The ATO's recently released Compliance Program 2012-2013
provides an overview of the issues the ATO will be focusing on for
micro to medium sized employers over the next year.
A key focus area is sham contracting arrangements. This issue is
particularly topical given a number of recent decisions involving
the vexed issue of whether independent contractors are genuinely
contracting on their own behalf or whether they are employees at
Working Paper Issue 9, we provided an update on ACE
Insurance Ltd v Trifunovski  FCA 1204 where the Federal
Court ruled that five former insurance sales representatives were
employees, not independent contractors. The Federal Court has
subsequently ordered penalties and approximately $500,000 in
damages against Ace Insurance, including an award of $333,130 for
annual and long service leave entitlements for the highest paid
agent who had been with the company for seven years.
What is happening?
The ATO has announced it will increase scrutiny on compliance
employer obligations in micro enterprises;
fringe benefits tax (FBT) rules in SMEs; and
superannuation guarantee obligations.
The ATO intends on auditing industries and employers and those
with a high-risk of non-compliance with their superannuation
guarantee obligations. In particular, the ATO will be focusing its
compliance activities on employers running cafes and restaurants,
real estate businesses and carpentry businesses in home building or
For employers running micro enterprises, the ATO's
compliance activities will focus on employer obligations in
relation to the correct treatment and disclosure of salary and wage
The ATO is pledging to review the tax affairs of more than
20,000 businesses to ensure that the correct amounts of PAYG
withholding are reported. Further, the ATO will use intelligence
and information matching to detect cases of non-compliance and
follow this up with reviews and audits where necessary.
As mentioned earlier, the ATO also intends continuing its crack
down on employers who try to avoid their tax and superannuation
responsibilities by engaging sham contractors rather than
employees, even though, legally, these workers are their employees.
The ATO is concerned that such practices mean that workers who
should be classified as employees are missing out on entitlements,
such as superannuation. The ATO is also concerned that these
arrangements are facilitating the 'non-reporting of income by
Fringe benefits tax
For SME employers, the Compliance Program includes a focus on
compliance with the FBT regime.
In particular, the ATO intends to take action against SME
fail to lodge returns when required;
fail to identify and correctly treat fringe benefits; and
incorrectly apply valuation, exemption and reductions
The ATO intends on conducting approximately 200 reviews and
audits and has stated that it will be taking firmer action against
employers who choose not to comply with their FBT obligations.
Tips for employers
Employers should conduct their own audit regarding the status
of any contractors, and consider whether those persons should
instead be engaged as employees.
Employers should seek tax advice regarding their FBT
obligations and ensure that they are meeting those
If audited by the ATO, employers should cooperate with the ATO
but should also seek advice about how best to respond to ATO
enquiries and the grounds on which they can refuse to produce
Employers can refuse to hand over legally privileged documents,
but should ensure that they deal with and store such documents in a
way that does not waive that privilege.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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