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Private company clients who receive payments, benefits or loans from their private companies need to ensure compliance with their additional tax obligations (which are often referred to as their ‘Division 7A’ obligations).
There are multiple ways in which business owners may access private company money, such as through salary and wages, dividends, or what are known as complying Division 7A loans.
Division 7A is an area where the ATO sees many errors and the ATO is currently focused on assisting taxpayers in managing their obligations when receiving payments and benefits from their private companies.
In this regard, the ATO has recommended that business owners do the following:
- keep adequate records;
- properly account for and report payments and use of company assets by shareholders and associates; and
- comply with rules around Division 7A loans.
Understanding these Division 7A obligations is essential in order to:
- make informed decisions when receiving private company money and using private company assets; and
- avoid unexpected and undesirable tax consequences.
Businesses that pay contractors to provide certain services may need to lodge a Taxable Payments Annual Report (TPAR) by 28 August each year.
From 22 March, the ATO will apply penalties to businesses that:
- have not lodged their TPAR from 2023 or previous income years;
- have received three reminder letters about their overdue TPAR.
Taxpayers that do not need to lodge a TPAR can submit a ‘non-lodgment advice form’. Taxpayers that no longer pay contractors can also use this form to indicate that they will not need to lodge a TPAR in the future.
A developer who conspired to lodge fraudulent business activity statements has been convicted and sentenced to 10 years in jail with a non-parole period of six years and eight months.
The developer was involved with two companies that formed part of a group known as the ‘Hightrade Group’ which developed properties such as a hotel and golf course in the Hunter Valley, NSW.
The developer fraudulently obtained GST refunds by using three tiers of companies (developers, building companies and suppliers) to grossly inflate the construction costs of his developments.
The companies he was involved with also claimed to have purchased goods when no such purchases had occurred. In total, the developer intended to cause a loss to the Commonwealth of more than $15 million.
His sentencing has closed a complex case, known as Operation 4. The ATO noted that “Tax crime, like the fraud uncovered in Operation 4, affects the whole community.”
The ATO has advised employers that ‘FBT time’ is just around the corner, and they need to stay on top of their fringe benefits tax (FBT) obligations.
Employers need to ensure they have attended to the following matters this FBT time:
- Identify if they have an FBT liability regarding fringe benefits they have provided to their employees or their associates between 1 April 2023 and 31 March 2024.
- Identify if they have an FBT liability as they will need to lodge an FBT return and pay the amount due by 21 May.
- Identify if they are currently registered for FBT and let the ATO know if they do not need to lodge an FBT return (Editor: by asking us to lodge an FBT non-lodgment notice) to prevent the ATO seeking a return from them at a later date.
Employers should also remember that when the new FBT year starts on 1 April, they can choose to use existing records instead of travel diaries and declarations for some fringe benefits. Furthermore, the ATO has released PCG 2024/2 which provides a short cut method to help work out the cost of charging electric vehicles (‘EV’) at an employee’s home for FBT purposes.
Eligible employers can choose to use either the EV home charging rate of 4.2 cents per kilometre or the actual cost.
Ultimately, all employers need to make sure they understand their FBT obligations and the records they need to keep to avoid an FBT liability.