Easier to pay your tax bill
The ATO has improved how your business can use and manage its credit or debit card details in Online services for business, making it easier to pay a tax or super bill.
The new payment features allow your business to:
Add and manage up to three credit or debit cards in its account profile;
Set up a payment plan with automatic direct debits from a card;
Make one-off payments using a card.
Online services for business offers a simplified process to make it easier to create a payment plan if your business owes less than $100,000.
If you’re worried your business will have difficulty paying on time, or are having trouble setting up a payment plan online.
Check your business’ PAYG instalments
Now is a good time to check your business’ pay as you go (PAYG) instalments still reflect its expected end of year tax liability.
If the business’ circumstances have changed and you think it will pay too much (or too little) in instalments for the year, the instalments can be varied on the next activity statement.
Instalments can be varied multiple times throughout the year. The varied amount or rate will apply for the remaining instalments for the tax year or until another variation is made.
If your business is affected by COVID-19, the ATO has said it will not apply penalties or charge interest to varied instalments relating to the 2020–21 tax year. This applies when the business has made its best attempt to estimate its end of year tax liability.
If an amount or rate is varied online, paper activity statements and instalment notices will no longer be issued. These will be issued electronically. Your business will need to consider this when deciding how to lodge, revise and vary future activity statements and instalment amounts.
STP reporting: Changes from 1 July 2021
If your business has employees, it should be reporting through Single Touch Payroll (STP) unless it only employs closely held payees or is covered by a deferral or exemption.
There are some changes to STP reporting from 1 July 2021:
Small employers (less than 20 employees) with closely held payees must report their closely held payees through STP. You can choose to report these payees each pay day, monthly or quarterly;
The STP quarterly reporting concessions for micro employers (less than 5 employees) will only be available to employers who meet certain eligibility requirements, including the need for exceptional circumstances to exist. Employers can apply for this concession through the online deferral tool from 1 July 2021.
A closely held payee is an individual directly related to the entity from which they receive payments, e.g.:
Family members of a family business;
Directors or shareholders of a company;
Beneficiaries of a trust.
Further changes will start on 1 January 2022. We will advise you of those nearer the date.
Bad debts
Your business may be able to claim a deduction for income that cannot be recovered from a customer or debtor. This unrecoverable income is known as a “bad debt”.
If your business accounts for assessable income on an accruals basis, an amount your business earns may be included in assessable income before payment is received (this cannot happen if your business accounts for assessable income on a cash basis). If your business determines there is no or little likelihood that an amount included in assessable income will be recovered from the debtor, that amount may be deductible as a bad debt.
To claim a deduction for the assessable income that cannot be recovered, your business needs to write off the unpaid amount as a bad debt (see below).
If your business subsequently recovers an amount that it wrote off as a bad debt and claimed as a tax deduction, the amount recovered must be included in its assessable income when it receives it.
Writing off a debt as bad is not the same as waiving or forgiving a debt. There are different tax consequences for debt forgiveness or waiver and there may also be tax consequences for the debtor.
How to write off a debt as bad
To claim a bad debt deduction for an amount included in your business’ assessable income that has not been recovered, it must:
Include the income in a tax return (whether in the current tax year or an earlier year);
Determine the debt is bad - there must be a debt owing to your business and it must be genuinely bad (i.e. It is unlikely to be recovered through any reasonable and commercial attempts); and
Write off the debt - this means that your business must have made the decision to write off the debt and recorded that decision in writing before the end of the tax year in which deduction is claimed.
If your business is a company, it must also satisfy the continuity of ownership or continuity of business test, as appropriate.
GST consequences
If your business has made a taxable sale and has paid GST to the ATO for that sale, but it has not received the consideration, either in whole or in part, and the debt is written off as bad, your business can claim a decreasing adjustment for the bad debt.
Have you been affected by floods?
If you're facing problems meeting your tax obligations due to flooding, the ATO will work with you to get things back on track, including:
Give you extra time to pay your debt or lodge tax forms such as activity statements;
Help you reconstruct lost or damaged tax records;
Prioritise any refunds you are owed;
Set up a payment plan tailored to your circumstances, including an interest-free period; and
Remit penalties or interest charged during the time you have been affected.
If you are an employer, you still need to meet super guarantee obligations for your employees. The ATO cannot vary the contribution due date or waive the super guarantee charge on late super guarantee payments.
Vehicle registrations: Data-matching
The ATO will acquire motor vehicle registry data from State and Territory motor vehicle registry authorities through to 2021–22. The collected data may include identification details (e.g. names, addresses and ABNs) and transaction details (e.g. date and type of transaction, sale price of the vehicle and market value of the vehicle).
The ATO estimates that records relating to approximately 1.5 million individuals will be obtained each financial year.
The data may be used to identify taxpayers buying, selling or acquiring motor vehicles who are at risk of not complying with their tax obligations.
Don’t forget that if you are contemplating buying a new car for your business (e.g. to take advantage of full expensing), your deduction cannot exceed the car limit ($59,136 for the 2020–21 tax year).
Tip! Buying a car for your business can have various tax implications, e.g. depreciation, GST and FBT. Talk to your tax adviser if you are contemplating buying a car.
Easier to pay your tax bill
The ATO has improved how you can use and manage your credit or debit card details in Online services for business, making it easier to pay your tax or super bill.
The new payment features allow you to:
Add and manage up to 3 credit or debit cards in your account profile;
Set up a payment plan with automatic direct debits from a card;
Make one-off payments using a card.
Online services for business offers a simplified process to make it easier for you to create a payment plan if you owe less than $100,000.
The fight against tax crime
The ATO is asking for help from the general community in the fight against tax crime. You can complete a tip-off form (available in the Contact us section of the ATO app) or call 1800 060 062 to tell the ATO about suspicious activity, including:
Cash in hand transactions;
Not reporting income;
Underpayment of wages;
Identity fraud;
ABN, GST and duty fraud;
Sham contracting – presenting an employment relationship as a contracting arrangement;
Illegal phoenixing – deliberately liquidating and re-forming a business to avoid obligations;
Schemes that involve deliberate steps to avoid the tax and super systems;
Illegal purchase of Australian property by a non-resident; and
Money laundering.
The ATO says it will safeguard your identity.
There are also protections for certain tax whistleblowers who report breaches or suspected breaches of tax law and misconduct relating to an entity’s tax affairs.
Are you a victim of tax crime?
The ATO can help you if fall victim to fraud. For example, the ATO may:
Cancel a tax return or activity statement lodged without your knowledge (you will then need to lodge a valid return or activity statement);
Grant you an extension of time to lodge a replacement return or activity;
Remit (reduce or cancel) interest charged on unpaid tax debts or shortfall amounts that occur as a consequence of fraud;
Allow you to pay a tax debt by instalments over an agreed period of time, if an outstanding debt causes financial difficulties;
Provide assistance during the course of audits or investigations to correct your tax accounts after fraud has occurred.
Tip! If you think you are the victim of fraud, contact the ATO and the police as soon as possible.
Are you being targeted by an illegal scheme?
The ATO has identified a new scheme where SMSF trustees were informed that they can set up a new SMSF to roll-over the fund balance from the old SMSF and then liquidate their old SMSF in an attempt to avoid paying potential tax liabilities.
The ATO warns that taking part in this arrangement and others like it can result in civil and criminal actions and could ultimately put your retirement savings at risk.
George Samaras
Principal
Taxation, Family and Business Lawyers
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