Director penalties, data matching and the future of small business

By Andrew Hayes, Director, Westlawn Business Services
19 March 2015

First up this month, we share the latest updates from the ATO on director penalties and ATO data matching programs in connection with motor vehicles and share trading. We then gaze into our crystal ball for a glimpse at how small business could change over the coming decades in two key areas: tax and cash.

Director Penalty Regime

The ATO has issued a new fact sheet to help directors (and those about to become a director) understand their obligations under the Director Penalty Regime in respect of unpaid and unreported Pay As You Go (‘PAYG’) and Superannuation Guarantee Charge (‘SGC’) amounts.

In particular:

    • Directors will be personally liable for unpaid PAYG withholding or SGC amounts
    • Director penalties can apply even if an individual is no longer a director of a company, or is a newly-appointed director
    • The ATO is likely to issue a director penalty notice to collect company debts where the company hasn’t engaged to resolve outstanding obligations
    • Payment is the only option to remit the penalty if the associated company liability was not reported within 3 months of the due date (e.g., if an SGC statement was required to be lodged by 28 August, but this had still not been done by 28 November)
    • The ATO recommends keeping address details up to date with the ATO and ASIC to ensure any time-sensitive action can be taken by impacted directors.

ATO data matching programs

The ATO is carrying out 2 new data matching programs to identify non-compliance with registration, lodgement, reporting and payment obligations.

Motor vehicles
The ATO has announced a new “Motor vehicle data matching program” to collect details of individuals or businesses that have purchased or acquired a vehicle costing $10,000 or more in the 2011/12 and the 2012/13 financial years. It will acquire information from every State and Territory vehicle registration authority. It is expected that records relating to approximately 2.8 million individuals will be matched.

Share transactions
The ATO has also announced a new “Share transactions data matching program” that will acquire details of share acquisitions and sales from 20 September 1985 to 30 June 2016 from:

    • Link Market Services Limited
    • Computershare Limited
    • Australian Securities Exchange Limited
    • Boardroom Pty Ltd
    • Advanced Share Registry Services Pty Ltd; and
    • Security Transfer Registrars Pty Ltd.

The type of data that the ATO will collect includes the name and address of the taxpayer, and the date, price and number of shares acquired or sold. It estimates that more than 95 million records will be obtained, including the records for approximately 1.2 million individuals.

The fact that this program collects information back to 20 September 1985 raised concerns the ATO might amend assessments up to 30 years old. However, the ATO has stated that it is only going back to when CGT was first introduced so that it can identify ‘post-CGT shares’ and calculate the cost base where shares have recently been sold (eg: if they were bought in 1986 and sold in 2014).

If you have any questions in relation to the Director Penalty Regime or to the ATO’s new data matching programs, please contact your Westlawn Business Services Accountant.

What does the future hold for small business over the coming decades? Let’s take a look at recent speculation in two crucial areas for small business: tax and cash.

Treasurer on long-term future of GST & company tax

The Federal Treasurer, Joe Hockey, recently speculated on the long-term future of GST and company tax. Speaking on Sky News earlier this month, the Treasurer said “it’s up for debate whether in 30 or 40 years’ time, taxes like the GST or company tax will be around.”

“The world is changing remarkably, and whilst you have easily assumed 10, 15 years ago that, for example, the GST is going to be an enduring tax … with global trade, with the development of internet commerce, with not just the transaction of the sale of goods over the internet but increasingly services, there are going to be more and more goods and services that are provided from offshore under free-trade agreements that is going to miss that net,” Hockey said.

Australia faces “intense competition” on tax rates from other countries, including the UK, New Zealand, Singapore and Hong Kong and this means “capital is more mobile than ever before,” Hockey added.

SmartCompany reported that Peter Strong, executive director of the Council of Small Business of Australia (COSBOA), welcomed the Treasurer’s comments, saying Australian policymakers need to “think differently” about future sources of government revenue.

Strong said different ways of taxing companies will become increasingly important in tackling the problem of base erosion and profit shifting by multinational organisations. One such model, proposed by some COSBOA members, is to introduce a 2% tax on turnover for all companies, which would replace all other corporate taxes.

“There are other ways of doing it, it’s just a matter of coming up with those ways to make sure big companies can’t dodge it,” Strong said.

Strong says Hockey and his colleagues need to start working on the problem now and work with international groups such as the OECD to do so.

“This is not just an Australian problem,” he said. “But maybe Australia can lead the way by coming up with a tax system that is monitored and accepted internationally.”

No physical cash by 2025?

In further speculation on how the future will shape up for small business, Mybusiness reported on 3 March that a leading academic from the Australian National University (ANU) believes the rise of electronic currency such as Bitcoin, will lead to the phasing out of physical cash in Australia within a decade.

Professor Rabee Tourky, Director of ANU’s Research School of Economics, believes there won’t be any paper cash in circulation by the year 2025.

“In 10 years’ time there won’t be any paper cash. The big question is what’s going to replace it in Australia? Will it be Bitcoin? I don’t think so. More likely it will be ‘AusBit’, an Australian government issued digital cash.”

“It’s quite clear that the central bank in Australia is going to have to issue electronic cash,” Professor Tourky said. “It’s also going to have some issues that cash as we know it doesn’t have, such as privacy, anonymity and perhaps the emergence of anonymous markets.”

So a future without GST or company tax or physical cash? We will have to wait and see, But in the meantime, you’ll need to keep preparing your BAS and ensure your cash register has plenty of spare change.

Copyright © 2015

Disclaimer

Westlawn Business Services Pty Ltd provides this information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.
Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.