News

Ahead of the holiday season, the ATO has reminded employers about the potential FBT implications of providing Christmas parties and gifts. When planning Christmas parties, the ATO says employers need to check how much it will cost and where and when it is held. This is because a party held on business premises on a normal work day is treated differently to an event outside of work. The ATO said it is also necessary to keep good records and consider who is invited – is it just for employees, or are partners, clients or suppliers also invited?

The ATO noted that Christmas presents or gifts may also attract FBT, so employers should consider:

• the value of the gift;
• the type of gift (noting that gifts of wine or hampers are treated differently to gifts like tickets to a movie or sporting event); and
• who the gift is given to.

There are different rules depending on whether gifts are given to employees and clients or suppliers, the ATO said.

FBT exempt benefits – minor benefits

Minor fringe benefits with a taxable value (if subject to FBT) of less than $300 are (with certain exceptions) exempt benefits under s 58P of the Fringe Benefits Tax Assessment Act 1986. According to Ruling TR 2007/12, exempt minor benefits (which are valued at less than $300) are likely to include Christmas gifts and a Christmas party.

The ATO’s FBT guide for employers says a single gift at Christmas time to each employee of, say, a bottle of whisky or perfume would be an exempt benefit, where the value was less than the $300 threshold for exempt minor benefits. However, if the gift is provided at a Christmas party, the ATO says the gift needs to be considered separately to the Christmas party when considering the minor benefits threshold.

In Australia, there are currently around 7.7m ABNs with over 860,000 new ABNs issued in 2017-18. The ABN system was originally introduced in 2000 as a way to provide businesses with a unique identifier when dealing with the government and to support the introduction and administration of GST. Over the years, the ABN has become a de facto licence to do business and a key business credential used by other businesses and consumers in general. Despite this expanded role, the ABN system has not changed substantially since 2000, ABNs can still be obtained easily and quickly using intentionally simple processes to facilitate small businesses. There is concern that this ease of application has led the ABN system to being used for nefarious purposes by operators in the black economy. This view was affirmed by Black Economy Taskforce which found that ABNs were being used to provide a false sense of legitimacy to dodgy businesses with the potential to deceive consumers and other businesses. As a way to tackle this issue, the government has proposed changes to the ABN system to ensure that it remains fit to support the expanded range of purposes it is used for. It is currently consulting on changes including adjusting ABN entitlement rules, imposing conditions on ABN holders, and introducing a renewal process including a renewal fee. The potential changes to ABN entitlement rules stem from the Taskforce finding that not everyone obtaining an ABN is entitled. This includes: inappropriate use of ABNs in phoenixing schemes; individuals working as employees but applying for ABNs as independent contractors; individuals incorrectly obtaining ABNs to avoid “no ABN withholding”, and individuals fraudulently claiming GST input tax credits. In terms of potentially imposing conditions on ABN holders, the Taskforce had initially recommended that ABN holders should only be allowed to continue to hold their ABN if they comply with government obligations (ie tax obligations). Which would allow businesses and individuals to better identify compliant businesses and act as a deterrent to those wanting to engage in black economy behaviour. However, the government emphasised that the design of the ABN cancellation process would need to be fair and transparent and only occur where the business had not taken appropriate steps of rectify issues. The government is also consulting on the proposal to make ABNs subject to periodic renewal for a fee. While a renewal process would not directly address those who use the ABN system to engage in fraudulent behaviour, it would indirectly address fraudulent behaviour by prompting ABN holders to have a closer engagement with the ABN system. The fee would also assist the ABR to better support data needs and discourage people from holding an ABN when they do not need one or are not entitled to one. Contact us today to get details on how this measure will affect your business.

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A garnish is an enhancer, something to dress up a plate – think of a sprig of parsley. A garnishee is something entirely different, although it can enhance an otherwise dire situation for a creditor and bring home the bacon. It’s a third party who is ordered by the court to release money to remedy a personal debt owed to the creditor by the debtor. This could be the debtor’s bank, their employer or their own creditor.

Issuing a garnishee order is a cheap and easy way to claw back some of your debt, but there are a few matters to consider first.

Once a court has given you a judgment against your judgment debtor, and they have failed to satisfy the judgment, you can apply to the court for a garnishee order. This allows you to bypass the recalcitrant debtor and it sets up a relationship in the form of a triangle between you as creditor, the debtor and the third party. This third-party garnishee acts as a kind of proxy for the debtor and the order will require them to pay the debt to you in a lump sum or in instalments.

A garnishee order can be directed straight to the debtor’s bank or their employer. In the latter case, you will be able to access the debtor’s pay packet before they do. You do not have to tell the debtor you have applied for a garnishee order and they may only find out when they see their bank statement or pay slip. However, the local and district courts instruct that the amounts claimed in total under the garnishee orders must not reduce the judgment debtor’s net weekly wage or salary received to less than $500.60.

This is known as the weekly compensation amount and is adjusted in April and October each year. When issuing a garnishee order, it must include an instruction to the garnishee about the amount that a judgment debtor is entitled to keep.

Garnishee orders can also be made against those who owe money to the debtor, for example a real estate agent who is collecting the rent from the debtor’s tenanted property.

One of the benefits of a garnishee order is that there is no filing fee, although a service fee may be payable. There is also no extensive research on the debtor required before the order is issued, the debtor’s name may be enough. And if the order fails to recover all or some of the money, the order can be reissued on the same garnishee several times.

There is also little the garnishee can do to stop the order unless they apply to the court or they repay the debt. If you have received a judgment and have an outstanding debt you are trying to recover from your judgment debtor, we can help take the lead on it for you and take you straight to the debtor’s funds.

Sustainability of tax revenue is key to any government’s fiscal sustainability, that is, the ability to meet both current and future financial obligations (including debt servicing obligations) without major policy adjustment. A recent report examining broad trends within the Commonwealth tax system has identified some significant changes in tax receipts and therefore risks to the sustainability of tax revenue.

The report noted that since the early 2000s, the most significant overall changes in tax receipts as a share of GDP have been in the areas of fuel excise, customs receipts, and company tax. While some of changes can be explained by innovation and globalisation such as a fall in fuel excise receipts being attributed to improvements in fuel efficiency of cars, and the fall in custom receipts being attributed to free trade agreements.

Other changes such as the fall in company receipts may be more concerning for the future government policy. The report indicates that the fall in company receipts is a result of investment becoming more concentrated in capital intensive industries which generally have higher losses that are carried forward. Although as the carried forward losses are used up, there could be a counteracting positive effect.

Another worrying trend in the coming decade is the increase in personal income tax receipts due to ongoing bracket creep, notwithstanding the government’s recent implementation of lower personal tax rates as an attempt to prevent such an occurrence. A further challenge identified in the report is the ongoing decreases in various consumption tax receipts, in particular GST, mostly driven by consumer behaviours and technological change.

The overall effect of these trends indicates that in the future, tax receipts from consumption taxes such as the GST will continue its downward trend, while taxes on capital will either trend downwards or remain flat. Further, an increasing proportion of income will be taxed concessionally through the superannuation system due to the increase in compulsory super contributions substituting for wages growth.

Beyond these identified tax trends, the report also identifies other risks to tax receipts including:

• Increasing uncertainty internationally regarding policy changes in company tax rates and tariffs which could have flow on effects for Australia;
• Growth of peer-to-peer sharing economy which increases the volatility in person income tax receipts and the scope for tax minimisation.

To avoid increasing reliance on personal tax receipts in the future to achieve fiscal sustainability, whichever party is in power will have to tackle the unpopular issue of tax reform which could include broadening the GST base, wholesale changes to the rules around the sharing economy, or potential changes to how superannuation is taxed. Want to get on the front foot? We can help you plan ahead and future proof you or your business’s tax affairs. Contact us today for more information on 9489 3399.