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Tuesday 16 December 2014

ASIC targets false declarations in the building and construction industry

ASIC’s surveillance program was set up in September 2013 to monitor the building and construction sector with particular regards to identifying illegal phoenix activities.

Feedback from the latest surveillance campaign uncovered larger companies are making false statutory declarations to claim payments for contracted work.

ASIC Commissioner Greg Tanzer said in a media statement that larger companies were sub-contracting smaller businesses to do a job, then claiming the cost but not paying the sub-contractors.

This substantially impacts the cash flow of small businesses affecting their ability to manage operating expenses and creditors.

Generally, false statutory declarations and matters of fraud are not dealt by ASIC, but under the Corporations Act ASIC can take civil or criminal action against company officers who knowingly make false statements.

Last year, ASIC banned 60 directors who engaged in misconduct including phoenix activities.

For more information, click here.

Tuesday 9 December 2014

ATO sets guidelines on Bitcoins and other crypto-currencies

Generally, the Tax Office does not consider Bitcoins to be money, foreign currency nor a form of financial supply for GST purposes but instead views it to be an asset for capital gains tax purposes.

Capital events arising from the disposal of Bitcoins by individuals for personal consumption is disregarded provided that the cost of the Bitcoins is $10,000 or less.

However, individuals who purchase Bitcoins as a form of investment may be subject to capital gains tax upon disposal.

Businesses receiving Bitcoins as a form of payment for goods and services have to record ordinary income at the fair value obtained from a reputable Bitcoins exchange. Similarly, businesses are entitled to a deduction based on the fair value if business items are purchased using Bitcoins.

Any GST charged when receiving Bitcoins as payment can be claimed if the underlying supply of goods and services is a taxable supply.

Businesses dealing with Bitcoins for profit-making undertaking, such as the mining of Bitcoins, conducting Bitcoins exchange or providing Bitcoins ATMs, will need to treat Bitcoins transactions as assessable income and are required to account for them as trading stock at year end.

Finally, fringe benefits tax may apply if Bitcoins are used to remunerate an employee under a valid salary sacrifice arrangement. Under other circumstances, Bitcoins are treated as normal wages and are subject to PAYG withholding.

For more information, click here.

Tuesday 2 December 2014

ATO focuses on profit allocation within professional firms

The Tax Office has become increasingly aware of professional firms exploiting different business structures to manipulate profits distributed to individual professional practitioners (IPP).
The Tax Office has issued guidelines regarding how professional firms may be assessed on their tax compliance risks associated with profit allocation.
The guidelines apply if:
  • An IPP provides professional services to the firm’s clients or is actively involved in the management of the firm, and the IPP and/or associated entities have a legal or beneficial interest in the firm;
  • The firm is structured as a partnership, trust or company; and 
  • The income of the firm is not personal services income.
An IPP may be rated as low risk if one of the following guidelines are met:
  • The IPP receives assessable income from the firm in their own hand as an appropriate return for the services rendered; and/or
  • At least 50% of the income to which the IPP and their associated entities are collectively entitled in the relevant year is assessable in the hands of the IPP; or
  • The IPP and their associated entities both have an effective tax rate of 30% or higher on the income received from the firm.
To determine an appropriate level of income, the taxpayer may use the level of remuneration paid to the highest band of professional employees providing equivalent services to the firm, or if there are no such employees in the firm, comparable firms or relevant industry benchmarks.
For more information, click here.