The Australian Tax Office is targeting certain businesses for potential tax audits if they fail to meet their obligations concerning paying the right amount of superannuation for their employees, collecting tax from payments to employees, fringe benefits tax (FBT) and other tax obligations.
In particular, the ATO says it has identified that businesses in the bakery, supermarket, car retailing, and computer system design industries often need more help to meet their tax and super obligations.
The ATO is currently running an education campaign for business owners in these industries to help them better understand their responsibilities. In particular, the ATO is focusing on superannuation, Pay-As-You-Go (PAYG) withholding and FBT.
From July 2016, the ATO says it will be undertaking audits of employers who continue to not meet their obligations.
The ATO is particularly concerned that some employers are nor correctly meeting their superannuation obligations.
In this regard, the ATO is looking at how much employers are required to pay, meeting quarterly deadlines, super for contractors, keeping accurate records, and the need to pass on an employee’s Tax File Number to their super fund within 14 days of receiving it.
The ATO reminds employers that generally, their employees are eligible for super if all of the following apply:
- The employee is 18 years old or over (those under 18 must work more than 30 hours per week before becoming eligible);
- They are paid $450 (before tax) or more in a calendar month; and
- They work on a full-time, part-time or casual basis.
Super payments for employees must be made at least four times a year by the quarterly due dates of: April 28, July 28, October 28 and January 28.
Missing those deadlines leaves an employer liable for the Superannuation Guarantee Charge (SGC).
Importantly, the ATO says it will support the efforts of employers who genuinely try to rectify mistakes by catching up with late payments and paying a little extra into their employee fund accounts. If employers have done this, the ATO says it is unlikely to take any further action. If, however, an employer waits for employees to complain, or for the ATO to audit their business, the ATO warns that SGC and other penalties will be applied.
In another important reminder, the ATO said employers must pay super contributions for contractors they pay under a contract that is wholly or principally for the labour of that person. This is because they are considered employees for the purpose of super guarantee, even if they have an Australian Business Number.
The Choice of super fund is another area where employers can get it wrong.
Employees may be eligible to choose which super fund their super contributions are paid into. Employers are required to provide their eligible employees with a standard choice form within 28 days of them starting work. Although employees are not required to complete the form if they don’t want to nominate a fund, employers must nevertheless give them the choice if they are eligible.
As with all tax and super matters, and at the risk of “stating the bleeding obvious”, employers are required to keep accurate and contemporary records. This goes without saying, but the ATO has plenty of instances where employers have not kept adequate records and this makes the ability to comply with the law that much more difficult.
Many of these issues are day-to-day matters of running a business, but the fact that the ATO has decided to highlight them, and flag potential audits, suggests they are not necessarily being fully complied with.
Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.