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Cash might be king, but the use of cash by businesses is attracting attention from the ATO. It will begin visits of selected businesses to ensure that all tax obligations are met. Third-party data and risk analysis is being used to identify the types of businesses the ATO will visit, which will not be limited to one particular industry this time around.

In this competitive economic environment some businesses are increasingly turning to cash payments to dodge their tax obligations. This is becoming such an issue that the ATO has started a program of visiting businesses across Australia that may be using cash inappropriately or operating in the hidden economy.

A wide variety of resources including third-party data and risk analysis will be used by the ATO to identify the type of businesses it will visit. These include businesses that:

• operate and advertise as “cash only” or mainly deal in cash;
• do not take electronic payments according to data-matching;
• are part of an industry where cash payments are common;
• indicate unrealistic income relative to the assets and lifestyle of the business and its owner;
• fail to register for GST or lodge activity statements or tax returns;
• under-report transactions and income according to third-party data;
• fail to meet super or employer obligations;
• operate outside the normal small business benchmarks for their industry; and
• are reported by the community for potential tax evasion.

A wide net is being cast to target all businesses that could potentially be avoiding their tax and superannuation obligations. In the course of the visits, where there are suspicions of wrongdoing, the ATO will follow up, initially by a letter which could include recommendations such as:

• lodging a voluntary disclosure to mitigate the risk of an audit or potential prosecution;
• investing in an electronic payment and record keeping system to reduce the risk of mistakes and meet consumer preference; and
• attending ATO record keeping information sessions.

In the last round of visits, three common issues of not having separate personal and business accounts, not recording all sales or keeping proper books, and having employees working off the books were found, and over 60% of businesses visited required some kind of corrective action.

The hair and beauty, restaurant, cafe, takeaway and catering, and the building and construction industries all reported an increase in timely lodgement of activity statements after being targeted by the ATO for specific attention.

As a part of the visits, the ATO will also be working with industry associations and local authorities to educate businesses on the use of electronic payment and record keeping facilities, online lodgement, superannuation obligations to employees; proper registration and meeting of obligations, and help with business specific issues.

Need help?

To ensure that you and your businesses are not targeted under this operation, or that if you are targeted, you do not get a follow-up, the following broad suggestions may help:

• deposit all cash payments into bank accounts;
• keep evidence to support all income, expenses and lifestyles;
• account for any stock used for private purposes; and
• work out the performance of the business relative to other similar businesses in the same industry using the small business benchmarks.

If you need help with documenting your business income, expenses and stock or calculating whether your business is performing within the small business benchmarks, don’t hesitate to contact us today.

At MartinCo we’re the Sydney Accountancy and Finance firm that makes a difference for their clients. We help you build your wealth so that you can achieve your goals! With the convenience of two Sydney offices, one in Hurstville and the other in Edgecliff, we’re more than equipped for you to contact us today!

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Taxpayers need to be ever-vigilant about bogus calls, text messages and emails from scammers.

Some scammers go to great lengths to deceive taxpayers, including impersonating government representatives on the phone, sending fraudulent emails and even creating fake websites.

The ATO reported recently that the most common type of scam is where the scammer demands payment for a fake tax debt or sends an email asking for personal information in order to pay out a refund, which may at first glance appear quite attractive! Not only do scammers try to steal money, they also try to steal identities. The Government has identified several cases of misuse of stolen personal information that have led to fraudulent income tax returns, as well as GST, superannuation and welfare frauds.

Scammers are becoming more sophisticated in their attempts to defraud the public and trick people into handing over money, their tax file numbers and other personal information. A recent scam is to telephone people, displaying an official-looking ATO number as a caller ID so the victim feels confident enough to engage with the scammer and will provide personal information – this type of impersonation is known as “spoofing”. Sending emails containing links to bogus websites that mirror the official ATO website is also still a popular scamming method.

The typical story is that a fraudster contacts a taxpayer out of the blue claiming that the taxpayer has overpaid taxes and is entitled to a refund. The fraudster often asks the taxpayer to pay an “administration” or “transfer” fee to obtain the refund. They may also ask for the taxpayer’s personal details, including financial details such as bank account information so that the “refund” can be transferred. If the taxpayer hands over money, chances are that it is never seen again, and no transfer is forthcoming.

Another tactic is when fraudsters phone to demand that people pay allegedly unpaid taxes. The ATO is aware of one such aggressive scam where taxpayers are threatened with arrest if they do not pay a fake “tax debt” over the phone. Scammers may also demand payment in gift cards, such as iTunes or prepaid Visa cards.

Kath Anderson, Assistant Commissioner recommends for people to look out not just to protect their own personal identity but also to make family and friends available to the risks. Those people who may be particularly vulnerable are those who do not have regular interaction with ATO and so may find it more difficult to determine genuine requests for information from those that intend to cause harm.

“There are a few simple steps taxpayers can take to protect themselves online, including only giving out personal details to people you trust, keeping tabs on your tax affairs so you know what to expect, and to be cautious about personal information that you share, especially on social media.”

If you receive an email, a text message (SMS), or an unexpected phone call from “the ATO” claiming that you are entitled to a refund, or that you owe taxes, or that you must confirm, update or disclose confidential details, such as your tax file number, delete the message or hang up the phone. Do not click any links or download any attachments.

From time to time, the ATO itself will send emails, text messages or official social media updates to advise you of new services. However, the ATO’s messages will never request personal or financial information by SMS or email, and its representatives will never ask you to pay money into a personal bank account.

If you receive a call, an email or an SMS and are concerned about providing personal information, you can call the ATO on 1800 008 540 (8 am to 6 pm, Monday to Friday), forward the suspicious email to ReportEmailFraud@ato.gov.au, or check your myGov account for any message from the ATO. You can also contact our office for more information if you have concerns.

You should practise the same level of vigilance in relation to calls and emails from people who claim to be from other government bodies, such as state revenue authorities.

Document verification service for businesses

The Government has developed an electronic Document Verification Service (DVS) for business use. The DVS can help you protect your business against identity crime and makes it easier for you to meet any regulatory obligations to verify your customers’ identities. The DVS allows businesses to verify information on Australian-issued driver licences, passports, visas and Medicare cards “in real time” directly with the issuing agencies. The system is not a database and does not store any personal information. All DVS checks must occur with the informed consent of the person involved. Further information is available on the DVS website at http://www.dvs.gov.au/.

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There has been plenty of press coverage on bitcoin, but what are the tax consequences if you decide to join the craze? Well, that depends on whether you are running a business, or if you are acquiring bitcoin for personal investment. Here we examine the tax effects if you choose to invest in bitcoin on a personal level.

What is bitcoin?

Bitcoin is the term for a type of cryptocurrency, a digital currency, created in 2009. Bitcoin currency transactions are entered on a peer-networked ledger – called the blockchain – agreed at the same time by multiple hosts. Balances are created and kept using public and private “keys”, long strings of numbers and letters linked through mathematical encryption algorithms. The public key serves as an address to which others may send bitcoin, rather like a bank account number. The private key, which is like an ATM PIN number, is meant to be kept secret and is used to authorise bitcoin transmissions.

Income tax and GST

If you decide to acquire bitcoin as a personal investment, provided you are not carrying on a business of bitcoin investment, you will not be assessed on any profits resulting from the sale. Conversely, you will not be allowed any deductions for any losses made in relation to your bitcoin investment. In addition, there will be no GST consequences for you where the bitcoin transaction is not a supply or acquisition in the course of furtherance of an enterprise.

Beware, however, that whether or not you’re carrying on a business, and whether or not an acquisition or supply is in the course of furtherance of an enterprise, depends on a number of subjective factors. The factors involved in determining whether you are carrying on a business or the furtherance of an enterprise also differ, which means you could be subject to the GST regime and not the income tax regime and vice versa. It is best to consult us to find out about your individual situation and to ensure that any bitcoin activities are not captured under the income tax or GST regimes.

Using bitcoin for purchases

Bitcoin is not only for investment purposes and some people use it in the same way as one would use money.

Where you have bitcoin and you use it to purchase goods or services for personal use, capital gains or losses from the disposal of bitcoin will be disregarded provided the cost of the bitcoin is $10,000 or less.

Where the cost of bitcoin is $10,000 or more, there may be CGT consequences on disposal and you need to keep records including the:

• date of the transaction;
• amount in Australian dollars sourced from a reputable online exchange;
• purpose of the transaction (ie, what it was for); and
• other party’s details (if no other details are available, the bitcoin address would be sufficient).

Unsure? Need more information?

Whether or not you are carrying on a business or making a supply in furtherance of an enterprise could be contentious, especially in cases where large numbers of trades and/or sums of bitcoin are involved. To ensure that you stay on the right side of the tax man contact us today.

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In 2017, the Government flagged and publicised plenty of changes to the tax and superannuation system, but how many of them have actually been passed by Parliament and made into law? Parliament ended its final sitting week in December 2017 with plenty of outstanding matters for the Government to deal with in 2018. Here is a brief summary of these proposals and how they could affect you.

Personal

The Bill that proposes to increase Medicare levy rate from 2% to 2.5% of taxable income for the 2019–2020 and later income years is still before the Senate. Labor Senators have recommended the rate of 2.5% to apply only to those individuals with incomes above $87,000. In addition, they would also like to reinstate the Budget Repair Levy of 2% on taxable incomes in excess of $180,000 which ended on 1 July 2017. Labor has indicated that they will vote against the increase in Medicare levy rate should they not get the desired changes. The Government seems unlikely to agree to the changes to the Budget Repair Levy as requested by Labor, which all points to a difficult passage for the Bill unless the Government can do a deal with the minor parties and/or independents.

Business

The Bill that seeks to progressively lower corporate tax rate is still before the House of Representatives. In its current form the Bill proposes to extend the 27.5% corporate tax rate to all corporate tax entities by 2023-2024, at which point the tax rate would be progressively cut to 25% by 2026–2027. An associated Bill to ensure that a company will not qualify for the lower company tax rate if more than 80% of its assessable income is passive income (ie interest, dividends, or rent) is also before the House of Representatives.

Businesses will need to satisfy a passive income test to access the 27.5% corporate tax rate from 2017–2018.

For the 2016–2017 income year, a company only needed to be carrying on a business and have a turnover of under $10 million to qualify for the 27.5% tax rate. If this Bill passes, small companies set up to invest in property and collect rent would no longer be able to access the lower tax rate if that income consists of more than 80% of its total income. It would be a similar outcome for those companies who invest in shares.

Superannuation

The salary sacrifice contributions integrity Bill is still before the Senate. It proposes to prevent employers from using employees’ salary sacrifice contributions to reduce their own minimum 9.5% super guarantee contributions from 1 July 2018. The Bill also extends the choice of super funds to employees covered by new enterprise agreements and work determinations made on or after 1 July 2018.

Education

The Bill to reduce the Higher Education Loan Program (HELP) minimum repayment income thresholds is still before the Senate. The Bill lowers the minimum repayment threshold from $51,956 to $41,999 from 1 July 2018 with a 1% repayment rate. It also proposes to index the minimum repayment income threshold according to the Consumer Price Index (CPI).

Social security

Bills that implement major social security changes are at various stages before Parliament, including:

• the creation of a jobseeker payment to replace seven existing payments;
• cessation of the widow B pension;
• removing certain exemptions for drug or alcohol dependence;
• establishing a two-year drug testing trial in three regions; and
• changes to residency requirements for the aged pension.

How might these changes affect me?

If you would like to know more about how these changes could potentially affect you, or you would like to consider some forward tax planning for you or your business to get ahead in 2018, contact us today.

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