Thinking Tax Edition 6

6 October 2020

Thinking Tax is an initiative from Findex to provide you with a short overview of specific tax issues that may affect you or your business, with a focus on practical issues you may face on a day to day basis.

1. Next 5,000 streamlined assurance program

As mentioned in Thinking Tax 5, private groups controlled by high wealth individuals who control wealth of more than $50 million will be asked to willingly participate in the Next 5,000 streamlined assurance program with the Australian Tax Office (ATO).

To determine whether such taxpayers have been paying the right amount of tax and whether there are any further tax risks, the ATO will typically request the following information from the business:

  • A group structure chart of the business at 30 June and further details about the group members in the last two years to determine what entities make up the business structure.
  • Financial information, tax reconciliation and working papers of the last two years to determine whether there has been any misalignment between accounting and tax results.
  • The tax governance and risk management framework of the business (e.g. manuals, exception reviews, internal governance reviews and written procedures) to determine whether the processes, controls, systems and key tax administration roles currently used by the business are adequate to support the tax functions of the business.
  • Recent significant transactions in the last two years (e.g. acquisitions and disposals) undertaken by the business to determine how such transactions were financed as well as the tax consequences from such transactions.
  • Other specific information requests about tax risks the ATO has previously flagged to the market to determine whether any risks or concerns expressed in ATO taxpayer alerts, practical compliance guides and other documents, have been sufficiently addressed by the business.

To help prepare your business for such a request for information, Findex can conduct a readiness review by reviewing your records and recent significant transactions to help identify any potential tax risks your business may face.

If we identify a tax risk, we can also help you to make a voluntary disclosure of any errors that were discovered, which could lead to a reduction of up to 80% of administrative penalties and interest charges that would normally apply if there was no voluntary disclosure.

Our tax advisers can support your business through the whole program by dealing with the ATO on your behalf and assisting with the disclosure of information to the ATO.

2. Payroll tax and salary sacrificed fringe benefits

Salary sacrifice occurs when an employer enters into an effective salary sacrifice arrangement with its employees whereby the employee agrees to forego part of their future salary in return for other entitlements such as the provision of a fringe benefit.

Therefore, in a salary sacrifice arrangement, the employer is obligated to pay Fringe Benefit Tax (FBT) on the fringe benefit the employee received.

Employers should include the fringe benefits provided to their employees as taxable wages in their payroll tax calculations. However, it is important to note employers are only required to pay payroll tax on employees’ reduced salaries.

Therefore, employers that have inadvertently been paying payroll tax on salary sacrificed benefits may be able to claim a payroll tax refund.

Please contact our employment taxes team to review whether the correct payroll tax treatment has been applied and if you may be entitled to a payroll tax refund.

Roelof van der Merwe, National Tax Director (Melbourne)

Tony Marks, Partner, Tax Advisory (Brisbane)

Tim Holloway, Partner, Tax Advisory (Melbourne)