Australian Small Business and Family Enterprise Ombudsman to look into ATO pursuing early recovery of tax debts
Minister for Small and Family Business Michaelia Cash, has asked the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) to look into the extent and impact of early recovery of tax debts on small businesses who are in dispute with the Australian Tax Office (ATO). Minister Cash cited the potentially devastating consequences of the practice, with some small business being forced to close their doors as a result even if they are subsequently successful in the dispute.
The ASBFEO will research past cases and determine whether the ATO has been treating small businesses fairly.
This follows the establishment of a small business concierge service run by the ASBFEO, which will provide:
- information on Administrative Appeals Tribunal (AAT) procedures for reviewing a decision;
- subsidised access to legal advice;
- access to support including a reduced AAT application fee and fast-tracked processing; and
- ongoing support and assistance until a decision is reached.
Increased penalties and enforcement measures against Directors
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) (Bill) has been moved in the House of Representatives and is currently before the Economics Legislation Committee for inquiry and report by 26 March 2019. Among other things, the Bill proposes to extend the Director Penalty Notice (DPN) regime to GST, luxury car tax (LCT) and wine equalisation tax (WET).
Hall & Wilcox previously covered some of the potential changes mentioned during the Federal Budget announcement in 2018. That article can be found here.
A more detailed article on the Bill will published shortly, and posted on our website and social media.
- Introduces new phoenixing offences to prohibit creditor-defeating dispositions of company property, penalise those who engage in or facilitate such dispositions, and allow liquidators and ASIC to recover such property (Schedule 1).
- Ensures directors are held accountable for misconduct by preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors (Schedule 2).
- Allows the Commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances (Schedule 3).
- Authorises the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information to the Commissioner that may affect the amount the Commissioner refunds (Schedule 4).
Review of Tax Practitioners Board
On 5 March 2019, the Government announced an independent review into the effectiveness of the Tax Practitioners Board and the operation of the regulatory regime for tax practitioners in Australia – which is found in the Tax Agent Services Act 2009 and the Tax Agent Services Regulations 2009.
Hall & Wilcox consultant (and Hall of Famer) Keith James will lead the review as an independent expert. Broadly, the review will consider whether the Tax Practitioners Board meets its policy objectives of ensuring that tax agent services are provided in accordance with appropriate standards of professional and ethical conduct.
The closing date for submissions is 12 April 2019.
Workers’ compensation payments are assessable as ordinary income
In Keys and FCT  AATA 238, the Administrative Appeal’s Tribunal affirmed the Commissioner’s decision that regular payments made under Western Australian workers’ compensation laws were assessable as ordinary income.
The Taxpayer’s submission that the payments were not assessable as ordinary income was based on the fact that he had an obligation to repay those amounts if he received a lump sum compensation payment awarded to him by a court and did, in fact, make those necessary repayments. On this basis, the Taxpayer (somewhat ambitiously we think) sought to argue that the regular payments he received could be characterised as a loan.
The Tribunal did not accept the Taxpayer’s submission. It found that:
Tax was properly payable on the compensation payments representing his weekly earnings. The fact that there has been a subsequent payment of a lump sum in settlement of the applicant’s damages claim does not change the correct characterisation of those periodic compensation payments as taxable income.
In any event that argument must fail because s 59-30(3) of the ITAA 97 specifically excludes repayments made out of lump sum compensation payments for a wrong or injury from being treated as not assessable income under ss 59-30(1) or (2) of the ITAA 97.
The Tribunal did not specifically consider whether the lump sum payment received by the Taxpayer was capital rather than income.
This article was written with the assistance of Norberto Rodriguez, Law Graduate.