Dangers of falling behind on BAS & superannuation guarantee lodgements
Many business owners fall behind on their superannuation guarantee & BAS lodgements as they don’t have the cash flow to pay the super, GST, PAYG withholding and PAYG tax instalments. Plus they don’t want the ATO chasing them for these tax debts.
However, this is not a good approach because a current and former director can be held personally liable for unpaid amounts of:
- pay as you go withholding.
- GST.
- Superannuation guarantee charge.
The ATO can make directors personally liable for these unpaid amounts by issuing a Director Penalty Notice. The sting in the tail is that if the company is behind on its BAS lodgements by more than 3 months of the due date, and if any superannuation debt is not reported to the ATO by the due date of the SGC statement, the only way to remit the amounts is for the debts to be paid in full – the directors can’t escape liability by appointing a small business restructuring practitioner or winding up the company.
Accordingly, it’s very important for company directors to ensure that BAS and superannuation lodgements are made on time, or within the relevant timeframes outlined above.
Superannuation contributions for people who are not employees at common law
There is a not so well known provision contained in section 12(3) of the Superannuation Guarantee (Administration) Act that says "If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract." The purpose of this provision is to extend the ordinary meaning of "employee" for the purposes of the superannuation guarantee law and, thus bring such people into Australia's compulsory superannuation scheme.
The trouble with this provision is that it can be read more broadly than what is intended. The recent decision of the Full Federal Court in Jamsek v ZG Operations Australia Pty Ltd pointed this out.
In this case truck drivers who provided their services through a partnership with their spouses were held not to be employees under s.12(3). The court made some important points when determining whether this provision applies to an individual including:
- The provision only applies where the putative employee is an identified natural person who is a party to the contracts for services in their individual capacity.
- The provision is not satisfied where a contract is properly characterised as being for the provision of a result and not for labour.
- A contract that leaves the contractor free to do the work himself or to employee other persons to carry it out is not wholly or principally for the labour of the person.
- The provision only applies in relation to contracts for the personal performance of work by the worker who is a party to the contract.
Section 12(3) is something that can catch businesses "unawares" and cause problems when superannuation contributions have not been made when they should have been. However, the provision must be applied and interpreted in the way the courts have interpreted it. If this is not done, a business may make superannuation contributions when they are not required to.
100% instant asset write-off set to end on 30 June
From 1 May 2023, there will be only two months until the end of “temporary full expensing” of assets. This will be so unless the Federal Government decides to keep, or partially retain, the concession in the upcoming Budget.
Background
As part of the stimulus of the economy to counteract the effects of COVID-19, the previous Federal Government introduced the ability to claim a 100% tax deduction for fixed assets purchased by businesses and installed ready for use by 30 June 2023. This was referred to as “temporary full expensing” of assets. It is referred to as “temporary” because it is a temporary adjustment to existing tax law that has a sunset date (currently) of 30 June 2023.
Note that not all assets qualify for this write-off. For example, buildings and “capital works” and certain software do not qualify.
Ready for use
If you want to write off 100% of the cost of an asset, it must be purchased and installed ready for use prior to midnight on 30 June 2023. For example, if your business has ordered a new machine, it must be in working order on your premises by that time. This does not mean that the machine has to be actually used in production by 30 June 2023. It means that someone could just “flick the switch” and the machine could operate in your business.
Another example is the purchase of a new prime mover for a transport company. Before 1 July 2023, it needs to be delivered and someone needs to be able to get into the driver’s seat and be able to drive the prime mover. It need not be actually transporting anything, but it must be capable of doing this.
Short time left
Depending on what is purchased, the delay between the order date and the delivery date may need to be watched if you want to claim 100% of the cost of the asset in your tax return for the year ending 30 June 2023. So, if you want to make use of this concession, you are strongly advised to think soon about when you are going to purchase the asset and by when it can be delivered.
For small businesses (turnover of less than $10 million), if the law reverts back to its original state, only assets costing below $1,000 will be able to be written off 100% in a year of income after 30 June 2023.
Data-matching program for uber drivers
The ATO will commence a data-matching program to identify individuals that may be providing ride sourcing services in the 2022-23 financial year. A Gazette notice setting out details of the data-matching program was published on 21 April 2023.
The data to be acquired under the program will include:
- Identification details (driver ID, ABN, individual name and birthdate, mobile phone number, email address and residential/business address).
- Transaction details of all payments received by the driver in the relevant period (i.e., bank account details, aggregated payment details, gross fares, net amount paid to driver and all other income to which GST may or may not apply).
Individuals identified as providing ride sourcing services may be contacted by the ATO to inform them of their tax obligations as part of a broader information and education program.
Electric vehicle home charging
The ATO has released for consultation draft Practical Compliance Guideline PCG 2023/D1: Electric vehicle home charging rate – calculating electricity costs when charging a vehicle at an employee’s or individual’s home (PCG 2023/D1). The draft PCG sets out the ATO’s methodology used to calculate the cost of electricity when an electric vehicle is charged at an employee’s or individual’s home.
The EV home charging rate is 4.20 cents per kilometre for FBT or income years commencing on or after 1 April 2022.
To use the methodology, the vehicle must be a fully electric, zero emissions vehicle and cannot be a plug-in hybrid vehicle with an internal combustion engine. If a commercial charging station cost is used, the EV home charging methodology set out in the draft PCG cannot be used. If the EV home charging rate is used, the commercial charging station cost must be disregarded.
The taxpayer must keep a record of the distance travelled by the vehicle that complies with record-keeping requirements detailed in the draft PCG. If odometer records are not available from the start of the 2022–23 FBT or income year, a reasonable estimate may be used based on service records, logbooks or other information. This transitional approach is available only for the opening odometer reading on 1 April 2022 or 1 July 2022.
