Question:
Tax Office crackdown on tax debts
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
The lenient approach to debt collection taken by the Tax Office during the Global Financial Crisis has been discarded and replaced with a new hard-line. This follows a blowout in outstanding tax debts from 5% of revenue to 11% ($15 billion) last year. The new approach includes the early instigation of garnishee notices and windup proceedings.
During the 2011 financial year, the Tax Office instigated more than 10% of all windups (numbering over 1000). This is double the figure for 2010.
It is using a new business viability software tool to determine whether a softly-softly approach or firm action is appropriate. It says that it will take firm action where:
- Despite multiple attempts at contact the taxpayer does not work with the Tax Office to resolve the debt;
- Multiple payment arrangements are defaulted;
- Debts are escalating and the Tax Office believes there is insufficient evidence that you will meet your ongoing tax obligations;
- Audit activity has identified deliberate avoidance and payment is not forthcoming; or
- Phoenix activity is suspected.
The new firm action approach could involve the issuance of garnishee notices, initiation of bankruptcy or windup proceedings through summons/statutory demands, pursuing company directors personally for PAYG withholding, issuing warrants for the seizure and sale of property or requiring a security bond to be paid.
Where the debt is greater than $100,000 you will be required to demonstrate that your business is viable before the Tax Office will consider a payment arrangement. Apparently, there are some 375,000 payment arrangements currently in place for tax debts.
Financial Review, 16 September 2011, p5; WTB 1439; Tax Office, Active Compliance minutes, July 2011, Firmer action approach to debt collection (NAT 73708).
