Most of us do not like dealing with red-tape or administrative tasks which take us away from the main focus in our businesses and jobs. It is important to remember as taxpayers having good records and complying with your reporting obligations is a mandatory obligation for us all. The purpose of this article is to keep you up to date with new reporting obligations and areas that the Tax Office is focused on.
Audit Activity – ATO
As always we stress the need for our clients to keep records which can substantiate and justify the expenses they claim in their tax returns. We take this opportunity to remind people of some of the key focus spots the ATO will be targeting this year:
Motor vehicles expenses
- If you are using the logbook method, please ensure your logbook is up to date and that you have receipts for the expenses you are claiming;
- Note that the 1/3rd of operating expenses method no longer exists and cannot be used to claim motor vehicle costs as a tax deduction.
Rental Properties
- Note that travel expenses to and from properties are no longer deductible;
- Any private use of the property must be identified and allowed for;
- Understand the difference between repairs and improvements; and
- If the property is not available for use (e.g. undertaking renovation) then expenses cannot be claimed during that period.
Work related expenses
- Conferences and Travel – Be sure to exclude any private expenditure which does not form part of the conference activities.
- Self- education expenses – Ensure that the education is relevant to your current work and is not undertaken for new role;
- Phones/Internet – Be mindful of any personal use and keep an accurate record of business use.
Individual Contractors
The Federal government announced in the last budget that it will provide $9.2 million over four years from 2019–20 to establish a dedicated sham contracting unit within the Fair Work Ombudsman to address sham contracting behaviour.
Such behaviour is described as employers who “knowingly or recklessly misrepresent employment relationships as independent contracts to avoid statutory obligations and employment entitlements”.
Employers can expect increased education campaigns, compliance and enforcement activities, and additional resources dedicated to the sham contracting unit to investigate and litigate cases.
Where you are employing someone principally for their labour it is important to be aware of the attached obligations including Workcover, superannuation and PAYG withholding.
Compliance Changes
Single Touch Payroll
With effect from 1 July 2019 Single Touch Payroll becomes mandatory for all employers. Put simply Single Touch Payroll requires employers to report wages, PAYG withholding and superannuation information directly to the Australian Taxation Office using an online payroll system. The purpose of this is to ensure the ATO has real time data with respect to employer payments and can more quickly identify circumstances where employers do not make appropriate payments. We will be assisting our clients in the coming month with the transition to single touch payroll which for most businesses will be relatively seamless where they have appropriate accounting software in place.
Taxable Payments Reporting (TPAR)
The TPAR is required by the ATO to report payments that are made to contractors for providing services in certain industries.
Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships or trusts.
The details you need to report about each contractor are usually found on the invoice you should have received which include:
- their Australian business number (ABN), if known
- their name and address
- gross amount you paid to them for the financial year (including any GST).
For many years these reporting requirements only applied to the building and construction industry. In recent times they have been extended to:
- From 1 July 2018 – Cleaning & Courier Services
- From 1 July 2019 – Road Freight Services, Security, Investigation or Surveillance Services and Information Technology Services.
If you operate a business in any of these industries, you will have mandatory reporting for payments made to any of your contractors.