Four areas that advisors should be aware of.
It's been a busy year in the lead up to the Federal Election and following the Banking Royal Commission. Then there's just the usual cogs of commerce turning. Here's four areas advisors should be aware of what's happening at a macro level of regulation, and what's happening at a micro level of industry.
The Australian Taxation Office (ATO) is inherently never dormant, and is arguably becoming more sophisticated in its policy and data matching programs, and has publicly been reported in the media that:
- Before tax time there was a Black economy "blitz" of 1,800 businesses.
- From 1 July, businesses tendering for Commonwealth contracts over $4 million must provide an ATO statement showing a "satisfactory" tax record.
- ATO wants to retain data on lifestyle assets from a three-year period to a five-year period. Data includes insurance policies on certain asset classes, including racehorses, fine art and aircraft.
- From 1 July, new black economy hotline is now active—1800 060 062.
The black economy blitz involves a particular focus on businesses not registered for pay as you go (PAYG) withholding or GST (in May to June specific areas included Dandenong and Richmond in Victoria; Maroochydore in Queensland; and the Northern Territory). ATO agents were said to also visit tax practitioners of small businesses in its focus areas as part of what it says is an "early intervention strategy".
- Fair Work
The Fair Work Ombudsman (FWO) has been actively investigating wage theft and non-compliance breaches. Notably in May, FWO raids reported by the media resulted in the following:
- A total of $581,976 was recovered for 951 employees across 300 plus businesses.
- The above followed an audit of over 1,385 in regional Queensland, New South Wales, and Victoria.
- High-risk industries in the audit were businesses in the accommodation, hospitality and retail sectors.
- The FWO issued 39 formal cautions, 27 infringement notices and 8 compliance notices and intend to revisit offenders periodically.
Just a few weeks later, another series of inspections across Albury-Wodonga, Ballarat, and Wollongong resulted in back pay of over $330,000 for 725 workers. Then in June, two cafés in Melbourne's admitted to underpaying workers just under $25,000 and now find themselves subject to "close attention" from the FWO with a three-year-long enforceable undertaking with the regulator.
Illegal phoenixing continues to be of great concern to the government, regulators, and the insolvency industry. While the government grapples with legislation to try and attack this problem it remains a live issue and strategy of choice for unscrupulous advisors. Until such time as the government and regulators find a real and effective way to deal with illegal phoenixing, it will remain a risky alternative for directors that fail to get proper advice.
With the outcome of the Banking Royal Commission, it was natural enough to see banks become more aware and conscious of lending practices and refinancing. While this could very well lead to making it harder to secure financing and refinancing from major lenders, second tier lending is seeing the benefit (and reaping the rewards). The balance of securing finance and the cost of that finance continue to play out.
What has also been reported is the significant number of mortgages technically in default across Australia. What will be of interest is the major banks reaction to this data in not just their new lending practices, but also in dealing with the significant mortgage defaults currently on their books. Will they take a hard line and risk further public backlash against the industry, or avoid acting on defaults through renegotiation and extended terms? I tend to think it will be the later.
What is evident is that we continue to live in an ever-changing and evolving legislative and regulatory environment where each stakeholder group is trying to secure their position. While strides have been made in the area of illegal phoenixing, there is much yet to be done. But it must be remembered that the greater majority of directors and business owners are decent; honest and hard-working people trying to make their business a success. While introducing laws to make it harder for rogue directors is undoubtedly necessary, there needs to be balance to make it easier for those in business that are doing the right thing without increased fear of failure and its consequences.
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