7 Things to Know about the ATO’s Newest Rules for High Transaction Accounts

With attempted GST fraud on the rise and certain family trust payments under scrutiny, the Australian Tax Office (ATO) is implementing new rules for high-transaction accounts. Here are the key takeaways from the Office’s recent measures.

1. GST fraud warning

The ATO has issued a strong warning to taxpayers not to engage in GST fraud and for current participants to come forward. The Office has said it will begin to take tougher action on suspicious accounts, such as imposing tax penalties and seeking criminal charges.

Using sophisticated risk models and intelligence from the banks, AUSTRAC, and the Reserve Bank, the ATO has identified a fraud scheme where fake businesses claim false GST refunds through fictitious activity statements. According to their findings, the average fraudulent amount claimed is $20,000.

The ATO is aware information on how to attempt this scheme is being shared via social media. The Office has reminded taxpayers that online activity is not anonymous, already identifying around 40,000 scheme participants.

2. New rules on family trusts

According to the new draft guidance, the ATO is reframing how it approaches family trusts. The Office will focus on tax planning strategies relying on section 100A exclusion, which covers distributions to companies and family members. The draft ruling clamps down on agreements involving “ordinary family or commercial dealing.” Thus, the section 100A exemption will be unavailable in some situations.

As we approach the end of the financial year, this measure is particularly important to taxpayers with trusts where there are parent controllers of the trust and adult child beneficiaries.

3. Imminent Super Guarantee contribution deadline

Employers claiming a tax deduction for Super Guarantee (SG) contributions made on behalf of their employees in their 2021-22 return need to ensure their contributions are received by the employee’s super fund prior to 30 June 2022 to be eligible for the deduction.

Payroll systems must be updated to accommodate the 1 July 2022 increase in the SG contribution rate to 10.5 per cent and the removal of the existing $450 a month minimum threshold for employees to qualify for SG contributions. 

4. Disclosure of business tax debts

Businesses with tax debts have been alerted that their liabilities may be disclosed to credit reporting bureaus (CRBs) under the Disclosure of Business tax debts measures. To avoid this, businesses are encouraged to engage with the tax office and make full payment of the debt or negotiate a payment plan.

5. Deductions available for work-related COVID-19 tests

Legislation covering the deductibility of COVID-19 testing costs received Royal Assent prior to Parliament rising for the Federal Election. Expenses incurred by individuals from 1 July 2021 in relation to work-related COVID-19 testing can be claimed as a tax deduction, provided the expenditure can be substantiated. Employers are exempt from paying FBT where they pay for or reimburse work-related COVID-19 testing costs for employees.

6. Lower tax instalments in 2022–23

The GDP ‘uplift’ rate used to calculate both pay-as-you-go (PAYG) and GST instalments has been announced for the 2022-23 financial year. The new rate applies to instalments due after 31 March 2022.

The new rate is only two per cent, lower than the 10 per cent rate applying under the statutory formula that provides valuable additional cash flow to small and medium businesses, sole traders and individuals with passive income. If earnings exceed the amount calculated, businesses will need to pay the extra tax owed at the end of the financial year. While businesses will still be able to manually set instalments with the ATO, the new PAYG formula is reportedly designed to avoid penalties arising from underpayments.

7. Attracting ATO attention

New information has been issued on the behaviours, characteristics and tax issues of privately owned and wealthy groups that attract the ATO’s attention.

The Office is interested in entities with:

·       a tax or economic performance not comparable to similar businesses;

·       low transparency when it comes to their tax affairs; and

·       large, one-off, or unusual transactions, including wealth transfers.

Aggressive tax planning and outcomes inconsistent with the intent of tax law also interest the ATO.

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