Audit Shield Service

With the prevalent focus on increasing audit activity, it is more likely than ever that you could be audited. Audit Shield service provides for the payment of professional fees incurred in the event that you are selected for an audit, enquiry, investigation or review by the Australian Taxation Office (ATO) or other government body, in relation to lodged returns. The cost of being properly represented in these matters can be quite considerable depending on the length of time involved in the investigation. Even the simplest enquiry can require hours of work.

All professional fees up to a prescribed limit (with no excess) are covered when you engage Audit Shield service in audit activity matters. Fees, legal fees, bookkeeping fees and other specialist professional advisor fees are covered. Audit Shield also provides retrospective cover so that all previously lodged returns are included in the coverage.

The list is extensive as to what is covered under Audit Shield. Income Tax, GST and BAS, Superannuation Guarantee, PAYG Withholding, Fringe Benefits Tax, Payroll Tax, Land Tax, Stamp Duty, WorkCover and Self Managed Superannuation Funds (SMSFs) are just a few that are included.

Is Audit Shield service right for you?
All of our clients can take advantage of the Audit Shield service. Different levels of cover are available for salary earners, businesses and SMSFs.

Anyone can be targeted, even if their lodgements are accurate, and this is no reflection on the quality of work from your accountant. With all of this in mind, we offer you the opportunity to protect yourself with our Audit Shield service.

If you would like peace of mind and coverage in the event of audit activity, please ask your accountant or one of our friendly team members about our Audit Shield service.

Case Studies of Audit Activity:

Australian taxpayers, in the form of businesses, individuals and Self Managed Superannuation Funds, are constantly finding themselves at the mercy of the Australian Taxation Office (ATO) or
other government agencies for the purpose of audits, enquiries, investigations or reviews.

Below are a few examples of Audit Shield clients who had lodgements which were thorough and honest, however were still sought after by the ATO. Luckily they all had Audit Shield in place to avoid the costly ramifications!

Type: Payroll Tax Investigation
End Result: Fees of $8,801 were fully covered by Audit Shield.

A Queensland based entity was selected in respect of whether or not the right amount of payroll tax was paid and whether grouping was relevant. All enquiries with regard to grouping were satisfactorily responded to but the client was still found to have slightly understated one contractor payment and some minor superannuation which resulted in the authority issuing an assessment for $1,553.

Type: Stamp Duty Enquiry
End Result: Fees of $1,210 were fully covered by Audit Shield.

The matter was in respect of a Deed of Settlement which the OSR were arguing should have been subject to Stamp Duty for this Western Australia based Audit Shield user. It was deemed that Stamp Duty should have been paid on the transaction and an assessment was issued for $13,490. Penalties were successfully argued down to nil.

Type: Income Tax (CGT) Review
End Result: Fees of $9,625, including $1,671 of legal fees, were fully covered by Audit Shield.

A review of the use of CGT Small Business Concessions on a gain of around $5 million reduced down to around $450,000 was conducted on a Tasmanian based client.

After providing all the responses and obtaining some legal advice to further validate the client’s position, the outcome was that the ATO accepted the returns as lodged.

Type: Land Tax Audit
End Result: Fees of $2,708 were fully covered by Audit Shield.

A New South Wales based client completed a questionnaire in regards to his land holdings to be used to determine whether he is liable for Land Tax.

The outcome was that property was found not to be primary production land and the client was assessed for $,300 worth of Land Tax.

Type: Employer Obligations Audit
End Result: Fees of $7,374 were fully covered by Audit Shield.

A Victorian based client was picked due to a data-matching flag where the ATO believed the employees had claimed more PAYG withholding than the employer had reported.

Although the issue of the mismatch of PAYG withholding was cleared, the client was found to not have paid the correct amount of superannuation and was assessed for $4,083 in Superannuation Guarantee Charge.

Government Forces Foreigners To Sell Australian Real Estate

The Treasurer has ordered the forced sale of a further 15 Australian residential properties held by foreign nationals in breach of the foreign investment framework, taking the total number of forced sales to 61, with a combined value of $107 million.

A further 36 foreign nationals have sold properties during the course of ATO investigations, showing improved compliance with the rules and a strengthening of the enforcement program.

The foreign nationals in the latest group of forced disposals purchased their properties without Foreign Investment Review Board (FIRB) approval, and in some cases held multiple established properties in breach of the rules.

The ATO identified these breaches through data matching programs, as well as using information provided by the public.

The ATO has detected more than 570 foreign nationals who have breached the rules, which has resulted in forced sales, self disposals, variations to previously approved FIRB applications and retrospective approvals with strict conditions.

Breaches of these conditions will result in civil penalties or criminal prosecution.

The ATO has also issued 388 penalty notices to foreign nationals in breach of the rules, attracting penalties of more than $2 million.

No Overtime Meal Allowance, No Overtime Meal Deduction

An employee construction project manager/supervisor was denied deductions for overtime meal expenses, as he was not paid an overtime meal allowance under an industrial agreement (award).

The taxpayer often worked at nights and on weekends during the relevant income years, and so additional amounts were negotiated and ‘rolled into’ his salary to cover the fact that he was expected to work additional hours, and also to cover any out-of-pocket expenses associated with such overtime.

However, the taxpayer’s salary was not paid under an award, which was simply used as a starting point in annual remuneration negotiations (and he was paid the same amount each week, regardless of the hours worked or expenses incurred).

Therefore, the AAT agreed with the ATO, finding that the taxpayer had received no overtime meal allowance under the relevant industrial award.

As no deduction is claimable under the income tax law for overtime meal expenses unless an appropriate award overtime meal allowance is paid, the Tribunal swiftly dismissed the taxpayer’s appeal, and also affirmed the 25% administrative penalty.

Diverting Personal Services Income to SMSFs

The ATO is currently reviewing arrangements where individuals (at, or approaching, retirement age) purport to divert their personal services income to an SMSF, so that the income is taxed concessionally (or exempt from tax) in the fund, rather than being subject to tax at the individual’s margin rate.

These arrangements normally involve the individual’s income being paid to another entity (e.g., a company) which then makes distributions to the SMSF as a ‘return on investment’ (e.g., dividends, where the SMSF holds shares in the relevant company).

The ATO advises a any people that have entered into such an arrangement to contact the ATO by 30 April 2017, so they can work with them to resolve any issues in a timely manner, and minimise the impact on the individual and the fund.

Individuals and trustees who are not currently subject to ATO compliance action, and who come forward will have administrative penalties remitted in full (although interest may still be payable on any tax collected later than it should have been).

Fringe Benefits Change For Tax Offsets From 1 July 2017

The ATO has issued a reminder that the government has changed the way fringe benefits will be treated for the calculation of several tax offsets from 1 July 2017.

The meaning of ‘adjusted fringe benefits total’ (which is used to calculate a taxpayer’s entitlement for the low income superannuation tax offset, the seniors and pensioners tax offset, the net medical expenses tax offset and the dependent tax offset) has been modified so that the gross, rather than the adjusted net value, of reportable fringe benefits is used.

Fringe benefits received by individuals working for registered public benevolent institutions, registered health promotion charities, some hospitals and public ambulance services will not be affected by this change.

This aligns the treatment for tax offsets to the treatment for the outcome tests for family assistance and youth payments.

Making ‘Intangible’ Capital Improvemenets to Pre-CGT Assets

The ATO has confirmed that, if intangible capital improvements are made to a pre-CGT asset, they can be a ‘separate CGT asset’ from that pre-CGT asset if the relevant requirements are satisfied.

The result of this is that, while the disposal of the pre-CGT asset itself will be exempt from CGT, the improvements which are treated as a separate, post-CGT asset could still give rise to CGT.

A farmer, holding pre-CGT land, obtains council approval to rezone and subdivide the land.

Those improvements may be separate CGT assets from the land, so if the land is sold with those improvements (the council approval), there may be some CGT (even though the land itself is exempt).

ATO Data Regarding Super Guarantee Non-Compliance

The ATO has provided some information about Superannuation Guarantee (SG) non-compliance in its recent submission to a Senate inquiry into the impact of the non-payment of the Superannuation Guarantee.

In addition to marketing and education activities to re-enforce the need for employers to meet their SG obligations, the ATO conducts audits and reviews to ascertain SG non-compliance, with 70% of the cases stemming from employee notifications (the remaining 30% of cases are actioned from ATO-initiated strategies).

On average, the ATO receives reports from employees which relate to approximately 15,000 employers each year, although the ATO finds that nearly 30% of these employers have in fact paid the required SG to their employee.

However, an SG shortfall is identified in the remaining 10,000 cases (this represents approximately 1% of the estimated 880,000 employers who make SG payments).

The top four industries from which reports are received by the ATO are from:

* Accommodation and Food Services;
* Construction and;
* Manufacturing; and
* Retail Trade.

These four industries represent approximately 50% of the audits and reviews undertaken.

The ATO also noted that the proposed Single Touch Payroll (‘STP’) will help overcome certain limitations in the data currently provided to the ATO (as well as simplify taxation and superannuation interactions for employers, by aligning the reporting and payment of PAYG withholding and SG with a business’s natural process of paying their employees).

Use of STP is mandated for businesses with 20 or more employees from 1 July 2018, and a pilot program will be undertaken in 2017 to identify the nature of STP benefits for small businesses.