Major Crackdown on the Black Economy
BUDGET UPDATE │ MAY 2018
The Government will introduce 3 new key measures targeting Black Economy activities and illegal phoenixing.
– Disallowing deductions to businesses for payments to employees where PAYG could have been withheld and payments to contractors where an ABN is not provided and the business does not withhold any tax
– Expanding the Taxable Payments Reporting system to cover contractor payments in the security providers and investigation services industry, road freight transport and computer system design and related services industry.
These measures will be reinforced by the $318 million being given to the ATO over 4 years to implement new strategies targeting the Black Economy and phoenixing activities.
With the boost in funding from the Government, the ATO plans to improve data analytics and data matching, implement new “mobile strike teams”, increase information sharing between government enforcement agencies and increase its audit presence.
The funding will commence on 1 July 2018.
Why the Crackdown?
This measure is in response to the Black Economy Taskforce findings that contractors in these industries have been identified by the ATO as being at higher risk of not complying with their tax obligations.
Under the taxable payments reporting system (TPRS), businesses are required to report payments to contractors to the ATO. This brings payments to contractors in these industries into line with wages which are reported to the ATO.
Businesses will need to ensure that they collect information from 1 July 2019, with the first annual report required in August 2020. A new online form will make the reporting process easier.
It is expected that the Government’s revenue bottom line will be better off by $3 billion over the forward estimates period and there will be an extra $2.5 billion in underlying cash receipts. These numbers suggest some robust enforcement from the ATO is coming to the Black Economy. All taxpayers need to ensure they are fully compliant with the law or they may find themselves entangled in these enforcement strategies.
Reforms to Combat Illegal Phoenixing
Illegal phoenix activity is when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements. This illegal phoenix activity impacts the business community, employees, contractors, the Government and environment.
The Treasurer reinforced in his Budget speech that the Government is making sure small businesses don’t get ripped off by other businesses who deliberately go bust to avoid paying their bills, with tough new anti-phoenixing measures.
Additional funding will be given to the ATO from 1 July 2018 to bolster compliance activities and better target those who participate in illegal phoenixing.
Speak with our Tax Accountants about any questions you may have regarding what impact the Budget measures will have on your personal circumstances.
Please contact us below or call us on 03 9773 3660
Source: Tax Wise 2018