It’s November and we’re off with the race that stops a nation. While this is normally a given, the fact that the Spring Carnival is going ahead, and overseas travel is back on the agenda, is a welcome sign that Australia is getting back to business.

All eyes were on the September quarter inflation figures in October, as speculation mounted that the Reserve Bank may be forced to raise interest rates sooner than planned. The Consumer Price Index (CPI) rose 0.8% in the September quarter while the annual rate eased from 3.8% to 3%, although this was distorted by the end of free childcare in the September quarter last year. A more accurate measure is underlying inflation, which rose to a 6-year high of 2.1% in the year to September.

Rising fuel and construction costs were the main culprits, as global supply chain disruptions pushed import prices up 6.4% over the year to September. Australia’s national average petrol price hit a record 169.5c a litre in October, as rising demand and supply constraints pushed the price of Brent Crude to a three year high. Inflation fears lifted the Australian dollar to US75.2c, up 4% over the month, while the interest rate on 3-year Australian government bonds lifted 82 basis points over the month to 1.14%.

Inflation fears also dented consumer confidence in the final week of October, but the ANZ-Roy Morgan rating still ended the month higher at 106.8. Rising business optimism saw the NAB business confidence index lift from -5.5 to +13 points in September.

We are unlikely to get a clear picture on inflation until supply pressures ease. The Reserve Bank has stated it won’t lift rates until inflation is ‘’sustainably” within its 2-3% target band and wages growth is above 3%.

How the ATO mines your data

It was hard to miss the media splash about international tax evasion when the Pandora Papers were released, with local interest focussing on what Australian tax authorities would do with this massive trove of information.

But it seems the ATO is relaxed. Deputy Commissioner and Serious Financial Crime Taskforce Chief Will Day responded that the tax man doesn’t “rely on data leaks to do our job. We detect, investigate and deal with offshore tax evasion year-round.”

So where does the ATO get its data from and how is it being used?

Information from many sources

As some of the most powerful computers in the country are matching data from just about every facet of a taxpayer’s financial life, the ATO doesn’t miss much. Every year it receives reams of data from share registries, banks and financial institutions, allowing it to identify most of the financial transactions occurring in Australia. In 2020, more than 600 million transactions were reported to the ATO.

Property and lifestyle assets are also key areas of interest, with data from state and territory title offices and revenue agencies covering real property transactions, rental bond payments and property management all flowing to the ATO.

Data is also exchanged with tax agencies in other countries to ensure correct reporting of overseas income and income earned by foreign residents.

Current data-matching programs by the ATO cover credit and debit cards, ride-sourcing providers, sharing economy accommodation platforms and cryptocurrency service providers. Information on online sales over $12,000 also end up with the tax man.

Government departments data sharing

Government agencies are also a major source of data for the ATO, with detailed protocols on information sharing in place with the Australian Electoral Commission, Services Australia (Centrelink and the Child Support Program), and the Department of Home Affairs’ visa and passenger movement records.

Motor vehicle registrations from the states and territories provides data on all motor vehicles sold or registered where the value is over $10,000.

The new Single Touch Payroll (STP) system for businesses is also used to confirm employment income, deduction reporting, payments to contractors and superannuation contributions.

Even tips from other businesses and individual taxpayers can be used in specific data-matching activities.

Matching and analysing the data

Once all this information is received, it’s validated against the ATO’s internally collected data. Algorithms and other analytical tools are used to refine the data and match it against information reported in tax returns.

Although the ATO uses some of the data it receives to pre-fill sections of your tax return, much of it is used to identify discrepancies in taxpayers’ returns.

You are then contacted and provided with details of the discrepancy so you can check your records. Discrepancies can be as simple as omitted interest, employment income or government payments; CGT from the sale of an asset; payments to contractors in the building and construction industry; or distributions from partnerships, trusts and managed funds.

Data-matching is also undertaken on taxpayers purchasing expensive consumer items (such as boats, racehorses, antiques and luxury cars) to determine whether they can afford the items based on their declared income.

Helping businesses operate

Data-matching programs help the ATO identify businesses that may not be reporting all their income, operate outside the system, or operate but fail to lodge a tax return.

Careful analysis of financial data helps businesses to operate on a level playing field. Running part of a business ‘off the books’ and not reporting all the income received provides an unfair advantage.

By data-matching, the ATO can also better understand trends and patterns in specific industries. This is used to create performance benchmarks (or financial ranges) for each industry, particularly in relation to tax and activity statements. These benchmarks cover turnover comparisons with your cost of sales, total expenses, rent, labour and motor vehicle expenses.

The ATO also develops a key benchmark range for an industry. If data analysis shows your business operates outside this range, it’s a red flag raising the possibility that your business may be avoiding its tax obligations by not reporting some of its income. The benchmark range may also be used to determine how much tax a business should have paid if there are insufficient or no records available.

If you would like help with understanding your tax obligations and preparing your tax records, please contact our office today.

What super stapling means for employers

If there’s one certainty in business these days, it’s constant change. Now there’s an extra step you need to take with new employees to comply with the superannuation choice of fund rules.

From 1 November 2021, whenever a new employee starts with your business and they don’t select a super fund for their Super Guarantee (SG) contributions, you will need to ask the ATO for their stapled super fund details.

New fund choice rules

Under the new rules covering choice of super fund, every employee is now stapled (or linked) to an existing super account that follows them for life as they change jobs unless they choose otherwise.

This reform to the super rules was introduced by the Federal Government to reduce duplicate account fees and insurance premiums paid by employees on their super. Up until now, many employees ended up with a new super account each time they started a new job, often losing track of multiple accounts and unnecessary fees along the way.

A stapled fund can be any type of eligible super fund, including SMSFs and defined benefit super funds.

The new stapling rules do not affect your existing employees, so in most situations you will only need stapled fund details if a new employee fails to give you a choice of fund form.

You must, however, request the stapled super fund details for any new employee who is a temporary resident or who is covered by an enterprise bargaining agreement or workplace determination made before 1 January 2021.

If the employee doesn’t have a stapled fund, you can make your SG contributions into your employer default MySuper product (unless they are subject to an enterprise bargaining agreement or modern award stipulating a prescribed super fund).

What to do from 1 November 2021

To ensure you’re ready to request stapled fund details, check you have enabled online services with the ATO and your authorised representative has all the necessary permissions in place.

When you onboard a new employee on or after 1 November 2021, the first step of offering your employee an ATO Superannuation Standard Choice Form within 28 days remains the same. If they fail to choose a super fund, you will then need to check with the ATO whether or not your employee has a stapled super fund.

Before you can make a stapling request, however, you need to have lodged either a Single Touch Payroll (STP) event or a tax file number (TFN) declaration for your new employee with the ATO.

If your new employee has a stapled fund, you simply pay your SG contributions into that fund. Employees always retain the right to change super funds if they wish and their new super fund then becomes their stapled fund.

More than one super fund

If your employee has more than one super fund, they are automatically stapled to the fund that most recently received a super contribution on their behalf. Where there is more than one active super fund, the most appropriate fund (such as the one with the largest balance), will be selected by the ATO.

The new stapled fund rules don’t mean your business can avoid nominating a default super fund to receive your SG contributions.

If your new employee doesn’t have a stapled fund, you will need to make your contributions into this fund.

The reforms mean it’s also a good idea to check whether the superannuation clauses in your employment contracts for new employees cover the possibility of super contributions being made into an employee’s stapled fund.

As an employer, if you fail to meet your obligations under the choice of fund rules – such as checking for a stapled fund – additional penalties may apply on top of the normal SG Charge (SGC) penalties.

If you would like more information on stapling, or the rules about making contributions for your employees’ super in general, please contact our office today.

The new Director ID: Do you need one?

It’s been a busy year for Australia’s two million plus directors dealing with the pandemic and lockdowns and there’s now a new task on their to-do list.

From 1 November 2021, if you’re a director or want to become one, you will need to apply for the new Director Identification Number (Director ID) being rolled out by the Federal Government.

Directors of businesses and entities of all sizes – including directors and corporate trustees of self-managed super funds (SMSFs) – will all need to apply. If you run your business as a sole trader or partnership, however, you won’t need a Director ID.

Director ID: what is it?

The new Director ID is a unique 15-digit identifier most directors will need before they can take up a directorship.

Before you join a board, you will need to apply for your own Director ID which you will keep forever, even if you change boards, stop being a director, change your name or move interstate or overseas.

This new identifier is part of a broader registry modernisation project combining the Australian Business Registry Service (ABRS) with numerous ASIC registers to form a single system overseen by the ATO.

According to the government, unique director identifiers will create a fairer business environment by preventing the use of false and fraudulent director identities.

Who needs a Director ID?

The new regime casts a pretty wide net and will catch most business entities and organisations.

You will need a Director ID if you are an eligible officer of a company, Aboriginal and Torres Strait Islander corporation, corporate trustee, charity or not-for-profit organisations limited by guarantee, or a foreign company registered with ASIC and conducting business in Australia.

Directors of registered Australian bodies (such as incorporated associations registered with ASIC that trade outside the state or territory in which they are incorporated) also need to apply.

If your organisation has an Australian Business Number (ABN), you can use the ABRS LookUp tool to check whether it is registered with ASIC.

Officers outside the ID regime

Some company officers are not required to apply for the new identifier.

If you are a company secretary but not a director, act as an external administrator of a company, or are called a director but haven’t been appointed as a director under the Corporations Act, you won’t need a Director ID.

Neither will directors of charities not registered with ASIC to operate throughout Australia.

The officers of an unincorporated association, cooperative or incorporated association established under state or territory legislation (unless the organisation is also a registered Australian body), are also exempt.

Applying for your Director ID

From November 2021, you will need to apply for your Director ID on the ABRS website and log in using the myGovID app. The myGovID app is downloaded on your smart device to verify your digital identity and is different to your existing myGov account.

When applying for your Director ID, you are required to personally make the application so you can verify your identity.

There are varying application deadlines for the new identifier, with current directors (on or before 31 October 2021), having until 30 November 2022 to obtain their Director ID.

While existing directors have plenty of time, if you become a director between 1 November 2021 and 4 April 2022, you must apply for your Director ID within 28 days of your appointment to the board.

Directors appointed after 5 April 2022, must apply prior to taking up their directorship.

If you are unable to apply for your Director ID by the relevant deadline, you can apply for an extension.

Once you receive your new Director ID, you will need to pass it on to your company recordholder who is usually the company secretary or authorised agent. The ABRS is not permitted to disclose Director IDs to the public without consent and your details won’t be searchable on the register.

If you would like more information about Director IDs, whether you need one and how to go about applying, please get in touch.