Private Groups Stewardship Group special briefing 25 June 2020
Information and support for Private Wealth clients
The ATO recognised that industry and advisers have been very busy and working under difficult circumstances. The ATO has been aiming to “help not hinder” and encouraged its staff to take an empathetic approach.
Private Wealth clients with existing engagements in progress were offered to defer their case (if impacted by COVID-19), the majority of our engagements have been continuing to progress.
Cash flow boost
Amendments on Personal Services Income received royal assent. The ATO is in the process of re-crediting a very small number of taxpayers who have previously paid back the cash flow boost credits. ATO website content is being updated.
Our continued focus is on ensuring cash flow boost credits issue to eligible clients as soon as possible. There are some cases where clients think that they should have received credits, however they are ineligible for various reasons. Some examples of the reasons they are ineligible include backdated Australian Business Number (ABN) or pay as you go (PAYG) withholding registration.
There are a small number of matters which are raising concerns in relation to integrity. Behaviours that are raising a 'red flag' include:
- out of pattern increases in reported salary and wages
- previously dormant PAYG withholding entities reporting W1/W2 amounts to access cash flow boost
- highly inflated non-arm's length salary and wages purportedly paid to business owners, associates.
At this stage we are still not seeing any significant integrity trends or concerns in the Private Wealth clients that we have engaged with.
We are focussing on assisting to progress queries from clients that either think they should have received the cash flow boost credit but did not or did receive the credit but are unsure if they were eligible. Queries being progressed by Private Wealth generally relate to aggregate turnover.
All applications for JobKeeper payments are reviewed, and a range of compliance activities to maintain the integrity of the program are being undertaken.
Over 95% of applications are being made in a timely manner and only a small portion are considered prior to payment.
There are common issues and mistakes which can cause delays such as applying with the wrong ABN, incorrect employee details or dated Single Touch Payroll reporting.
There are some behaviours of concern involving employee relationships, no PAYG withholding role and eligibility of employees.
There are also behaviours which are considered fraudulent and where schemes may apply such as 'ghost' employees, falsifying records or adjusting the prior year business activity statement to meet the turnover tests.
As previously mentioned, our focus to date has been to work with Private Wealth clients to assist them through the enrolment and identification phases. We have also more recently been focussing on the review of applications that needed to be considered prior to payment.
Most Private Wealth clients are doing the right thing and we encourage those businesses making honest mistakes to approach us so we can assist them to get it right.
Broader compliance communication issued last week. The focus from a large business perspective includes:
- clients who are Significant Global Entities or have foreign associates controlled entities and have not considered this in their turnover test calculations.
- decline in turnover, both from a contrived arrangements perspective and looking at divergences between projections and actuals
- employee eligibility
- satisfaction of the wage condition i.e. that employers are actually paying the $1,500 per fortnight to their employees that they have claimed for.
We will be contacting clients on their turnover, including governance and assumptions that underpin projections and their reasonableness.
For large Private Wealth businesses, we recommend that they review our recently published guidance on better governance practices in relation to JobKeeper.
Division 7A administrative relief for COVID-19 affected taxpayers
The process aims to provide a streamlined approach to apply for the Commissioner’s discretion. The ATO thanked members for their swift feedback during consultation.
Feedback has been incorporated into the proposed guidance including:
- a commitment to a 5-day response timeframe from the day the form is correctly completed
- safeguards in the form enable the Commissioner to take the streamlined approach and the form specifically warns of providing misleading or false information
- this approach is supported by the requirement of taxpayers to maintain their relevant records, however they do not need to submit evidence, information with their form
- although we received feedback to consider information that may be provided with the form, we are of the view that this is not aligned with the intent of the streamlined approach and would not be possible in the timeframe available
- updated to be a 'blanket date' of 30 June 2021, as this provides simplicity and an even playing field for borrower
- if a loan matures on 30 June 2020, the ATO will still be able to exercise the discretion.
The guidance includes a practical example, based on members’ feedback.
The guidance and form is expected to be published this week. The ATO will appreciate it if members could share this information with their colleagues, clients and members.
For more information go to Request to extend time to make minimum yearly repayments for COVID-19 affected borrowers under section 109RD.
What if basic mistakes (e.g. form completion errors) are found in the application form?
ATO confirmed our staff will reach out to the taxpayer to help them correct the form and return it. We will exercise discretion.
Where a form is completed in good faith, but the taxpayer later finds it to be incorrect, they should contact the ATO for advice.
Reportable Tax Position (RTP) Schedule expansion to large private companies
The ATO thanked members for their input and feedback and noted:
- We have now concluded consultation on the expansion of the RTP schedule to large private companies.
- Private Groups Stewardship Group (PGSG) members and members of the PGSG subgroup have provided comments. We have also undertaken a public consultation process and two submissions, from Chartered Accountants Australia and New Zealand and Greenwoods, have been received.
- We are progressing towards notification letters being issued before mid-July 2020. The letters will be in hard copy form. Taxpayers can email email@example.com if they have queries in relation to notifications.
- Based on feedback, guidance web content will be published covering issues raised in consultation.
For an overview of external feedback provided and the ATO response, email PrivateGroupsStewardshipGroup@ato.gov.au and specify what you require.
Summary of key topics discussed at the Private Groups Stewardship Group meeting 25 June 2020