audit & assurance

Safeguard Your Affairs with Audit Insurance

Audit Insurance: A different perspective on a wise investment

In the dynamic world of business, facing an Australian Taxation Office (ATO) audit can be a daunting and costly experience for both business owners and individual taxpayers alike.

However, did you know that already 15% of Allan Hall business clients have chosen to secure their financial well-being by opting for audit insurance?

This strategic decision is not just about protecting finances; it’s about ensuring peace of mind during potential ATO reviews.

The Cost of an ATO Audit

The average cost for professional fees associated with a standard ATO review of a proprietary limited (Pty Ltd) company can be as high as $18,000. This figure includes the expenses incurred in navigating through the intricacies of tax regulations, responding to ATO queries, and addressing any discrepancies that may arise during the audit process.

The Affordable Solution

Enter audit insurance — a financial safety net designed to alleviate the burden of exorbitant audit-related expenses. For an average annual cost of around $600, businesses can secure comprehensive coverage that not only shields them from the financial impact of an ATO audit but also allows them to navigate the process with professional support.

Why Choose Audit Insurance?

1. Cost Mitigation:

  • Shield your business from hefty expenses associated with ATO audits, including accounting and legal fees.
  • The annual investment in audit insurance is minimal compared to the potential costs of an unexpected ATO review.

2. Peace of Mind:

  • Focus on running your business without fear of unexpected financial setbacks due to audits.
  • Audit insurance provides peace of mind, allowing you to concentrate on growth and development rather than compliance concerns.

3. Professional Support:

  • Freedom to access our team of experts to assist in handling ATO audit queries ensures that your business is in capable hands.
  • Receive guidance throughout the audit process, ensuring compliance and minimising the risk of financial penalties.

Being prepared for unforeseen challenges is a mark of a prudent entrepreneur. Audit insurance emerges as a sensible investment, providing a safety net against the potential financial impact of ATO audits.

With an average annual cost that pales in comparison to the potential expenses of an initial review or an extensive audit, business owners can make an informed decision to safeguard their financial health. In the end, the choice is yours but with audit insurance, you can make that choice with confidence and financial security.

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hyperlink

Removal of ATO SMS hyperlinks

ATO announces the removal of hyperlinks in SMS

The ATO is in the process of removing hyperlinks from all outbound unsolicited SMS by Tax Time 2024.

Removing hyperlinks is a scam-preventative measure. It will help protect the community by making it easier to identify legitimate ATO SMS interactions and provide trust and confidence in the ATO’s tax, superannuation and registry systems. 

There has been significant growth in the use of SMS by cybercriminals.

Throughout the 2022–23 financial year, SMS scams impersonating the ATO brand, products, services and employees increased by over 400%. 

Cybercriminals often use hyperlinks in targeted SMS phishing scams. The hyperlinks take individuals to highly sophisticated fraudulent websites (such as a fake myGov sign-in page) designed to steal their personal information or install malware.  

The ATO  may use SMS  to contact you, but will never include links to log-in pages. If you want to access the ATO’s online services, always type my.gov.au or ato.gov.au into your internet browser yourself. 

This change also serves as a timely reminder to protect your information. Do not give out your TFN, date of birth or bank details unless you trust the person you are dealing with, and they genuinely require these details. 

If you think communication such as a phone call, SMS, voicemail, email or interaction on social media claiming to be from the ATO is not genuine, do not engage with it. You should either: 

  • go to Verify or report a scam to see how to spot and report a scam 
  • phone the ATO on 1800 008 540 if you have divulged information or remitted a payment to a scammer. 

For information and examples of ATO impersonation scams see Scam alerts »

CONTACT ALLAN HALL BUSINESS ADVISORS

stopwatch countdown to deadline

Small business lodgement penalty amnesty deadline

Clock ticking on small business lodgement penalty amnesty

Small businesses have until the end of December 2023 to get back on track with overdue forms via the small business lodgement penalty amnesty.

Late lodgement penalties will be remitted under the amnesty which ends on 31 December 2023 for small business income tax returns, fringe benefits tax (FBT) returns and business activity statements (BAS) originally due between 1 December 2019 and 28 February 2022.

More than 14,000 small businesses have taken advantage of the amnesty since it kicked off on 1 June 2023, with more than $48 million in failure to lodge (FTL) penalties remitted.

Directors who bring their company lodgements up to date can also have FTL penalties remitted if they rely on company lodgements to finalise their tax affairs. This applies to eligible lodgments made between 1 June and 31 December 2023.

The amnesty provides an opportunity for small businesses to re-engage with their tax affairs and get back on track with their lodgement obligations without penalties.

If a small business has ceased trading, they need to advise their registered tax professional or contact the ATO directly to seek assistance with finalising their tax obligations, which may include lodging overdue returns, cancelling their ABN and paying any amounts overdue.

While penalties will be remitted under the amnesty, if a business finds themselves with a tax debt after their overdue forms are lodged, they must pay in full to avoid further interest charges or check the ATO website to see if they are eligible for a payment plan.

CONTACT ALLAN HALL BUSINESS ADVISORS

calculator on AUD$

Using business money for private purposes

2 steps to take

If you use money or assets from your company or trust for private purposes and don’t account for the transactions correctly, there can be tax consequences.

That’s why it’s important to get it right.

Business money and assets you take or use for private purposes can include:

  • salary and wages
  • director fees
  • fringe benefits, such as an employee using the company car
  • dividends paid by the company to you as a shareholder (that is, distribution of the company’s profits)
  • trust distributions if your business operates under a trust and pays you as a beneficiary
  • loans from a trust or company
  • ad hoc drawings or takings
  • allowances or reimbursements of expenses you receive from a trust or company.

If you’ve used business money or assets from a company or trust for private purposes, follow these steps to avoid unintended tax consequences:

  1. Keep accurate records of the transactions, and
  2. Account for the transactions in the company or trust tax return and your individual tax return, if applicable.

Remember, there are different reporting and record-keeping requirements for each type of transaction, so make sure you know how to keep accurate records to suit your circumstances.

You can also practise good record-keeping habits by regularly cross-checking your records against the original documents so you can fix mistakes earlier and monitor your business’s cash flow.

Taxpayers are ultimately responsible for keeping business records and what you claim in your tax returns, however Registered Tax or BAS Agents like Allan Hall on the Northern Beaches can help and advise on your tax.

CONTACT ALLAN HALL BUSINESS ADVISORS

taxation & accounting

Business income: it’s not just cash

Clothing, jewellery, gaming products, flights and crypto assets are just some of the things you might have to account for in your tax return as part of your business income.

If you received these or any other non-cash benefits instead of money for your goods or services, or as a tip or gift – you must record them as income at their market value.

This means you record the cash price that you would normally have to pay for those goods or services.

You may be able to reduce the assessable amount of a non-cash benefit you’ve received, by the amount you would have been able to claim as a deduction if you had purchased the item to be used in carrying on your business.

It’s important to report your regular forms of income

Such as:

  • cash and digital payments
  • vouchers or coupons
  • business investments
  • online and overseas business activities
  • services you provide using your personal effort and skills (personal services income)
  • the sharing economy, such as ride-sourcing
  • assessable government grants and payments
  • the value of trading stock you take for your own use
  • payments from insurance claims.

There are some payments that aren’t assessable income, so you don’t need to include them on your return, such as:

  • non-assessable non-exempt (NANE) government grants
  • bona fide gifts or inheritance
  • GST you’ve collected
  • money you’ve borrowed or contributed as the business owner.

Always keep accurate and complete records to prove the income you report and the expenses you claim as deductions.

Remember, registered tax professionals like Allan Hall in Brookvale can help and advise on your tax.

CONTACT ALLAN HALL BUSINESS ADVISORS

Compliance cogs

Understanding Director Penalty Notices

Navigating the ATO’s Enforcement Measures

In the complex territory of tax obligations, the Australian Taxation Office (ATO) is actively deploying Director Penalty Notices (DPN) at an average rate of 60 per day, as revealed by the ATO themselves.

A DPN does not confer liability upon directors for outstanding company debt, as directors are inherently liable by law. Rather, it serves as a formal notification that initiates a countdown, compelling directors to either remit the debt promptly or confront the ensuing consequences.

There are imperative steps for directors to take in response to a DPN:

  1. Complete business lodgements even if there is an inability to pay associated liabilities such as PAYG, GST and superannuation
  2. Ensure business address accuracy on ASIC’s register
  3. Seek advice from a liquidator if you are unable to meet the DPN amount.

Lockdown DPNs

A lockdown DPN comes into play when a company fails to lodge Business Activity Statements (BAS) and Instalment Activity Statements (IAS) within three months of the due date or Superannuation Guarantee Charge (SGC) statements within one month and 28 days after the quarter’s end to which the superannuation charge contribution relates. In such cases, directors face automatic and permanent exposure to penalties, with the sole remedy being full payment of the debt.

Non-lockdown DPNs

Conversely, a non-lockdown DPN provides directors with a 21-day window to consider options for remitting the applicable tax (penalty). The available choices include paying the debt, appointing a voluntary administrator, engaging a small business restructuring practitioner or appointing a liquidator. Failure to act within this timeframe results in the penalty becoming permanent, empowering the ATO to initiate debt recovery proceedings.

Adding a layer of complexity, the ATO now issues DPNs that break down amounts owed into lockdown (monthly unremitted amounts) and non-lockdown (monthly remitted amounts) columns.

Navigating the intricacies of DPNs can be challenging for directors, so engaging with a qualified tax advisor is crucial to gaining the necessary support and understanding:

  • Explaining the mechanics of DPNs
  • Reviewing individual circumstances to provide tailored assistance and outlining options based on unique circumstances
  • Offering support throughout the decision-making process.

In essence, understanding and responding to Director Penalty Notices requires a comprehensive approach, combining intricate tax knowledge and strategic insights, ensuring directors are well-equipped to address these ATO enforcement measures.

CONTACT ALLAN HALL BUSINESS ADVISORS

Related reading

company tax return

Business debt on ATO’s watchlist

The five types of business debt at the top of the tax office’s watchlist

The Australian Taxation Office (ATO) has unveiled the top five categories of business debt that have captured its attention, signalling the end of the unprecedented leniency extended to late payers during the COVID-19 lockdowns.

Speaking at the Tax Institute Tax Summit in Melbourne, Vivek Chaudhary, the ATO’s deputy commissioner of lodge and pay, emphasised the necessity of offering substantial support to taxpayers, including small businesses, amidst lockdowns and stringent public health measures.

The ATO’s arsenal during the pandemic included payment plans, deferred deadlines, waived penalties and interest, and the option to file without immediate payment, all aimed at aiding businesses during challenging times. Chaudhary acknowledged the positive outcomes of these measures but also pointed out their impact on payment behaviour, with an increasing number of businesses failing to meet tax deadlines compared to the pre-pandemic period.

Chaudhary identified five priority payment categories where the ATO’s renewed focus will be most evident:

  1. Topping the list is the unpaid Superannuation Guarantee Charge (SGC), a penalty imposed on businesses that fail to fulfil their Superannuation Guarantee obligations. Notably, small businesses owe the majority of this debt, totalling $1.8 billion. To ensure compliance, the ATO has equipped itself with tools such as garnishee notices, payment directives, Director Penalty Notices, and potential legal actions to secure SGC payments.
  2. Chaudhary expressed concerns about new self-assessed debts raised by employers, suggesting that taxpayers might be waiting for the ATO to prompt payment before taking action.
  3. Refund fraud remains a significant worry, with fraudsters siphoning billions of dollars from the tax system through counterfeit GST refunds.
  4. The ATO is also monitoring substantial aged debts exceeding $100,000, and
  5. Debts arising from audit actions initiated by the ATO. Chaudhary emphasised that while some audit adjustments stem from genuine errors, others result from negligence, recklessness, or deliberate attempts to evade tax payments, and such cases will receive no leniency, with heightened expectations for debt settlement.

Consequently, the ATO is reverting to its pre-pandemic compliance strategies to transition from the COVID-induced payment culture to a more standard payment approach. ATO commissioner Chris Jordan revealed that the ATO is pursuing approximately $50.2 billion in collectable debt, with small businesses accountable for over $33 billion of this total.

Read the full speech Addressing collectable tax debt – Tax Institute’s Tax Summit 2023 here »

CONTACT ALLAN HALL BUSINESS ADVISORS

audit

Federal Budget weight behind tax audits

The 2023 Federal Budget included $1 billion for audits of taxpayers over the next 4 years.

Therefore all taxpayers have an increased chance of a tax office review of their returns in the near future.

Did you know that our costs for assisting you with the management and supply of information to the ATO for their reviews can be insured?

We’ve partnered with AuditCover to share their offer with our clients.  AuditCover covers the professional fees you may incur when responding to a tax audit, review, investigation or enquiry from the ATO or state-based authorities and agencies.

If you haven’t already done so, please consider getting an online quote below.

If you’d like assistance with generating a quote, please let us know and we will be happy to help.

If you have any questions, you can call AuditCover on 1300 895 797 or email them at [email protected]. Need more info? Read more here »

CONTACT ALLAN HALL BUSINESS ADVISORS

checklist

Superannuation health check

Use this checklist to review the health of your super in 5 easy steps

Getting started

  • The best way to perform these checks is either on ATO online services through myGov or by contacting your super advisor directly
  • You need a myGov account linked to the ATO
  • Once you link your myGov account, you can also use the ATO app.

Check 1: Check your contact details

Check your contact details, tax file number (TFN) and bank account are up to date with the ATO and your super fund. This helps prevent lost super and assists us in matching any unclaimed super to you.

Log on to ATO online services through myGov. In the top menu, select My profile. From the drop-down options, select either:

  • Personal details to update your name, contact number, email and home address
  • Financial institution details to update your bank account and
    • under the Account heading, you will see Income Tax and Superannuation
    • select either Add or Update.
     

To update your contact details, bank account and TFN with your super fund, see their website or contact them directly.

Check 2: Check your super balance and employer contributions

It’s important to check your super balance each year to see how much you have and keep track of your employer contributions. You can do this anytime on ATO online services or through your super fund.

Your employer should pay your super at least every 3 months. They may choose to do it more frequently, such as your regular pay cycle. From 1 July 2022 to 30 June 2023, your employer should pay at least 10.5% of your salary into your super. From 1 July 2023 to 30 June 2024, the rate increases to 11%. If you’re under 18, you need to work more than 30 hours a week to be eligible for super.

Funds report account balances to us at certain times of the year. Balances shown in ATO online services may be different to your actual current balances.

Log on to ATO online services through myGov. From the top menu, select Super and then either:

  • Fund Details to see all your super accounts and balances (including those held in funds or with us) and the most recent date reported by your fund
  • Information then Employer contributions to see the total year-to-date employer contributions in a selected year – select Transactions to see each contribution separately.

For help calculating the amount of super your employer should be paying, use the ATO’s Estimate my super tool. If you do not receive super contributions or the amounts are incorrect:

  • contact your employer and request an update
  • report it.

Check 3: Check for lost and unclaimed super

You may have lost track of some of your super when you changed your name, address or job, for example. This is why it’s important to ensure your fund has your current details.

Lost super is when your fund has lost touch with you, or your account is inactive. This money is held by your fund. Unclaimed super is when your fund transfers lost super to the ATO.

All your super accounts including lost and ATO-held super are displayed on ATO online services.

Log on to ATO online services through myGov. From the top menu, select Super. Then select either:

  • Fund details to check for lost super – if you want to keep your super with the same fund, contact them directly to update your details
  • Manage and then Transfer super to transfer this lost super to an eligible super account – or ask your fund to complete the transfer for you
  • Manage and then Transfer super to transfer ATO-held super to an eligible super account
  • Manage then Withdraw ATO-held super to have your super paid directly to you if the amount is less than $200 or you are over 65.

Check 4: Check if you have multiple super accounts and consider consolidating

If you’ve had more than one job, you may have more than one super account. It’s important to know how many super accounts you have. Combing your super may reduce fees and make it easier to manage.

If you decide to consolidate your super, it’s important to choose the fund that’s right for you. You should check that it provides better value, and the insurance cover suits your needs, which may change throughout your life. To see which fund is the best option for you, visit MoneySmart. If you are unsure of what to do, contact your super fund or seek independent financial advice.

Log on to ATO online services through myGov. From the top menu, select Super then either:

  • Fund details to see all your super accounts and balances
  • Manage and then Transfer super to consolidate your accounts, then
    • select the fund you want to close (transfer)
    • select the fund you want your money transferred to from the accounts listed
    • confirm your selection and submit request.
     

Check 5: Check your nominated beneficiary

Take time to ensure you have a valid death beneficiary nomination in place in your super fund as this isn’t covered by your will. This means your loved ones will not be put through unnecessary difficulties to finalise your estate.

Most binding nominations expire every three years. Some super funds have an option where nominations do not expire and remain in place until they are revoked.

If you don’t nominate a beneficiary, your fund may not know who your benefit should be paid to. In these cases, they will follow the law. This usually means they pay it to one or more of your dependents or your legal personal representative.

To check or nominate your death beneficiary:

  • Refer to your super fund’s website or contact them to check if you already have a valid nomination in place
  • To update it, complete the form from your super fund, sign and date in the presence of two witnesses
  • If you are unsure, contact your super fund or seek independent financial or legal advice from a qualified advisor

Why you should review your super

Your super is one of the biggest assets you’ll accumulate in your lifetime.

However, many Australians think they don’t need to worry about their super until retirement. Some don’t think about it at all.

It’s never too early to think about your super and the earlier you get on top of it, the better. It’s a good idea to regularly review and manage your super. At the very least, make sure you:

  • are getting the super you are entitled to from your employer
  • know where it is.

Small decisions you make today can have big impacts on your final super outcomes. For instance, missing out on some employer contributions today, could have a huge impact on your super balance in retirement due to the compounding effect of earnings. The same can happen if you have lost or unclaimed super.

Benefits of a super health check

A super health check consists of 5 simple and important things you can do to get on top of your super. It will help you:

  • manage your super
  • understand your entitlements
  • make better choices for when you retire.

You can check on your super at any time. However, we suggest you get into the habit of doing a health check each year when you prepare your tax return.

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Disclaimer: This article contains general advice only and has been prepared without taking into account particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. The information provided in this newsletter is objectively ascertainable and therefore does not constitute financial product advice.  If you require personal advice, please contact us to arrange an appointment with one of our licensed SMSF advisors. Source: ATO