Author: Jenny

2019 May/June – Page 1

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FEDERAL 

BUDGET WHAT’S 

IN IT FOR YOU?

MTS

M Y   T A X   S A V E R S

MAY/JUNE

2019

IS

SN

  2651-8627

Year-End Money 

Saving Tax Tips
Single Touch Payroll 
– 

Frequently Asked Questions

All the latest 

TAX NEWS

2019 

2019 May/June – Page 2

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SINGLE TOUCH 

PAYROLL FAQs

Don't fret  

on

 

tax debt

YEAR-END 

TAX TIPS

NOT A LOSS 

CAUSE

THE NEW

 

IMPORTANCE 

OF TAX COMPLIANCE

MY TAX SAVERS

May/June  2019

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www.mytaxsavers.au

Index

Under new law passed by Parliament, employers may 
be denied deductions for payments to employees and 
contractors if they withhold tax incorrectly or fail to 
lodge BAS on time. This article is a must-read.              

This article provides some guidance on how 

you can deal with and also help prevent, 

ATO tax debts. We also provide general 

cash-flow advice.                                  

As we approach 30 June, this article 

provides readers with a range of year-

end tax saving tips. Whether you are an 

employee, contractor, or in business, there’s 

something  here  for  everyone!                                                               

Legislation has now passed Parliament 

which makes it easier for companies to carry 

forward prior year losses, and write off debts 

incurred in prior years. 

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KEY DATES

Many deadlines are imminent over the 

next couple of months. Don’t be late!                                                       

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Published by My Tax Savers, P.O.Box 2255 Southport BC 4215  Email: info@mytaxsavers.com.au  Phone: 1800 SAVETAX  

Web:  www.mytaxsavers.com.au. My Tax Savers is a trading name of My Tax Savers Pty Ltd ABN 85 059 305 976.

Print Post Approved 100019425

Single Touch Payroll commences for 

smaller employers on 1 July 2019. We 

answer all the key questions about this 

massive change to ATO reporting.    

2019 May/June – Page 3

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Tax Take-aways  

for May and June

2019 Federal Budget 

 

Individuals

2019 Federal Budget 

 

Superannuation

2019 Federal Budget 

 

Business

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My Tax Savers

Avoiding panic and premature action in relation to mere 

tax proposals from either side of politics is one of the key 

messages in the weeks ahead.                                                  

In this first of a three-part article 

series, we examine the recent Federal 

Budget and its impact on individuals.

Concluding our examination of the 

2019 Federal Budget, we examine the 

superannuation proposals.

This article continues our examination of 

the 2019 Federal Budget – this time from 

a business standpoint.

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GENERAL ADVICE WARNING: The information contained in this publication is general information only. Any advice, if any, is general advice only. Your objectives, financial situation or needs have not been taken into 

consideration. You should consider if this information is suitable for your needs and seek the advice of relevant taxation, superannuation and/or other relevant advisers before any financial product information is acted on.
COPYRIGHT: This newsletter has been written and designed for My Tax Savers Pty Ltd. No part of this publication that is covered by copyright may be reproduced without the express permission of My Tax Savers Pty Ltd.

WHAT THE TAXMAN 

IS THINKING

In this edition we detail a new, affordable mechanism 

to resolve disputes with the ATO, warn of the latest tax 

scams, outline the criteria for accessing superannuation 

on compassionate grounds, and more. 

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2019 May/June – Page 4

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MY TAX SAVERS

May/June  2019

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www.mytaxsavers.au

MAY 2019

12 MAY

3rd Quarter 2018/2019 Activity Statements – due for 

lodgement and payment if lodging electronically

21 MAY

April 2018 monthly Activity Statements – due for 

lodgement and payment

21 MAY

2019 FBT annual tax return – due for lodgement 

and payment for self-preparers

28 MAY

Due date for lodgement and payment of the 

Superannuation Guarantee Charge Statement if you 

failed to pay Superannuation Guarantee on time for the 

January-March quarter. Superannuation Guarantee 

Charge is not deductible

JUNE 2019

21 JUNE 

May monthly Activity Statements  - due for 

lodgement and payment

25 JUNE

2019 FBT annual tax return – due date for lodgement 

and payment if using a Tax Agent who lodged 

electronically 

30 JUNE

Superannuation Guarantee payments must be received 

by Superannuation funds by this date in order to be 

deducted in 2018/2019 

30 JUNE

End of the 2018/2019 financial year

Where one of these dates falls on a weekend or a public 

holiday, the due date is extended to the next business day

Many lodgement and payment deadlines are 
looming for business including those relating to 
Activity Statements, superannuation, and more.  

KEY DATES

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SINGLE TOUCH 

PAYROLL FAQs

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My Tax Savers

Single Touch Payroll (STP) is a new 

Government initiative aimed at streamlining 

business payroll reporting obligations. It 

is now compulsory for larger employers 

(those with 20 or more employees) and has 

been since 1 July 2018. The STP regime 

revolutionises the way employers report 

payroll information to the ATO. In essence, 

STP is a new reporting mechanism whereby 

employers report employee payments 

(such as salary and wages, allowances, 

superannuation) and PAYG withholding to 

the ATO directly through their STP solution 

(typically, upgraded Standard Business 

Reporting-enabled software) at the same time 

they pay their employees. To be clear, no 

additional reporting is required – just a new 

method of reporting.
A typical STP-compliant process involves:

 

 Adopt upgraded Standard Business 

Reporting-enabled software (this is 

essential to reporting under STP) and 

also software that provides ATO and 

Fair Work-compliant pay-slips each pay 

period, and also calculates and processes 

termination payments

 

 Enter employee details accurately in the 

software

 

 Complete standard field details in all 

the fields requested by your software 

(STP does not require any additional 

information to be reported)

 

 Provide ATO and Fair Work-compliant 

pay-slips to employees at the time of 

payment

 

 Calculate Superannuation Guarantee 

entitlements

 

 Consider all workarounds that may exist 

in your payroll processes and banking 

instructions to automate them within your 

software program.   

WHAT ARE THE FINAL STP START 

DATES?

This depends on the type of employer as 

follows
•  Large Employer (more than 19 

employees) These employers should 

already be reporting their payroll via STP, 

as their start date was 1 July 2018 unless 

they were granted an exemption by 

the ATO. 

•  Smaller Employer (19 or less employees)

Legislation was passed in February 

confirming a 1 July 2019 start date. 

However, a few days later, the ATO 

Commissioner stated that these smaller 

employers can commence reporting 

at any time from 1 July 2019 to 30 

September 2019. Also, the ATO will grant 

deferrals to any smaller employer who 

requests additional time to commence 

STP reporting. 

•  Micro Employers (1-4 employees) 

These employers who rely on a registered 

Tax Agent or BAS Agent (registered 

bookkeeper) can report quarterly for the 

first two years of STP, rather than each 

time payroll is run. 

• 

Businesses with Closely Held Employees. 

As noted in the next section, businesses 

businesses with closely held employees 

will have an additional 12 months to report 

via STP in respect of these employees such 

as family members. For other employees 

of such businesses who are paid a regular 

salary however, STP reporting will 

commence on the dates advised above. 

HOW DOES STP APPLY WHEN  

THE DIRECTOR TAKES DRAWINGS AS 

AND WHEN CASH IS AVAILABLE?

The ATO recently provided a deferred STP 

start date for businesses with closely held 

payees. The start date has been put back by 

12 months until 1 July 2020. A closely held 

payee is as an employee who is a non-arm’s 

length employee, directly related to the entity 

from which they receive payments, including 

family members of a family business, 

directors of a company and shareholders or 

beneficiaries. 
With such businesses, the process of paying 

oneself is not a typical payroll process. 

Rather, these people may make a drawing as 

and when cash is available in the business, or 

they may use loan accounts. 
Going forward, the ATO will move to 

quarterly reporting obligations for these 

payees – aligning its STP approach to the 

current closely held lodgement concession 

that applies for the PAYG withholding 

payment summary annual report. 
Said ATO Director Michael Karavas: 

“It won’t be a pay day because lots of them 

don’t have regular pay days but a once a 

quarter again with the activity statement. 

This is a recognition that there is a current 

practice in place, about where directors when 

they go see their tax agent and accountant to 

do the tax return at the end of the year they 

finalise what their salary and wages are at 

that point in time.”
The ATO will allow employers to calculate 

the amounts through actual withdrawals, not 

including payments of dividends or which 

reduces the liabilities owed by the business 

entity to the closely held employee; 25% of the 

salary or director fees from the previous year 

2019 May/June – Page 6

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MY TAX SAVERS

May/June  2019

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per quarter; or by varying the previous years’ 

amount within 15% of the total salary for the 

current financial year. Says ATO Director, 

Michael Karavas:
If you lodge quarterly using one of the methods, 

then the ATO will accept that you made a 

genuine effort to meet your STP obligations 

and that will allow you to do that finalisation 

and make any adjustments at the time you do 

your tax return at the end of the year.
While other businesses will have to provide a 

finalisation declaration by 14 July each year, 

the ATO has granted an extension to closely 

held payees to the due date of their income 

tax return.
We are not saying that you need to know your 

final position by 14 July but we are saying 

you have made a reasonable estimate, each 

quarter reported throughout the year and by 

doing that you are able to make reasonable 

adjustments at the end of the financial year.
You'll be able by the due date of your tax 

return, make that finalisation of what your 

actual final salary and wages or directors 

fees are. That finalisation will then make 

information available through pre-fill for that 

person's tax return

AM I ELIGIBLE FOR A DEFERRAL?

As stated, any smaller employer who requests 

a deferral will be granted it. It is uncertain 

at this point how long this type of blanket 

deferral will be for. 

HAVE STP MICRO SOLUTIONS  

COME TO MARKET? 

Recognising that there are a significant 

number of smaller employers who do not use 

any type of payroll software when processing 

the pays each week/fortnight etc. micro 

businesses (employers with 1 to 4 employees), 

will not be required to adopt/buy payroll 

software in order to comply with Single 

Touch Payroll reporting. Rather, these small 

employers will be permitted to use low-cost, 

low-maintenance solutions.
As of early March, there are now six products 

that are currently available from the following 

providers:
•  Cashflow Manager
•  ePayroll
•  Single Touch Pty Ltd
•  CloudPayroll Pty Ltd
•  AccXite Pty Ltd, and 
•  Free Accounting Software Pty Ltd. 
You can contact these providers via their 

website if you wish to enquire about these 

products, and start reporting via Single 

Touch Payroll. 

Some of the major software houses, such as 

MYOB, Xero, Intuit and Reckon have all 

since announced that they will be providing 

an option at $10 or less per month, with their 

products slated to be available between April 

and June. 
See the ATO website for an updated list of 

providers and their products.  

SOLUTIONS FOR NON-MICRO 

BUSINESSES?

Standard business reporting-enabled software 

(SBR-enabled software) is essential to 

reporting under STP. Employers must adopt 

an STP solution by the due date. Solutions 

will vary depending on an employer’s current 

payroll processes. 
•  Accountant or Bookkeeper – Employers 

who use an Accountant or Bookkeeper to 

process their pays will simply rely on them 

to provide an STP solution (SBR-enabled 

software) by the deadline. Even where an 

Accountant or Bookkeeper does not process 

employer payroll, employers may turn to them 

for advice around how they can become STP-

compliant. 
•  Software Upgrades – If an employer uses 

commercial payroll software, then they should 

contact their software provider as the deadline 

nears and ensure that they offer an updated 

Standard Business Reporting-enabled version 

of the software. Major software houses have 

this software available. 
•  In-House Method – If an employer uses 

an in-house method of payroll or manual 

method (such as paying employees by EFT 

and manually providing them with pay-slips 

and Payment Summaries)…then they will 

likely need to adopt STP-compliant payroll 

software. Such employers may lean heavily 

on their Bookkeeper or Accountant when 

installing this software, and may need upfront 

training. Alternatively, they may choose to 

outsource their payroll to a payroll service 

provider such as a payroll bureau, or an 

Accountant or Bookkeeper. 

WHAT ARE THE PENALTIES FOR 

MISTAKES AND NON-COMPLIANCE 

UNDER STP?

The Commissioner has confirmed that there 

will be no penalties for mistakes, missed or 

late reports for the first year of STP reporting. 

ARE EXEMPTIONS AVAILABLE?

Certain employers can apply to the ATO 

for an STP exemption. Exemptions may 

be granted on a class basis. For instance, 

as SBR-enabled software is essential to 

reporting under STP, if an employer lives in 

a remote location with no reliable internet 

connection, an exemption may be granted. 

Other circumstances where a class exemption 

may be granted include for cultural or religious 

reasons, or where a natural disaster has 

occurred. The Commissioner has also stated 

that an exemption from reporting will also be 

provided for employers experiencing hardship. 
To apply for an exemption, employers or 

their Tax Agents or BAS Agents will need 

to contact the ATO directly to apply. To this 

end, you can submit an exemption request 

via 

www.ato.gov.au

 using the ATO Business 

Portal, Tax Agent or BAS Agent Portal. Once 

in the portal:

1. Select General questions/problems/help 

as the message topic.

2. Enter Single Touch Payroll as the message 

subject.

Include the following information:    
•  the number of employees on your payroll 

– this will help the ATO understand the 

size and complexity of your business

•  the reasons why you are unable to report 

through STP

•  any steps you have taken to attempt to get 

ready for STP

•  any supporting evidence that may help the 

ATO understand your circumstances.

IF I TRANSITION INTO STP EARLIER 

THAN THE START DATE, DO I STILL 

NEED TO PREPARE EMPLOYEE 

PAYMENT SUMMARIES FOR THE  

FULL FINANCIAL YEAR?

By opting into STP early (before 1 July 2019) 

smaller employers can enjoy the advantages of 

STP including:
•  Streamlining the reporting process. 

Payroll information is reported at the 

same time employees are paid; thus 

avoiding the need for action at a later date

•  Not being required to provide Payment 

Summaries to employees at year-end

•  Efficient employee on-boarding. Some 

digital service providers will offer 

employee commencement forms – such 

as TFN declarations and Withholding 

declarations – through their STP soft-

ware. If this is available, employers will 

have the option to invite their employees 

to complete these online forms via their 

STP-enabled software

•  Minimising reporting errors. The ATO 

will be able to pre-fill employer Activity 

Statements (labels W1 and W2) which in 

turn reduces the potential for employer 

human error.

Employers who transition to STP part way 

into 2018/2019 will have various options to 

move across depending on the methods used 

by their STP software provider. These include 

starting STP reporting with zero year-to-date 

balances and giving payment summaries to all 

employees for payments made before the first 

STP pay run.

2019 May/June – Page 7

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New legislation could see businesses 
lose tax deductions for payments to 
employees and contractors. This article 
details this new law, and provides a 
checklist of how to be compliant. 

BASICS

In March, legislation was passed which will 

deny an income tax deduction for certain 

payments if the associated withholding 

obligations are not complied with by the 

business making the payment. This new law 

commences on 1 July 2019, and provides 

a very strong incentive for employers to 

comply with their withholding obligations. 

Under current law, employers are entitled 

to a deduction for actually having made 

a payment to an employee or contractor – 

irrespective of whether they have correctly 

met the withholding requirements in respect 

of these payments. That is, the payment itself 

is sufficient to claim a deduction. 

NEW RULES

From 1 July 2019, a deduction will no longer 

be allowed in relation to the following 

payments:

•  Of salary, wages, commissions, bonuses, 

or allowances to an employee

•  Of directors’ fees
•  To a religious practitioner 
•  Under a labour-hire arrangement
•  For a supply of services – excluding 

supplies of goods and supplies of real 

property – where the recipient of the 

payment has not quoted their Australian 

Business Number (ABN)

…if withholding applied to the payment, 

and the payer was required to withhold 

an amount from the payment and did not 

withhold an amount OR did not notify the 

ATO when required. To be clear, deductions 

will only denied where no amount has been 

withheld at all from the payment that attracts 

withholding or no notification is made to the 

ATO. Withholding an incorrect amount (such 

as from an allowance etc.) or reporting the 

withholding incorrectly will not result in a 

deduction being denied. 
In summary, provided an amount is withheld 

(even if it is incorrect) and a notification 

to the ATO is made (i.e. a BAS is lodged 

before the mistake / non-lodgement is picked 

up by the ATO) there is an opportunity to 

correct mistakes relating to the amount or 

the payment of the amount, and therefore a 

deduction is allowed.  
Note also that the new rules apply equally to 

non-cash benefits provided in lieu of a cash 

payments in respect of one of the earlier-

mentioned payments. While there may, in 

this scenario be no obligation to withhold, an 

amount must be paid and then reported to the 

ATO by the required lodgement time. 

EXCEPTION 1 

Where an ABN is quoted by an employee, 

and no amounts have been withheld from 

the payments because the employer believes 

they are a contractor, a deduction will still be 

allowed for the payments. Therefore, honest 

employee/contractor classification mistakes 

are not caught by the new rules. This is 

sensible, as this distinction can be difficult to 

make in some cases, and is not always assisted 

by the ATO’s Employee/Contractor Decision 

Tool which can, in some cases, provide the 

incorrect result. If however, the worker did 

not provide you with an ABN, and no amount 

was withheld, a deduction will be denied. 

This is because, if you classified the worker 

as a contractor, and they did not provide an 

ABN, then 47% of the payment should have 

THE NEW

 

IMPORTANCE OF

 

TAX COMPLIANCE

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2019 May/June – Page 8

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been withheld under the ‘No ABN Withholding Rule’. An exception 

would be where no ABN was provided, but the recipient provided 

your business with a Statement by Supplier form detailing the reason 

why no ABN was provided (such as the payment was for a hobby etc.). 

EXCEPTION 2

The other exception is where the business voluntarily notifies the 

ATO of its mistake in the approved form (such as by amending your 

BAS) before the ATO commences an audit or other compliance 

activity. 

OBSERVATIONS

1. INNOCENT MISTAKES CAUGHT 

These new rules were the recommendation of the Government’s Black 

Economy Taskforce. The black economy refers to people who operate 

entirely outside the tax and regulatory system or who are known to 

the authorities, but elect to not correctly report their tax obligations. 

Despite originating from this tax avoidance taskforce, these new rules 

can actually catch out businesses that are attempting to comply, but 

have simply made an innocent mistake.

For instance, in the above example, there is no suggestion that 

Caleb is not acting in good faith – he simply was not aware that 

apprentice wages attracted withholding. While it may be argued that 

a reasonable business owner would not make such a basic mistake, 

consider the quite common instance of employers incorrectly 

determining that certain motor vehicle allowances do not attract a 

withholding obligation. If this involved several employees (or even 

just one) over a three-month quarterly BAS period…then none of 

the allowance payments would be tax deductible unless the mistake 

was picked up before it came to the attention of the ATO. Therefore, 

despite making a quite common mistake, and lodging BAS on time, 

and reporting and remitting all other withholding to the ATO for 

the period, no deduction would be allowed for the motor vehicle 

allowance payments. 
Therefore, it’s important for employers to review their payroll systems 

and ensure that amounts are being withheld correctly from salary, 

wages, allowances etc. 
2. ALWAYS REPORT  
Even if you’ve spent the withholding and don’t have the cash on hand 

to pay the ATO, always report it on your BAS. Failing to report the 

withholding means you are unable to claim a deduction even if you 

did actually withhold. If you do not have the cash on hand, you can 

always enter into a payment arrangement with the ATO and pay 

the amount owing in instalments. This will preserve your right to a 

deduction, which will be forfeited if you don’t report the withholding. 
3. LODGE ON TIME
Even if you do the right in terms of (a) withholding the tax required 

and (b) reporting the withholding on the BAS and (c) lodge your 

BAS…you can still be denied deductions if that BAS is lodged 

late! This is because, the failure to notify the ATO of a withholding 

obligation when required (i.e. by the due date of your BAS) can itself 

result in the denial of a deduction. The ATO’s data collection systems 

are highly developed and can pick up non-compliance in real time. 

Therefore, where you lodge a BAS late (and therefore fail to notify the 

ATO of a withholding obligation on time) this can itself trigger the 

disallowing of deductions. Always lodge on time, where possible.  

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TREASURY EXAMPLE

Caleb carries on a business as a mechanic. Caleb does not 
have any employees until he hires an apprentice, Bianca, in 
May 2020. 

Caleb is not aware that he must withhold an amount from 
Bianca’s wages. 

Caleb visits his accountant in September 2020 to prepare his 
2019/2020 income tax return. He mentions his expenditure 
to pay Bianca’s wages. Caleb’s Accountant advises Caleb he 
should have been withholding from the wage payments. 

Caleb notifies the ATO of his mistake. Caleb may still be 
subject to penalties for his failure to withhold. However, he is 
entitled to claim the deduction for the cost of Bianca’s wages 
in his 2019/2020 income tax return. This is because, although 
no amount was withheld, Caleb notified the ATO before it came 
to their attention.

2019 May/June – Page 9

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Don't fret 

on tax debt

This article examines the growing issue of debts owed to the ATO. We look at ways to 
minimize the chances of slipping into debt, as well as the deductibility of interest on loans 
taken out to repay these debts, and more. 

FIRMER APPROACH

The latest ATO annual report highlighted that 

collectable tax debt had grown to more than 

$23.7 billion for 2017/2018 — up from $20.9 

billion the previous year. The majority ($15.1 

billion) is owed by small business. Almost 

$10 billion of the $23.7 billion in debt owed is 

subject to objection or appeal, $1.1 billion is 

"uneconomical to pursue" and $3.7 billion is 

"irrecoverable at law".
In the recent times, the Government and the 

ATO have signaled their intent to crackdown 

on debt that is owed:
•  The Government recently provided the 

ATO with an additional $133 million 

over four years for it to continue a raft of 

measures that will sustain and increase 

debt collections and the timeliness of 

those collections.

•  Legislation is currently before Federal 

Parliament to extend the Director Penalty 

Notice (DPN) regime to make directors 

personally liable for unpaid GST, luxury 

car tax, and wine equalisation tax. Under 

the DPN regime they are already liable 

for unpaid Superannuation Guarantee, 

and PAYG withholding

•  Last year, we flagged a Government 

proposal that would allow the ATO to 

report certain overdue (by 90 days or 

more) undisputed tax debts of $10,000 

(not covered by a formal ATO payment 

arrangement) to Credit Reporting 

Bureaus (CRBs). As we noted, the effect 

of this on a business could be quite 

devastating, as CRBs may include the tax 

debt information in their credit reports 

which are available for purchase by 

parties who wish to use this information 

to make an informed decision on the 

credit worthiness of a business. This 

could have profound effects on the 

reported business such as support from 

financiers being withdrawn, and supplier 

credit stopped. Early in 2018, the ATO 

released Exposure Draft legislation on 

this measure for public consultation. The 

consultation period closed on 9 February 

2018, and this measure has not proceeded 

any further. The only development that 

has taken place is that in its Mid-Year 

Economic Statement in December 2018, 

the Government raised the debt threshold 

to $100,000 – making this potential 

measure irrelevant for many taxpayers 

who would likely have smaller overdue 

ATO debts.

•  While the ATO has in the past waited 

for a company’s outstanding debt to 

reach more than $340,000 before taking 

firmer action, in recent times the ATO 

has reduced this threshold down to 

$93,000. For individuals, the threshold 

has been reduced to $35,000 (down from 

$300,000).

PAYMENT PLANS

The ATO recognises that taxpayers (including 

individuals and businesses) sometimes 

experience short-term cash-flow issues that 

prevent them from paying on time. To assist, 

they offer payment plans tailored to your/

your business’s circumstances. You can use 

the ATO’s online “Payment Plan Estimator” 

(search this term at 

www.ato.gov.au

) to work 

out a plan that meets your circumstances, 

taking into account the payment plan 

conditions and how quickly you can pay off 

the debt, including how much interest you'll 

be charged.  The advantage of entering into 

a payment plan is that if you comply with 

its terms, no further more serious action 

will be taken by the ATO. It also gives you 

peace of mind that the debt is under control 

and is being dealt with. Payment plans can 

be organised by taxpayers themselves or by 

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My Tax Savers

2019 May/June – Page 10

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their Accountant or registered bookkeeper 

on their behalf, simply by calling the ATO’s 

automated self-help numbers and following 

the prompts – there is no need to talk with a 

Tax Officer. To set up an arrangement, call the 

ATO on:
•  Business - 13 72 26 (and enter 2), or
•  Individual - 13 28 65 (and enter 3).
If you are ineligible to enter into an automated 

payment plan, you should contact the ATO 

directly. 

RANGE OF ACTION

The ATO takes a tailored approach to debt. 

A taxpayer/business’s behavior, individual 

circumstances, lodgment and payment history 

are used to determine the most appropriate 

action for a tax debt. A three-tiered approach 

is taken:
1. EARLY ACTION
•  Post due date SMS debt reminders
•  Reminder letters
•  Pre-referral to external debt collection 

agency warning letter

•  Phone call from the ATO
•  External debt collection agency
2. FIRMER ACTION
•  Firmer action warning letter
•  Garnishee 
•  Director Penalty Notice (see earlier).
51,000 garnishee notices were issued in 

2017/2018. Furthermore, in the most recent 

12 months, there is anecdotal evidence from 

business bankers that there has been an 

increase in the number of garnishee notices 

received by banks from the ATO in relation to 

outstanding debts. These notices require the 

recipient (bank) to pay available funds from 

an individual or business’s account to reduce 

the debt owed to the ATO. This can create 

both cash-flow problems and/or financial 

problems for the individual or business that 

has been targeted. Firstly, you can be left 

without funds in your bank account to pay 

commitments to ensure the ongoing operation 

of your business (e.g.  payments of wages 

to your employees and payments to key 

suppliers). Secondly, the receipt of a garnishee 

order by a bank typically constitutes a 

breach of borrowing conditions which can 

have a detrimental effect on continued 

funding.  A copy of garnishee notices issued 

to banks is forwarded by the ATO to your 

registered address. This will typically be your 

Accountant if you use one.

3. STRONGER ACTION
•  Notice of intended legal action
•  Summons
•  Judgement
•  Bankruptcy notice
•  Creditor’s petition
•  Statutory demand
•  Application for winding up
There were more than 1,800 bankruptcies and 

company wind-ups in 2017/2018. 

SERIOUS HARDSHIP

In certain circumstances, the ATO will 

release you from some or all of your tax debt. 

This is only possible if you're experiencing 

serious hardship – that is, when payment of 

your debt would leave you unable to provide 

food, accommodation, clothing, medical 

treatment, education or other necessities 

for yourself, family, or other people you are 

responsible for. 
You can apply for release of your tax debt if 

you are:
•  An individual (including if you are self-

employed or a sole trader who is no longer 

trading) 

•  The trustee of the estate of a deceased 

person, if payment of the debt would 

cause serious hardship for the dependants 

of the deceased estate. 

Companies, trusts, and partnerships cannot 

apply for release from tax debt. If your 

company, trust or partnership has a tax debt 

and you are having difficulty paying, phone 

the ATO on 13 11 42 to discuss your options. 

Alternatively, speak with your Accountant 

and get them to contact the ATO. 

PREVENTION

The best way of managing this issue is to not 

incur a tax debt in the first place! Strategies to 

help minimise the chances of this include:
GST AND PAYGW TO BE KEPT 

SEPARATE
GST that you charge on the goods and 

services you provide should be quarantined. 

Unlike income tax on your income, all of 

the GST you receive is payable to the ATO. 

Likewise, all of the PAYGW taken from 

payments such as salary, wages, allowances, 

directors’ fees etc. must be remitted to the 

ATO. For this reason, both amounts should be 

kept separate from other finances. 

PROVISION FOR PAYG INSTALMENTS 
Be sure to keep sufficient income aside to 

meet your PAYG instalment obligations 

on your Activity Statement. The PAYG 

instalment system is a tax collection system 

which is designed to ensure that tax is 

paid on business and investment income at 

various points throughout the financial year 

(typically quarterly). The tax instalments paid 

during the year are based on the business and 

investment income recorded in your most 

recent income tax return. Because it is merely 

a tax collection system, taxpayers (companies, 

sole traders and individuals) within the system 

must still lodge annual income tax returns at 

the end of the financial year.
If you pay instalments by a set amount given 

to you by the ATO, then you will know how 

much income to keep aside. On the other 

hand, if you pay by reference to an instalment 

rate/percentage of your business income 

provided by the ATO, then you may wish 

to speak to your Accountant in regards to 

how much money to keep aside. It is worth 

noting that if your business is in its first year 

of operation, it will not be in the instalment 

system. This is because an instalment rate 

or amount is based on your most recent tax 

return. However, a business in this situation 

can opt to make voluntary payments to the 

ATO as provision for their first year tax bill. 

Again, your Accountant should be able to 

guide you on the amounts to keep aside. 
VARYING PAYG INSTALMENTS
Businesses are also at risk of going into debt 

with the ATO if they vary the ATO-provided 

dollar instalment amount downwards, and 

therefore pay a lesser amount than the ATO 

recommends per Activity Statement towards 

your year-end income tax liability. Businesses 

should only look at varying the amount where 

you are certain that you will receive less 

income during the year than last year, 
On the other hand, if you pay via an 

instalment rate, only look at varying the rate 

where there is a change (as compared to last 

year) in the percentage of your business and 

investment income that will be paid as tax at 

the end of the year. For example, a business 

may have many more deductions that can be 

claimed this year (as compared to last year). 

Therefore, all other things being equal, the 

percentage of that business’s business and 

investment income that will be paid as tax 

will be less. 
Variation decisions should always be made 

with the assistance of your Accountant, 

because an inaccurate variation can lead to 

tax debts, and penalties may also apply. If the 

varied amount or rate is based on an estimate 

that proves to be less than 85% of the actual 

tax payable on your  business and investment 

MY TAX SAVERS

May/June  2019

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