Extra super step when hiring new employees from 1 November 2021
Where your business hires new workers from 1 November, you'll no longer be able to open default super accounts for employees who don't nominate a super fund.
Currently if a new employee doesn't choose their own super fund, you can pay super contributions for them to your default fund.
From 1 November, if you have new employees start and they don't choose a specific super fund, you may need to request their 'stapled super fund' details from the ATO.
A stapled super fund is an existing account which is linked, or 'stapled' to an individual employee, so it follows them as they change jobs. This change aims to reduce the number of additional super accounts opened each time they start a new job.
Click here for further information.
Time frames for director identification number (DIN) applications
A director ID is a 15 digit identifier that ALL directors will need to apply for once and keep permanently. The director ID is similar to an Australian tax file number (TFN) and will help prevent the use of false or fraudulent director identities. This has been specifically introduced as a means of addressing phoenixing.
Anyone currently acting as a director of an Australian registered body or a director of a foreign company registered with ASIC (regardless of where they live), or you wish to become a director in the future, will need a director ID – applications are open from 1
November 2021.
Directors must apply for a director ID themselves.
The Federal Government has by way of legislative instrument set the following time frames:
- existing company directors are required to apply for a DIN by 30 November 2022.
- new directors appointed between 1 November 2021 and 4 April 2022 will have just 28 days after appointment to apply for their DIN.
- new directors appointed from 5 April 2022 will be required to apply for their DIN before appointment.
Applicants within Australia can apply in 3 ways:
1. Online which requires the following:
- a myGovID that needs to be setup (different from myGov);
- an individual Australian TFN;
- your residential address as recorded by the Australian Taxation Office (ATO); and
- to answer two questions based on details that the ATO knows about you from the required documents, such as bank account details, notice of assessment, superannuation account details, dividend statement and PAYG summary.
2. By phone
3. By paper downloaded via ABR.
Under the law, directors who fail to apply for a DIN within the stipulated time frame can face criminal or civil penalties of 5,000 penalty units, which currently stands at $1.11 million.
Penalties will also apply for conduct that undermines the new requirements, including providing false identity information to the registrar or intentionally applying for multiple DINs.
Click here for further information.
Businesses warned against using the ATO as an alternative line of credit
The Disclosure of business tax debts measure received Royal Assent on 28 October 2019 and applies from 21 February 2020.
This measure has taken a backseat during the COVID pandemic and could see businesses that owe at least $100,000 in tax and are more than 90 days in arrears without a payment plan be reported to credit agencies. The $100,000 threshold includes income tax debts, activity statement debts, superannuation debts, fringe benefits tax debts, and penalties and interest charges.
The ATO will send a written letter (Intent to Disclose Notice) to a business if they plan to reporting their outstanding tax debts to a credit agency. The notice outlines the steps that need to be taken to avoid the tax debt information being reported. Businesses have 28 days from receiving the notice to take the relevant action.
If your business currently has or is likely to have an ATO debt of more than $100,000, its important that you or your tax advisor engage with the ATO before the business is issued with an Intent to Disclose Notice.
Click here for further information.
Recent AAT decision denies SMSF complying status
The recent AAT decision in Driscoll and Commissioner of Taxation [2021] AATA 3892 has important implications that all SMSF professionals and trustees should be aware of.
The case related to an application by a SMSF Trustee for a review of the Commissioner's refusal to issue the fund with a Notice of Compliance. A non-complying SMSF is subject to a tax rate of 45% on the market value of the assets of the SMSF, less non-concessional contributions, in each year of contravention.
The important facts are that the taxpayer used SMSF funds to attend a Church of Scientology course aimed at making money and also the fund’s annual return for the relevant year was lodged late despite the trustee claiming that the ATO advised him in a telephone conversation to defer lodgement until he had sorted out his personal problems.
The AAT determined that the facts resulted in the following contraventions of the SIS Act:
- late lodgement (in contravention of s 35D of the Superannuation Industry (Supervision) Act 1993 (SISA); and
- the expenditure on the course, which the AAT considered was to confer on Mr Driscoll a personal benefit rather than one that had anything to do with the Fund (which caused a contravention of the sole purpose test and the prohibition on the provision of financial assistance to a member in sections 62 and 65 of the SISA).
Ultimately the AAT determined that the discretion to issue a Notice of Compliance in respect of the Fund year should not be exercised for the relevant year.
The case has important implications with the AAT expressly stating:
- late lodgement is a contravention. Timely lodgement is important. Sometimes, delays occur, and there can be leniency. Nevertheless, generally speaking, all efforts should be made for on-time lodgement. Late lodgement can be exacerbated where there are other issues too. The ATO has a focus on SMSF lodgements as late lodgers are seen as a significant risk to the super system, especially those seeking illegal early access via SMSFs.
- file notes and other evidence of important events (e.g. alleged extensions from the ATO) should be made, retained and potentially provided to any other party involved. Otherwise, without such evidence, claims made, such as Mr Driscoll’s contact and discussion with the ATO, may not be accepted.
- extreme caution should be exercised before proceeding with any non-traditional investments or other expenditures (e.g. expenditure on courses or books). Where there is doubt, expert advice should be sought.
Tax-free COVID-19 grants
There are two types of government grant and support programs, under which COVID-19 payments to support businesses may be non- taxable.
These are:
- state and territory grants relating to the recovery from COVID-19
- Australian Government support payments established under the COVID-19 Business Assistance Program.
The NSW state grants that are tax-free are:
- 2021 COVID-19 business grant
- 2021 COVID-19 JobSaver payment
- 2021 COVID-19 micro-business grant
- NSW Performing Arts COVID Support Package.
Varying PAYG instalments
Due to the ongoing impacts and economic uncertainty of the COVID-19 pandemic, the ATO will not apply penalties and interest on varied instalments that relate to the 2021–22 income year, if the taxpayer has taken reasonable care to estimate their end of year tax liability.
When considering if a genuine attempt has been made, the ATO will take into account what a reasonable person would have done in your circumstances.
Taxpayers can vary instalments multiple times throughout the year. The varied amount or rate will apply for all remaining instalments for the income year, or until another variation is made.
