Late last year, the ATO revealed the top types of business debts currently under its scrutiny.
As the leniency extended to late payers during the COVID-19 lockdowns fades away, the ATO is refocusing on pre-pandemic compliance activities. This shift emphasizes the importance of businesses proactively addressing their financial obligations. Let’s delve into the key areas of focus outlined by the ATO:
1. Unpaid Superannuation Guarantee Charge (SGC)
A major focus of the ATO’s reset effort is pursuing unpaid superannuation guarantee charges (SGC). Small businesses owe unpaid superannuation guarantee charges to the tune of $1.8 billion. To ensure that outstanding SGC amounts are settled, the ATO is utilising various tools, including garnishee notices, direction to pay notices, Director Penalty Notices, and prosecution actions. The tax office is resolute in holding employers accountable and is actively identifying those taking advantage of non-payment of employee entitlements.
2. New Self-Assessed Debts Raised by Employers
The ATO is closely monitoring new self-assessed debts raised by employers. This underscores the importance of proactive debt resolution and compliance, emphasising the need for businesses to address financial issues without waiting for official communication from the ATO.
3. Refund Fraud
Refund fraud remains a significant concern for the ATO, with fraudsters successfully scamming billions of dollars from the tax system through fake GST refunds. The ATO is intensifying efforts to combat refund fraud, employing advanced detection mechanisms and stringent measures to penalise those engaged in fraudulent activities.
4. Major, Aging Debts
The ATO is closely monitoring major, aging debts—those exceeding $100,000 and surpassing two years in age. These substantial liabilities are subject to heightened scrutiny, reflecting the ATO’s commitment to addressing long-standing financial obligations that have not been settled.
5. Debts Resulting from Audit Actions
Debts arising from audit actions initiated by the ATO constitute another priority. The ATO maintains Debts arising from audit actions initiated by the ATO constitute another priority for the tax office. While some audit adjustments stem from genuine errors, others result from carelessness, recklessness, or deliberate attempts to evade tax payments. Clients in this category will receive no concessions, with the ATO maintaining elevated expectations for timely settlement of raised liabilities.
6. Next 5,000 Tax Performance Program
In addition to the business debt watchlist, the ATO introduced the “Next 5,000 Tax Performance Program” last November 2023.
Funded by the Tax Avoidance Taskforce, this program focuses on larger privately owned wealthy groups. The ATO use data matching and analytic models to identify Australian resident individuals who, together with their associates, control wealth of more than $50 million.
While it may not directly impact everyone, it provides insights into the ATO’s future audit approach.
The ATO identified several areas of concern, including related party transactions, assets sales, capital gains tax reporting, GST calculations, mismatches in reported income and expenses between related parties, lack of independent valuations, omission of related party income, issues with family trust elections, and non-compliant loans.
What This Means for You: The Importance of Tax Governance
The key theme from the ATO’s programs is the importance of having robust tax governance. This involves clear roles and responsibilities, recognising tax risks, and seeking timely advice to meet the ATO’s requirements. It’s essential for businesses to prioritise timely tax payments and compliance to avoid facing intensified enforcement actions from the tax office.
At KMT Partners, our commitment to the quality of our work ensures that you are well-prepared in the event of an ATO audit. Our meticulous approach includes comprehensive workpapers, detailed transaction understanding, and up-to-date, correct advice. Adopting a normal payment culture is crucial in this post-COVID era, and our team is here to assist you.
Contact KMT advisers for any tax assistance or queries!
Source: AuditCover, ATO
About our advisers:
Chrisanthe Lekatis is renowned for her expertise in management accounting, virtual CFO services, and top-tier business advice. She empowers management with tailored strategies for success, streamlining processes to achieve efficient and cost-effective outcomes. Her commitment to building trust and lasting relationships goes beyond professional excellence; it’s a personal ethos. By actively listening and understanding her clients’ businesses and goals, Chrisanthe thrives on collaborative efforts to navigate challenges and collectively achieve their aspirations. Please do not hesitate to reach out if you need assistance.
Michael Fox has been dedicated to the success of his clients, devising comprehensive wealth strategies for both personal and business growth for over 30 years. With extensive expertise in business governance and family business succession, Michael specialises in empowering emerging businesses and family enterprises by fostering renewal, enhancing value and smooth transitions to the next generation. Please do not hesitate to reach out if you need assistance with your business advice.
The information in this paper is not advice. The information in this paper is intended to be educational only. No person should rely on the educational information in this paper in relation to their taxation or financial affairs. You should only undertake transactions following the provision of advice from a suitably qualified adviser who has considered the particular facts involved with your circumstances.