In this Sky Update, we bring you all the latest tax news along with some other items that may pique your interest.
Taxing Christmas Parties
With Christmas just around the corner, many businesses are organising their end of year Christmas party.
It is important to be mindful of the tax implications associated with Christmas parties to ensure that your end of year function does not end up costing a lot more than expected.
The ATO have a useful guide that summarises when Fringe Benefits Tax (FBT) will apply to Christmas parties and associated benefits (eg gifts) provided to staff and their associates. It also touches on the tax deductibility of the cost of Christmas parties.
With thoughtful planning, it is possible to minimize the tax impact. For example, by keeping within the limitations of the minor benefits exemption.
Small Business Superannuation Clearing House (SBSCH) & Timing of Contributions
As superannuation contributions are deductible in the year in which they are paid, it is common place for businesses to pay contributions in the final throws of June each year.
However, a complication may arise where contributions are made through a clearing house such as the SBSCH.
This is because the tax deduction is only available once the contributions have reached employee superannuation accounts. Whilst the contributions may have been paid to the clearing house prior to 30 June, the clearing house may not disburse those contributions to employee superannuation accounts until July. If that happens, the deduction will be pushed into the following year.
Given that employers have no control over the processing times of clearing houses, and have limited visibility of when contributions are disbursed, this can be a significant source of difficulty and frustration.
In light of this, the ATO have released draft Practical Compliance Guideline PCG 2019/D8 in which they confirm that they will not “apply compliance resources” to consider whether contributions made to the SBSCH on or before 30 June had reached their destination in that same year.
This is welcome news for businesses that use the SBSCH, giving them more certainty around the availability of a deduction for employee superannuation contributions paid.
15,000 Tip-Offs to Tax Integrity Centre
- Not declaring income;
- Cash payments and/or paying workers cash in hand;
- Mismatch of lifestyle and reported income; and
- Not reporting sales.
Cafés and restaurants have featured most frequently in the tip-offs received.
These statistics show that people are increasingly willing to dob in those people and businesses that are seeking to avoid their tax obligations.
The best way to avoid unwanted attention from the Tax Integrity Centre is to keep your nose clean. Businesses that are diligent in meeting their tax obligations have nothing to fear.
We also find that maintaining a good compliance history pays dividends in the long run as these businesses:
- Have better visibility of their performance and can better manage their businesses;
- Are more readily able to secure finance from lenders; and
- Achieve the best results when selling their businesses.
Penalty Rates – Peak Holiday Trading Period
With the peak trading period for the retail, hospitality and tourism industries fast approaching, employers are urged to do their homework to ensure that they pay employees correctly and meet all of their obligations.
A quick scan of recent media releases shows that underpayment of staff is a priority issue that the Fair Work Ombudsman is taking action on with significant penalties being handed out to non-compliant businesses.
Underpayment of staff is a hot issue at present with high profile businesses such Woolworths, Sunglass Hut & MADE Establishment (George Calombaris) attracting unwanted attention in the mainstream media for infractions. The resulting damage to the reputation of these businesses will take a long time to repair.
Given the complexity of Awards, it can be very challenging to ensure that staff are paid correctly. Particularly during the peak trading period where there are issues to contend with such as extended trading hours, public holidays and additional casual employees put on to meet demand.
We recommend the Fair Work Ombudsman’s Pay & Conditions Tool as a great place to start in ensuring that your business is paying staff correctly.
Lost Super Exceeds $20b – Is Any of It Yours?
The ATO has recently advised that unclaimed & lost super now exceeds $20.8b.
If you have any concerns that you may have lost track of some of your superannuation, we recommend that you use ATO Online Services to find and manage your superannuation accounts.
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