Important Compliance Matters, Lodgment Dates and consequences of not meeting your obligations
Forward tax planning matters
A must read - this may save you a lot of tax!
Individuals who are not running a business
Sole Traders, Partnerships and Trusts
Self Managed Superannuation Funds (SMSF)
Additional obligations for SMSFs running a business:
Additional obligations for SMSFs with a Corporate Trustee:
New Additional requirement for Businesses in the Building and Construction Industry
Click here for
- Record Keeping requirements, Logbook and Diaries and Information on Audits
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Medicare Levy Surcharge
- If your income is greater than the Medicare Levy Surcharge Threshold then you (if you are single), otherwise you and your spouse (if any) and all your dependants must be covered over the entire year by an Appropriate level of private patient hospital cover to avoid paying up to 1.5% extra tax on your income - which is known as the Medicare Levy Surcharge for the days that any one of you weren't covered (for example if you were covered but one of your kids weren't covered then you will pay the surcharge even though you had the cover).
This is separate to the Medicare Levy which is a tax that most Australians pay regardless of their private health insurance situation.
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Personal Superannuation Contributions
In order to claim a deduction for your personal superannuation contribution you must
- lodge your Notice of Intention to claim as deduction form to your superfund no later than the earlier of the following dates:
- The date you actually lodge the tax return
- 30 June of the year following your tax return year
for example if in May 2019 you made a personal superannuation contribution you must lodge the form before 30 June 2020 or before the lodgement date of your 2019 tax return, whichever date comes first.
- Receive confirmation of receipt of that notice from your superfund.
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Div 293 superannuation charges
If your income and concessional super contributions (such as your mandatory superannuation paid by your employer plus any extra super salary sacrificed, plus any personal superannuation contributions made which you are claiming as a deduction in your personal tax return) are more than $250,000 in 2019/20, you may have to pay an additional 15% tax on some or all of your contributions.
This is not something relevant to your tax return booking as it is not calculated when lodging your tax return.
Rather, after the tax return is lodged and processed the ATO will work out if you need to pay Div 293 tax based on information in your tax return and data they receive from your super fund(s). They will issue you with a notice of assessment stating the amount of tax payable and provide an authority to enable your super fund to release the money. You can, however, pay the tax from your non-super savings.
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Tax Returns - Individuals, Sole Traders, Partnerships, Trusts, Companies and Self-Managed Superfunds
If lodging the tax return through a tax agent and your previous tax return was lodged on time
For those who lodge the tax return through a tax agent the due date for lodgment is 15 May of the year following the relevant tax year. For example, the tax return for the 2013 financial year (being the period from 01/07/2012 - 30/06/2013) is due for lodgment by 15/05/2014 for those who are in this category.
First Tax Return - Due date is 28 February of the year following the relevant tax year
Subsequent Tax Returns - The same as all other tax returns
Not lodging the tax return through a tax agent, or using a Tax Agent but your previous tax return was lodged late
The due date for lodgment is 31 October. For example, the tax return for the 2013 financial year (being the period from 01/07/2012 - 30/06/2013) is due for lodgment by 31/10/2013 for those who are in this category.
Failure to lodge a tax return on time may result in a penalty of up to $1050 per tax return
You must be able to prove every item claimed in your tax return.
In the case of deductions 2 criteria need to be met
A comprehensive guide to the supporting documents required to prove items claimed in a tax return can be found here: https://www.ato.gov.au/Individuals/Ind/Supporting-documentation/
- Expenses were actually incurred
- These expenses are actually deductible
For example, if you are a carpenter and are trying to claim a trip to Fiji on your tax return, you may be able to meet the first criteria (by having proof of payment for the expenses you claimed in the tax return, such as airfare, accommodation and food receipts). Simply being able to prove that you travelled to Fiji does not automatically entitle you to claim the trip in your tax return. You need to also be able to prove that these expenses were necessarily incurred in earning your income and that the amount being deducted was not for something that was of a private nature. For example if you went to Fiji, paying for flights, accommodation and meals, took your wife and kids, spent 2 weeks there and happened to visit a work client then the trip is of a private nature and is not deductible even though you may be able to prove that you incurred all expenses related to that trip.
On the other hand, if you went to Fiji yourself under instruction of the employer, the employer paid for most things aside from some meals, you went by yourself or with other work colleagues also instructed to undertake this trip, and spent the entire time working and can prove everything aside from the meals you wish to claim because you lost your receipts or did not keep them in the first place, then the ATO may choose to disallow the deduction simply because you can not prove that you spent money on deductible items
How long do you need to keep records
As a general rule
You must keep written evidence of expenses, other deductions, losses brought forward (such as business, rental and taxable income losses), depreciation, amortisation and any claims whatsoever made in a tax return for the later of five years from when
Any taxpayer can be chosen to be audited (or "reviewed") by the ATO.
The purpose of ATO audits is to ensure that the claims made on the tax return (or other lodged document) are true and allowable. Any taxpayer can be chosen to be audited. Taxpayers may be randomly selected, be in an industry being targeted for audits or have claimed amounts that are substantially higher than what is expected from similar tax returns.
Our service for representing you in an audit of an individual tax return
Preparing a basic (wages, interest and dividend income) individual tax return typically takes approximately 30 minutes. Our tax return fees are based on this time frame only. They do not cover the provision of assistance in the case of an ATO audit or review.
If a client is chosen to be audited by the ATO
- We will provide them with a list of the expenses we claimed for them as well as the latest ATO guide on the supporting evidence required.
- The client can choose to have us represent them in the audit. But this is not mandatory.
If a client chooses to engage us to assist them with the audit we will
Our fees for assisting and representing a client in an ATO audit of an individual tax return
- Require the same documents that are present in the list that we provide to them
- Determine whether the quality of the supporting evidence is sufficient. If not we will work with them to get further supporting evidence.
- Act as the client's representative with the ATO. Therefore the client does not need to have any contact with the ATO if that is their wish.
As per our terms and our invoices the tax return service we provide to clients is preparation and lodgment of a tax return. It does not include providing audit assistance and representation. Providing audit assistance and representation is a separate service which is extremely time consuming and generally has to be done outside of working hours due to our other bookings.
Our charge for the service of providing audit assistance for individual tax returns depends on the amount of work involved and starts at $895 which is payable before the service is given. For any other tax return we will provide a quote of our fees based on the complexity and estimated time involved in the audit.
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Self Managed Superannuation Funds (SMSF) - Audited Tax Returns
- A SMSF must have its Tax Return audited before it can be lodged with the ATO. The audit is not undertaken by the ATO (although the ATO can later choose to audit a SMSF) but by an approved private auditor. We send all SMSF tax returns to be audited prior to lodgment as part of our service of preparing SMSF tax returns.
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- Pay as you go (PAYG) instalments is a mandatory system for making regular payments towards your next annual tax return liability. It only applies to you if you earn business and/or investment income (ie capital gains, dividends, interest, rental profits etc) over a certain amount.
The Tax Office works out whether you need to be in the PAYG instalments system based on your latest tax return. If the income earned is high enough they will send a letter advising you that you will have to pay PAYG Instalments.
These payments act as a "deposit" against your next income tax result. When your next year's tax return is completed, if the amount you paid throughout the year was more than the tax result, you'll receive a refund of the overpayment. If the amount was lower than the tax result then you will have to pay the shortfall.
You will receive a document called an Activity Statement or a PAYG Instalment Notice at the end of every Quarter (Jan-Mar, Apr-Jun, Jul-Sep, Oct-Dec). The due date for each quarter's payment is the 28th day of the following month. Therefore the due dates are: 28 Apr, 28 Jul, 28 Oct, 28 Jan
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Income Activity Statements (also known as a BAS or an IAS)
- These documents are used to report various taxes and either make a payment or receive a refund depending on your circumstances
The items that you may be reporting through these documents include:
- PAYG Withholding (this is tax that has been withheld from your employees' take-home pay and paid instead to the ATO. The employees' tax return results will be credited by these amounts. This is the system primarily responsible for wage earners receiving refunds)
- PAYG Instalments
- Fuel Tax Credits for heavy off-road trucks and industrial plant
- Other government credits (very rare among our clients)
You will receive a document called an Activity Statement at the end of every Quarter (Jan-Mar, Apr-Jun, Jul-Sep, Oct-Dec). The due date for each quarter's payment is the 28th day of the following month except for the Oct-Dec quarter. The due dates are:
- The Jan-Mar Activity Statement is due on 28 April
- The Apr-Jun Activity Statement is due on 28 July
- The Jul-Sep Activity Statement is due on 28 October
- The Oct-Dec Activity Statement is due on 28 February
Failure to lodge an Activity Statement on time may result in a penalty of up to $1050 per activity statement
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If you have paid wages of more than $450 per month to an employee you must also pay superannuation. This rate is 9.5% of the total wages paid to each employee for that quarter (From 1 July 2021 – 30 June 2022 the rate will be 10% and will increase by 0.5% per year until it reaches 12% from 1 July 2025). This amount is paid directly to the employee's superannuation fund, and is payable by the 28th day following the end of the quarter in which wages were paid. The due dates for payment are:
- Superannuation for wages paid during Jan-Mar is due on 28 April
- Superannuation for wages paid during Apr-Jun is due on 28 July
- Superannuation for wages paid during Jul-Sep is due on 28 October
- Superannuation for wages paid during Oct-Dec is due on 28 January (please be aware that this is not the same due date as the Oct-Dec BAS/IAS due date)
If you don't pay the required super on time, then the following happens to the "shortfall" (the amount that you should have paid)
- You have to pay annual interest of 10% on the shortfall applicable from the start of the pay quarter
- You have to pay an administration fee to the ATO
- You may be penalised heavily by the ATO
- You will not get any deduction for the late-paid shortfall, the 10% interest or the administration fee
- You will have to lodge a form to the ATO declaring the unpaid super shortfall for each quarter that there was unpaid super. We can prepare these forms for you, however there is a charge to do this. Please let us know if you need us to prepare these forms and we will provide you with a quote for this service
- From 1 July 2016 you must pay super using the SuperStream system
Workers Compensation Insurance
If you are paying wages totalling more than $7500 including super, you need to pay workers compensation insurance. We can't advise which insurer you should use, however we have found them to be very similar. Simply Google "workers compensation insurance" and the first few search results will be for insurance providers. If you don't pay enough workers compensation insurance you may be heavily penalised.
Workers Compensation Insurance and Superannuation for subcontractors - how to determine if the "worker" or "subcontractor" is an employee
A subcontractor who has an ABN can still be considered to be an employee for superannuation and workers compensation insurance purposes. If they are considered an employee then the super and workers comp rules mentioned above will apply to them. You can use the online services below to determine if your worker/subcontractor is an employee:
Workers Compensation Insurance assistance hotline
Workers Compensation Insurance online assistance tool
ATO Superannuation Deemed Employee Decision tool
PAYG Payment Summaries (for employers and also for Superfunds paying a pension or lump sum to their members)
These documents report the total remuneration paid to each payee (ie an employee or a superfund member). They also contain some of the payee's personal information. It is a legal requirement that an employer provide a copy to the relevant payee as well as to the ATO. Some employer's report this data to the ATO electronically and others use a paper form.
The due date to provide this document to the payee is 14 July (14 days after the end of the relevant financial year).
The due date to provide this document (whether electronically or in paper form) to the ATO is 14 August (45 days after the end of the relevant financial year).
If your payee requests their PAYG Payment Summary from you in writing prior to 9 June, you must provide it to them within 14 days of receiving their request.
PAYG withholding payment summary statement (for employers and also for Superfunds paying a pension or lump sum to their members)
This document summarises all of the PAYG Payment Summaries that you have issued in the relevant financial year.
The due date to provide this document (whether electronically or in paper form) to the ATO is 14 August (45 days after the end of the relevant financial year) if lodging yourself or 30 September if using a Tax Agent.
Extension to the due date for lodgment of PAYG Payment Summaries and PAYG withholding payment summary statement for "Closely Held Entities"
Employers in this category will be required to lodge the PAYG Payment Summaries and PAYG withholding payment summary statement by the earlier of: The due date of the employer's tax return, or the lodgment date of that tax return (for example if your due date to lodge the tax return was 15 May 2014 but you lodged it on 20 March 2014 then the due date for these PAYG documents is 20 March 2014)
- Only have closely held payees: A closely held payee is one who is a non-arms length payee. This means they are directly related to the entity from which they receive wages (for example: family members of a family business, directors and shareholders of a company, beneficiaries of a trust)
- Lodge the previous tax return before 30 June of the year following that tax return and not receive a failure to lodge penalty: For example, in order for the employer to get this extension for these PAYG documents for their 2013 financial year they needed to have lodged their 2012 tax return by the dates mentioned. So if the due date for the 2012 tax return was 15 May 2013 and the employer lodged their 2012 tax return by 15 May 2013 then they will meet this condition
Failure to lodge the PAYG Payment Summaries and PAYG withholding payment summary statement to the ATO on time may result in a penalty of up to $1050
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ASIC (Australian Securities and Investments Commission) lodgments and fees
- Making changes to a company's ASIC register
- ASIC stores information relating to the company such as the company name, date of registration (also known as the date of Incorporation), physical address, postal address for correspondence from ASIC, the company structure and personal information relating to the shareholders (also known as members) and the directors. When any of these details change you need to inform ASIC within 28 days of the change otherwise you will be penalised. ASIC has started to change these penalties at least once a year however currently they are $70 if you report the change up to one month later than the due date and $292 if reporting over a month late (these amounts may have changed since the time of writing of this article).
- Annual ASIC Review and fee
- Every company has an annual review date, usually the anniversary of its registration date. Soon after its annual review date, we issue each registered company with an annual statement and an invoice statement for the company’s annual review fee. This fee needs to be paid within 28 days of the company's anniversary otherwise you will be penalised. ASIC has started to change these penalties at least once a year however currently they are $70 if you pay up to one month later than the due date and $292 if paying over a month late.
We will not take any responsibility for your failure to pay your annual ASIC fee regardless of the reason
The Corporations Act states that it is the responsibility of a director of a company to pay the annual fees on time regardless of whether they are notified by ASIC or an ASIC Agent (us). We don't provide a reminder service for these payments but we do try, as a matter of goodwill, to email you the annual ASIC statements on time. But sometimes this is not possible due to our ASIC system being down or emails being sent to spam folders rather than inboxes or letters that we post somehow don't make it to our clients. Unfortunately while ASIC officially accepts some of these reasons in order to waive late fees, their requirements of proving that these incidents happen are, in our experience, unrealistic. Therefore you must not rely on us or ASIC to receive the Annual Review Invoice. To avoid being fined, you can set up a yearly scheduled Bpay transfer to ASIC of $250 (their fee is currently $230 but it increases by $5-10 per year). You can also prepay next year's fees. For companies who are registered with ASIC as having the sole purpose of acting as a trustee for a SMSF the ASIC Annual Review fee is currently $43 but may also increase.
ASIC's Annual Review fees can be found on their website
- Solvency Resolution as part of the Annual Review process
- Company directors must pass a solvency resolution within 2 months after each review date, unless the company has lodged a financial report under Chapter 2M of the Corporations Act 2001, with ASIC within the previous 12 months. There are two types of solvency resolutions
Positive solvency resolution:
This is passed when the directors have reason to believe that the company will be able to pay its debts as and when they become due and payable. You must keep a copy of the solvency resolution, but you do not need to send it to us.
Negative solvency resolution:
This is passed when the directors have reason to believe that the company will not be able to pay its debts as and when they become due and payable. If this resolution is passed, you must also lodge a form notifying ASIC. However please contact us as we can lodge this form for you.
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Rules for running a Self Managed Superfund
There are a wide range of rules on running a Self Managed Superfund.
You should use the Tax Office's guide prior to undertaking any actions in relation to your superfund or ask us for advice.
- You can't transfer SMSF money to a member or associated entity unless it is to buy an interest in commercial properties or a Condition of Release is met
- The SMSF can't borrow money from anyone unless it is structured in a particular way that allows it to use limited recourse borrowing arrangements (LRBAs)
- You can't invest SMSF money unless it is in line with the SMSF investment strategy and fits the Sole Purpose test (your fund needs to be maintained for the sole purpose of providing retirement benefits to your members or to their dependants if a member dies before retirement)
- There are limitations on the SMSF being able to accept deposits from members including limits on the amount of contributions it can receive
- All assets owned by the SMSF must be properly named (For example if the trustee is a company called Co Pty Ltd and the SMSF is called WWSuper then the assets must be held in the name of Co Pty Ltd as trustee for WWSuper). If the asset is unable to be named this way due to limitations imposed by the asset provider, such as a bank not allowing an account to be named as such then you must be able to provide proof of this limitation. If the superfund changes trustees or changes its name, all assets must have their names changed as well. This can cost time and money with some assets such as real estate
- All purchases and sales must be made at Market Value. All assets must be valued at Market Value the end of each financial year
- A superfund can accept concessional contributions, such as employer contributions up to the limit for that year (in 2019 the limit is $25,000) - exceeding the limit incurs extra taxes