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It is time to take action. The soft touch allowed by the ATO during Covid is completely gone. Businesses have had plenty of time now to make arrangements to pay debts, refinance, sell or liquidate business and where none of this has happened then the ATO is now taking swift action.
This is most prudent where businesses are not solvent – (able to pay debts as and when they fall due).
Best advice is, if your business is facing financial stress, speak to your accountant or an insolvency specialist early. The longer you leave it, the less options you have and the less favourable they get for you, your employees, customers, suppliers and bank.
Right now the ATO is targeting:
Director Penalty Notices
Late and unpaid employee super
FBT on motor vehicles
These are being sent out at great rate for overdue debts, not already on a payment plan. DPNs or Director Penalty Notices are documents notifying Directors and Trustees that they are now being held personally liable for GST and PAYG withholding tax obligations to the ATO. This places the Directors personal assets in the line of fire of the ATO.
Tips to avoid DPNs are try to refinance the ATO debt or apply to the ATO for a payment plan before they issue a DPN. Getting finance after they have issued a DPN will be more difficult.
Late and unpaid super has become a boon activity for the ATO due to data matching available from STP reporting, super portal reporting and from the superfunds themselves.
Reports are required to lodged each quarter for late paid super with fees and interest. Interest is payable on the amount of late paid super from the applicable period to the SGC lodgement date regardless if it has already been paid.
Where they find late paid super, businesses can incur years of interest worth thousands of dollars for a super payment which was a couple of days late originally.
At the ATOs discretion, they can charge up to 200% of the value of outstanding super as a penalty. The super paid, fees, penalties and interest are not deductible for tax up to the lodgement date of the SGC report but interest is deductible on the ATOs SGC account after the date SGC reports are lodged.
The tax tips are to lodge SGC reports as soon as possible if late super payment has occurred to minimise non deductible expenses and if the ATO requests a SGC Reports, lodge them as soon as possible. They have a good idea what they should say already.
A recent audit report calculates an estimated FBT tax shortfall in 2021 to be $1.275 Billion. The ATO is motivated.
In the past, the ATO has been reported as auditing shopping centre carparks on weekends to see whose using business cars on weekends. These days, it is easier for them to use licence plate tracking data from freeways and toll roads or your own built in GPS navigation to do the same thing.
The biggest underpayers of FBT are small and medium businesses. To start, the ATO are targeting these businesses which have multiple vehicles.
The treatment of car expenses can differ a bit between entity types and who uses them. Common amongst all is:
If an employee uses a vehicle belonging to a business, FBT is more likely to apply than not.
There are two methods of calculation. One of which will always involve the completion of a logbook.
The most common mistake is the false belief that a 4 door ute is an exempt commercial vehicle. It can be but there are very few models and use cases which actually meet this criterion.
If you have never lodged an FBT return, the ATO can go back as far as they like to audit you for this. This allows the ATO the same audit scope as if they suspect fraud.
If you have lodged FBT returns, this generally limits their investigations to the last 3 years of lodged returns.
Best tip is to complete logbooks to give yourself options to reduce FBT and speak to your accountant about how to minimise taxes and audit risk in your fleet.