What everyone ought to know about the extent of risk.
The Australian Taxation Office’s (ATO) estimates suggest that the COVID-19 pandemic impacted revenue which fell very short of its compliance and receivables targets. The compliance revenue target suffered a $1.3 billion shortfall ($15 billion target) while its receivables deficit crystallised at $8 billion ($53 billion target) in the 2020 calendar year. Despite this, positive news was in circulation in December 2020 when economic reports indicated that the various relief and stimulus packages had taken effect, with Australia GDP increasing by 3.3 in the September 2020 quarter.
With the uptick in economic indicators at 2020’s end, it is with increasingly likelihood that the ATO will refocus its activities to collecting historical tax liabilities. How this collection effort might look is a key question and is likely dictated by how aggressively the ATO pursues such action. Presumably the ATO will take significant steps to recover historical tax debts, which if this is the case, the expectation is that the ATO will rely upon the director penalty notice (DPN) regime to recover PAYG withholding, superannuation guarantee charges (SGC), net GST and WET tax. This could be an ominous prospect for some businesses that never had to contemplate the potential ramifications for not meeting their tax obligations. COVID-19’s economic and global impact may be the first stressor that certain businesses/industries have had to endure. This means that directors ought to be aware that their personal liability for director penalties permanently locks-down with BAS lodgments filed over three months past the relevant lodgment deadline and SG statements filed after the relevant lodgment deadline.
Equally, employers also ought to be aware that to remain eligible for the ATO’s superannuation guarantee (SG) amnesty, they must pay in full any outstanding amounts they owe or set up a payment plan and meet each ongoing instalment amount. Those that have and continue to qualify for the SG amnesty can only claim a tax deduction for amounts paid on or before 7 September 2020. For those who are disqualified from the amnesty, they can expect to be charged an administration component of $20 per employee for each disqualified quarter and the ATO consider individual circumstances when deciding on a Part 7 penalty remission.
Meanwhile in the background, the ATO is busy applying increased attention to “flashy cars, low income” red flags in its extended data-matching program. The Accountants Daily report that “black economy participants and tax dodgers driving luxury cars will continue to come under ATO scrutiny as it looks to extend its motor vehicle data-matching program for a further three years”. These records from the last two and the current financial years will be used to capture and decipher the following:
- Motor vehicle registry records for approximately 1.5 million individuals.
- Newly registered or transferred vehicles for $10,000 plus (purchase/market price).
- Potential black economy activity extending to the vehicle sellers, licensed dealers, fleet managers, leasing companies, and taxpayer representatives.
- Compliance with GST, fringe benefits tax, luxury car tax, fuel schemes, and income tax obligations.
What should be made of all of this?
Given the ATO’s imminent debt collection activity in 2021 it is of the utmost and significant importance that businesses and employers with historical tax debts engage with the ATO and all lodgments with are being made within the deadlines. The alternative is the permanent lockdown of personal liability for director penalties, loss of SG amnesty if falling foul of those requirements or the ATO reporting details to the creditors reporting agencies. If your clients have a tax / SGC debt and showing the signs of financial difficulty speak to your local Worrells partner about the possible solutions.
 gross domestic product (GDP)
 Wine equalisation tax (WET)