With the new financial year and tax time rapidly approaching, the tax office have made a few crucial notes for small businesses and taxpayers before they lodge their tax return.
Payment summaries no longer required with STP reporting
With Single Touch Payroll (STP), many larger employers will have different obligations in respect of completing their end of financial year reporting for their employees. Employers are no longer required to provide a payment summary to employees or lodge a payment summary annual report for any information that has already been reported and finalised through STP, a significant change from prior years. Tax Agents such as Paris Financial will still be able to access this information through their access to ATO information for their clients.
In order for these employers to be exempt from the requirement to provide payment summaries and the payment summary annual report, employers will need to complete the STP finalisation declaration for their employees by the relevant deadline. This is generally 14 July, but the ATO has extended this to 31 July 2019 for employers who started reporting through STP during the 2019 financial year.
Also, given the change may confuse some employees who are used to receiving a written PAYG summary each year, we are taking this opportunity now to advise our clients that employ staff to let their employees know about the change before the end of the year.
Trustee reporting and withholding obligations
Trustees of closely held trusts have some additional reporting obligations outside the lodgement of the trust tax return each year. The ATO has indicated that it is currently reviewing trustees to ensure their compliance with these obligations, particularly the requirement to lodge TFN reports for beneficiaries.
The TFN withholding rules require trustees to withhold amounts from distributions made to beneficiaries if they have not quoted their TFN to the trustee. In these cases, the trustee is required to withhold tax at a rate of 47% and pay this to the ATO, and lodge an annual report of all withheld amounts.
Where beneficiaries have quoted their TFN to the trustee, the withholding obligation does not arise although trustees are required to provide the ATO with a TFN report for each beneficiary. The TFN report is required to be lodged by the end of the month following the end of the quarter in which a beneficiary quoted their TFN.
Tax agents should ensure that these reports are completed for their trustee clients to avoid the imposition of failure to withhold penalties on the trustee. Perhaps more importantly, trustees need to be informed of their withholding obligation in situations where the beneficiary has not provided a TFN to the trustee prior to the distribution being made.
Cryptocurrency data matching
The ATO has started to receive data from Australian cryptocurrency designated service providers (DSPs) as part of a data matching program to ensure people trading in cryptocurrency are reporting transactions and paying the right amount of tax.
As part of a media release advising of the commencement of the data matching program the ATO advised that taxpayers may be contacted and given the opportunity to verify the information collected before any compliance action is undertaken. Taxpayers will be given at least 28 days to clarify any information that has been obtained from a data provider.
The ATO has been increasingly concerned with the risks posed by cryptocurrency use. Specifically, the ATO is concerned that cryptocurrency may be used to move funds within the black economy, hide money offshore and that taxpayers using cryptocurrency might have undeclared taxable capital gains.
Where errors relating to the tax treatment of cryptocurrency are identified clients may want to consider making a voluntary disclosure to the ATO. Penalties may be significantly reduced in circumstances where the ATO is contacted prior to an audit or other compliance action commencing.
Valuation guidelines updated for SMSFs
The valuation guidelines for SMSFs have been updated to clarify the valuation of pension assets.
The market value of the assets that support a pension or super income stream needs to be determined on either:
- the commencement day of a pension
- for on-going pensions, 1 July of the financial year in which the pension is paid.
The ATO clarifies that the valuation can be undertaken by anyone as long as it is based on objective and supportable data. Where the nature of the asset indicates that the valuation is likely to be complex or where the valuation is materially inaccurate or a significant event has occurred, then the use of a qualified independent valuer should be considered.
The ATO also notes that, although a reasonable estimate of the value of a pension can be used for valuing the asset on commencement of the pension or at 1 July for ongoing pensions, you cannot rely on this reasonable estimate when preparing the SMSF’s financial accounts and calculating the SMSF’s entitlement to exempt current pension income (ECPI).