eligibility.
Eligibility Requirements:
Your organisation’s primary purpose must focus on promoting art, literature, or music. The main purpose of a cultural NFP could be:
Art, which includes performing arts such as drama and dance, as well as visual arts such as painting, architecture and sculpture,
Literature, which includes a wide range of written or printed works, such as works in different languages, on particular subjects or by particular authors, and
Music, which includes the performance of vocal or instrumental works, and covers various styles for example classical, jazz and liturgical.
If the main purpose of your NFP is social networking or promoting cultural heritage, it won’t qualify as income tax-exempt under this category. Similarly, if your organisation’s purpose is charitable and for public benefit, it must register as a charity with the ACNC for tax exemption.
For guidance on lodging your return, visit ato.gov.au/NFPtaxexempt.
🔶 AAT DENIES NAVY SAILOR'S WORK-RELATED DEDUCTION CLAIMS 🔶
The Administrative Appeals Tribunal (AAT) has rejected Cameron Lambourne’s $10,000 work-related deduction claims, supporting the ATO’s position that these expenses were personal rather than essential for his Navy role.
Mr. Lambourne, an Australian Navy electronics technician, claimed deductions for items including $1,655 in work clothing from a specialized naval store and $6,000 in equipment, primarily gym gear he bought for his ship. However, due to insufficient itemized invoices—particularly as the clothing store went into liquidation—AAT could not verify the expense connection to income production.
The ATO argued the gym equipment was purchased voluntarily, benefiting the crew but not required for Lambourne’s duties. The tribunal agreed, noting that his salary was not contingent upon these purchases, affirming both the denial of the deductions and a 25% administrative penalty.
🔶 DEDUCTING FINANCIAL ADVICE FEES 🔶
The ATO has issued guidance on when an individual not engaged in an investment business may claim deductions for fees paid for financial advice.
An individual can generally deduct financial advice fees if the expenses were incurred in generating assessable income, unless the expenses are capital, private, or domestic in nature.
Financial advice fees may also be deductible if they relate to managing “tax affairs,” such as advice on salary sacrifice arrangements.
However, fees for advice on proposed investments before acquiring an asset, or guidance on investing additional funds to expand a portfolio, are not deductible.
To claim the deduction, individuals must retain sufficient evidence of the expense, such as a properly itemized invoice.
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