AUDIT PROTECTION
SERVICE
Random
Government Audits, Reviews & Investigations
...Are you prepared?
What are Random Government Audits, Reviews &
Investigations?
Random audits, reviews and investigations are conducted by
the ATO and other State and Federal Government agencies to
ensure business and taxpayer compliance with various tax and
legislative requirements such as Income, Land and Payroll
Tax, GST, Workers Compensation, Superannuation Guarantee and
Compliance and Research and Development Grants.
How likely am I to get a random audit, review or
investigation?
The Australian Tax Office (ATO) and other federal and state
agencies continue to announce significant increases in their
audit activity. Now more than ever, individuals, businesses
and Self Managed Superannuation Funds are at risk of being
selected for a random audit or review.
What are the costs to businesses and taxpayers in the
event of a random audit, review or investigation?
If your business or individual return is subjected to a
random audit, review or investigation, you are responsible
for the costs involved in providing the required
information. Even the simplest enquiry can require hours of
work. In some cases, when there are complex environments,
unusual circumstances, multiple years or multiple companies
and trusts, thousands of dollars in accounting and legal
fees can be incurred.
How can I protect myself from the costs of random audits,
reviews & investigations?
We can offer you and your business an Audit Protection
Service which can provide you with comprehensive relief
from these audit, review and investigation costs.
The Audit Protection Service covers:
- Accounting fees in responding to audits, reviews & investigations of
your lodged returns, including those from previous years.
- Random government audit, reviews & investigations for Payroll Tax,
Workers Compensation, Self Managed Superannuation Funds,
Income Tax, BAS/GST, FBT, R&D, Superannuation Guarantee and
Record Keeping – to name a few.
- Specialist’s professional fees if we need to engage a tax expert or
lawyer for an opinion or defence.
The Audit Protection Service:
- Provides 100% coverage of our fees (up to a prescribed limit)
- Is tax deductible.
- Is underwritten by Vero, a subsidiary of Suncorp Ltd.
To find out more about our Audit Protection Service,
speak to us today.
Case Studies
A Motor dealer
received a BAS query which led to a comprehensive
review.
Total Accountancy Fees cost $13,991 – fully covered by
the Audit Protection Service. |
A property
developer was subjected to a Client Risk Review.
Total Accountancy Fees $17,550 – fully covered by the
Audit Protection Service. |
A Self Managed
Superannuation Fund received a Superannuation Fund
Compliance Audit.
Total Accountancy Fees $6,058 – fully covered by the
Audit Protection Service. |
A High net
worth individual received a Capital Gains Tax Review
and Income Tax Audit.
Total Accountancy Fees $4,000 – fully covered by the
Audit Protection Service. |
An
import/export business received a comprehensive GST
review.
Total Accountancy Fees $4,637 – fully covered by the
Audit Protection Service. |
EXTENSION OF THE ATO’s SMALL BUSINESS
ASSISTANCE PACKAGE
The Tax Office will extend the Small Business Assistance
Package until 30 JUNE 2011. [this was originally intended to
expire on 30 June 2010].
The extension of the Small Business Assistance Package will
mean that eligible businesses with a turnover of $ million
or less will continue to have access to:
- A 12 month general interest charge free payment
arrangement with the Tax Office.
- A deferral of activity statement payment due dates.
RENTAL PROPERTY CLAIMS – AVOIDING COMMON
MISAKES
The ATO has identified some common mistakes being made in
claiming rental property agent fees and commissions.
What are property agent fees
and commissions?
These are fees such as regular management fees or
commissions paid to property agent or real estate agent for
managing, inspecting or collecting rent for the rental
property on behalf of the owner.
They can only be claimed if they are paid to a legitimate
entity or person who is genuinely managing the rental
property – the best evidence are the statements the owner
receives from their property agent.
Three common mistakes:
- Claiming commissions or other costs paid to a real estate agent or
other person for the sale or disposal of a rental property.
- Claiming fees paid to any entity or person engaged to find a suitable
rental property to purchase.
- Incorrect labeling of management fees which include a number of
expenses rolled into one amount – for example, management
fees that also include cleaning costs.
CHANGES TO COMPANY LOAN RULES
1. Companies that are
beneficiaries of trusts
Where a trust distributes income to a corporate beneficiary,
but does not pay that income to the company (e.g., the trust
keeps the cash to keep running a business), the ATO now
believes that the unpaid amount may be deemed to be a loan
by the company back to the trust.
Fortunately, the ATO has agreed that, in most cases, this
will only apply where a trust distributes income to a
company on or after 16 DECEMBER 2009.
However, amounts distributed after that date will need to be
paid out, kept separate from other trust resources, or
officially lent back to the trust under a written loan
agreement to avoid Division 7A applying.
2. Use of Company Assets
New Legislation has basically removed the scope for private
companies to allow shareholders and their associates
(including their relatives) to use company assets – such as
real estate, cars, boats – for free, or at less than their
arm’s length value, without paying tax.
Under the new law, which applies from 1 JULY 2009, if a
shareholder (or their associate) uses a company asset but
does not pay the company a reasonable amount for that usage
(and no exceptions apply), the company is deemed to have
paid a dividend to that person.
TRUST DISTRIBUTIONS POST BAMFORD
Following the much anticipated High Court decision in
Bamford, the ATO has now issued a draft ‘Decision Impact
Statement’ and ‘Practice Statement’ PS LA 2010/ to apply
from 1 JULY 2010.
The Court confirmed what we believed was the correct
position: if the trustee has the power, it can determine
what is “income”, which can include a capital gain; and the
proportionate approach applies.
Action after 30
JUNE 2010:
- Trust deeds need to be reviewed to ensure the income definition and
trustee’s discretion gives the trustee discretion to
determine what is income but, in default, adopts a section
95 definition;
- Just because there is a power to amend the deed doesn’t mean there is
an automatic entitlement to do so:
- Making such amendments could potentially lead to a resettlement if the
effect is to alter the “substratum” of the trust: the
settlor’s purpose in establishing the trust and the
potential or actual beneficiaries’ entitlements.
BENCHMARKS AND DEALING WITH THE CASH ECONOMY
Second Commissioner of the ATO, Mr Bruce Quigley, recently
spoke about how the ATO intends to use its new “benchmarking
program”:
“Our small business benchmarks program…continues to expand.
We have now benchmarked the key business ratios of over 100
different businesses.”
“We use the benchmarks to identify businesses that may be
avoiding their tax obligations.”
“We have recently begun sending letters to approximately
1,000 businesses that are reporting income that is
significantly outside of the benchmarks.”
“These businesses will be advised that they are required to
meet their obligations and/or provide us with records to
support the income declared.”
“Where they do not fulfill these requirements we will
raise a DEFAULT ASSESSMENT based on the information
available to us through the benchmarks.”
The ATO stated that Tax Agents should try to ensure that
their clients are reporting within the benchmarked ratios,
or can substantiate their results when they report outside
of the benchmarked ratios.
SMSFs ACQUIRING EMPLOYEE SHARES
The ATO has warned that nominating a SMSF as the acquirer of
shares or options from an employee share scheme can have
serious tax and superannuation consequences:
- For the individual who has nominated their SMSF, there can be penalties
if the discount on the shares and options isn’t accounted
for in their tax return; and
- For the SMSF, acquiring an asset from a related party can put the fund
at risk of being made non-compliant and taxed at 45%.
In addition, trustees of SMSFs who intentionally acquired
shares or options from related parties contrary to the
superannuation law may face up to one year in jail.
PERSONAL PROPERTIES SECURITIES LEGISLATION
(PPS)
“ANOTHER HEADACHE YOU NEED TO KNOW
ABOUT”
Having trouble keeping up with all the changes that are
continually being forced upon us? Well get ready for the
implementation of the
Personal Properties Securities Legislation (PPS)
commencing MAY 2011.
Firstly what is
PPS?
- It is a single national law dealing with all securities with the
exception of land & buildings.
- It will apply to tangible assets such as trading stock, plant &
equipment and vehicles.
- It will apply to intangible assets such as licences and intellectual
property.
- It will replace existing forms of securities such as Mortgage
Debentures, Stock Liens, Retention of Title Charges, Motor
Vehicle Charges, and Chattel Mortgages.
NEW TERMINOLOGY TO GET YOUR HEAD AROUND
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