Tax technical update - December 2017

2. ATO Focus on Cash Economy – ATO likely to investigate businesses that:

• Operate and advertise as “cash only”
• ATO data matching suggests they don’t take electronic payments
• Are part of an industry where cash payments are common
• Indicate unrealistic income relative to the assets and lifestyle of the business and its owner
• Fail to register for GST or lodge activity statements or tax returns
• Under-report transactions and income according to third party data
• Fail to meet super or employer obligations
• Operate outside the normal small business benchmarks for their industry

3. Cash Economy – If the ATO suspects a taxpayer they may send a follow up letter recommending they:

• Lodge a voluntary disclosure – they consider them to be at risk of not reporting all their income and they may be subject to an audit
• Invest in an electronic payment and record keeping system to reduce the risk of mistakes and meet consumer preference
• Attend ATO record keeping information sessions
• Know their tax obligations if they have employees e.g. PAYGW and Super

4. SMSF Retirement Planning schemes identified by the ATO to be of concern:

• Individuals deliberately exceeding their non-concessional contributions cap to manipulate taxable and non-taxable components of their superannuation interest upon refund of the excess
• Granting of a legal life interest over a commercial property to an SMSF
• Contrived arrangements involving SMSF investment in property development ventures involving related parties
• Use of reserves within an SMSF to circumvent the new pension transfer balance cap (TBC) and Total Superannuation Balance (TSB) Limit
• Using different SMSF asset valuations in relation to the sale asset for TBC and TSB purposes compared to transitional CGT relief purposes

5. ATO e-Audits:

• If a taxpayer maintains electronic financial records, the ATO may use computer assisted verification (CAV) techniques to analyse their records
• ATO will initially meet with the taxpayer to understand their business systems and reach an agreement on electronic records required
• Auditor will conduct a series of tests on the data to ensure compliance with tax laws by interrogating downloaded information
• ATO’s Information Systems Risk Assessment (ISRA) tool may be used as part of a larger review or audit
• Correct reporting of tax and super obligations will be a main focus

6. Black Economy Measures in 2017/18 Budget

• Banning manufacture, distribution, possession, use or sale of “Sales Suppression Technology”
• Extension of TPAR system to the cleaning and courier industries

7. Non-Residents and Denial of Main Residence Exemption:

• The Government intends to deny foreign and temporary tax residents access to the CGT Main Residence Exemption
• Existing properties held before 09/05/2017 will not be denied if sold before 30/06/2019
• This will affect individuals, trustees and individual beneficiaries of deceased estates and special disability trusts
• Significant consequences for expatriate Australians who wish to sell their main residence after losing or surrendering their Australian tax residency

If you have questions on any of the above issues raised, please do not hesitate to contact us.

Kim Edwards
Accountant
T: 02 9984 7774
E: kime@northadvisory.com.au