Institute of Certified Bookkeepers

Federal Budget 2018

ICB Summary

The impact on bookkeepers and as such the practical impacts on business exist, however there is one significant impact to BAS Agents but no drastic change to the tax systems nor the business infrastructure.  There is nothing too radical.

Government will pour more funds into establishing computer driven compliance strategies as they develop their knowledge and expertise into monitoring what we do and how we do it through a better use of technology.

The economy grows giving Government more money to spend and they drop taxes to give us a bit of that benefit.

An ok budget.

Tax Rates change

Impact: PAYGW for employees to change

Personal tax will be lowered with an additional $530 income tax offset (18/19 to 21/22).

The marginal tax rates change from 1/7/18 meaning a revision to all tax withholding for employees.

-       1/7/18: The 32.5% will now commence at $90k (up from the current $87k)

-       1/7/22: The 32.5% will commence at $120k

-       1/7/24 The 32.5% rate will commence at $200k therefore removing the 37%

Company tax rate decreases

Impact:  PAYGI Instalments or rates will change

For companies with a turnover of less than $50m the 30% decreases to 27.5% and then eventually to 25% over 10 years.

Backing Small Business

Impact:  May slightly effect PAYGI Instalment rates

Unincorporated small business tax discount rate will gradually increase up to 16% by 26/27 but note the cap of $1000 (ridiculously low (ICB Comment))

This is eligible if your turnover is below $10m

Impact:  Classification of some capital acquisitions still to be noted for instant write off

The 20k instant asset write off remains to 30 June 2019

Tax Compliance

There are a number of items in the budget that provide between $600m and $700m to the ATO to help or initiate compliance actions including following up lodgements and chasing debts.

ATO Funded to make sure we comply

Impact:  Honesty & Integrity and legitimate claims, the ATO increasing their vigilance

For Bookkeepers:  Ensure you are asking the questions and getting the directions in writing.

Know that the ATO are watching the trends of your clients compared to the trends of other Agents.

The ATO obtained additional funding, $130.8m to ensure taxpayers are paying the right amount.  Primarily to improve their level of investigative activity and their “education” activities about what are legitimate claims.

“The measure will also provide funding for new compliance activities, including additional audits and prosecutions, improving education and guidance materials, pre-filling of income tax returns and improving real time messaging to tax agents and individual taxpayers to deter over-claiming of entitlements, such as deductions by higher risk taxpayers and their agents. “

ATO Funded to make sure we pay our tax debts

Impact:  Hopefully better debt collection payment gateways, better turnaround times, better consistency and system with payment plans and better consistent appropriate communication.  (But we are probably dreaming)

$133.7m to ensure tax debts are paid.  The ATO techniques for using technology and chasing lodgements and payments have been provided extra resources.

ATO Funded to bring Single Touch Payroll to Smaller Employers

Impact:  Every indication is that the proposed law to apply STP to all employers will be passed and that we will need to bring every employer into the system by 1 July 2019.

Additional Funding to the ATO in anticipation of the extension of STP to small business:  The budget acknowledges and continues the commitment to fund (+$15m) the ato work to enable the extension of STP to small (“non-substantial” less than 20 employees) as of 1 July 2019.

TPB receives additional funding for policing agents & the fees go up

Impact:  Slightly more registration fees at renewal (each 3 years)

Impact (if we dream a little):  $20m over the next 4 years to increase their activity to chase and prosecute unregistered agents aswell as to deal with Agents who don’t know what they are doing. 

$3.3m next year then $4.7m & $7.1m & $5.0m

These varying amounts are more to do with the renewal cycle of Tax Financial Advisors and therefore maybe they are just processing more paper.

“The Government will provide $20.1 million over four years from 2018-19 to the Tax Practitioners Board (TPB) to assist the TPB in meeting its broadened responsibilities to ensure that tax agent services are provided to the public in accordance with appropriate professional and ethical standards. “

This measure will be funded by an increase in tax practitioner registration fees.

The TPB provide the following media release

https://www.tpb.gov.au/news-media/media-releases/strengthening-tax-practitioners-boards-role-protecting-consumers-tax

Tuesday, May 8, 2018

Strengthening the Tax Practitioners Board's role in protecting consumers of tax services

Chair of the Tax Practitioners Board (TPB), Mr Ian Taylor, welcomes tonight’s Federal Budget announcement to provide the TPB with ongoing additional funding. Mr Taylor said that ‘the additional funding will ensure that the TPB is able to continue to meet its legislative responsibilities and protect consumers of tax services by registering and regulating nearly 80,000 tax agents, business activity statement (BAS) agents and tax (financial) advisers in Australia.’

The Government announced that the additional funding will be offset by an increase in application fees for tax practitioners. The increase across all tax practitioner application fee types better reflects the TPB’s costs to register tax practitioners and applies to those entities that use the TPB’s services. The Government has endorsed the increase in fees outlined below, but the increase in fees remain subject to regulation changes being made before the new application fees can take effect from 1 July 2018.

Application fees(payable at least once every three years)

Proposed fee*

Registration as a tax agent

$675

Registration as a tax (financial) adviser

$540

Registration as a BAS agent

$135

#The application category ‘does not carry on a business’ will no longer exist.

* The proposed application fee increases are expected to be effective from 1 July 2018, with the application fee amounts being subject to an annual consumer price index adjustment from 2019-20 onwards.

ICB Comment:  ICB had joined with the other professional associations previously in providing significant feedback on a draft proposal (pre-budget) to increase fees.  ICB do not believe they are justified.  We are disappointed that the Government has seen fit to impose another cost on Registered Agents in a period of significant change.  The cost of ensuring we are upto date through training on software aswell as GST and payroll changes are only the start of commitments and costs we need to incur in order to being able to maintain our professionalism and expertise.

ICB News item:  BAS Agent Registration Fees increased by 80%+

ICB is pleased to see that the TPB are receiving additional funding and look forward to further action in relation to unregistered agents and also enabling further work to improve the level of knowledge, professionalism and expertise.

Black Economy task force led initiatives

This measure funds ATO strategies to combat the black economy. It includes funding for:

  • ensuring taxpayers participating in the black economy meet their lodgment and employer obligations;
  • being highly visible in the community with mobile strike teams to engage clients across the country supported by a strong audit program;
  • leveraging the efforts of tax practitioners by supporting their dealings with clients, intervening early with agents at risk of requiring further compliance treatments, working with agents that have high numbers of high risk clients and dealing with the most concerning agents;

This measure provides the ATO with additional funding to:

  • prevent growth of the tax gap by continuing income matching programs; and
  • reduce the size of the tax gap by undertaking additional compliance actions and building IT infrastructure to:

assist taxpayers to get their claims right, and
deter over-claiming by higher risk taxpayers and agents.

  • investment in better data and analytics, including the development of a new Black Economy Hotline to collect community information on the black economy; and
  • helping and educating youth, migrants and small businesses to make the right decisions and take the right actions.

The task force has had a number of its other recommendations accepted and initiated in this budget:

Taxable Payments Annual reporting

This regime commenced with building and construction 5 years ago.

Government has previously announced (but not passed the legislation) to extend TPAR to Couriers and Cleaning Services as from 1 July 2018 ie reporting on the 2018/19 year.

This budget announced a further extension of the TPAR regime to:

-       Security Providers & Investigation services

-       Road Freight Transport

-       Computer Systems design and related services

as from 1 July 2019 ie reporting for the 19/20 year.

ICB expect a gradual increase in this reporting regime to all ABN to ABN payments (see other compliance measures announced in this budget).  The technology and reporting infrastructure exists in most Business software and the ATO have the reporting framework and data analytics systems in place.

If you don’t comply – you don’t play

(ICB description, not the governments)

Impact:  Business will have to be informed and realise this drastic change.  It becomes more significant for anybody who ignores lack of appropriate information and paperwork.  Details to follow when these proposals are brought to light.

No tax deduction if you haven’t withheld tax when you should. 

1a/       If you withhold tax from employees but don’t pay it to the ATO then there will be no tax deduction for those wages (similar to the Superannuation Guarantee concept).  There are no details known at this time.

1b/      If you pay a supplier without an ABN you are obligated to withhold tax.  If you don’t withhold (and therefore disclose that tax withholding and payment through the ABN Withholding system) then you will not be entitled to a tax deduction for that payment.  This is an extension to the no ABN withholding regime.

-       Possibly this will extend that from 1 July 2019 If you pay someone without an ABN there will be no tax deduction even if you try to withhold and report (details details details)

Cash Payments >$10k

Impact:  The allocation of any expenses changes where the payment is made with cash of more than $10k.

No tax deduction for any payment in “cash” above $10k.  We await the details.

Black Economy Tax Integrity Communications

Treasury has received two years’ funding to undertake further communications regarding the integrity of the Australian tax system.  The campaign will be broad, and will introduce the next areas of focus for government, the black economy.

It will provide an introduction to more targeted ATO communications once recommendations of the Task Force report are agreed and implemented.

ABN:  A new set of regulations to be developed

Impact:  Given the increased reliance on Valid ABNs as part of the tax system, we look forward to this review.  ICB will seek to represent the Bookkeeper community in this discussion.

Consulting on a new regulatory framework by Australian Business Numbers

This measure gives authority for the ATO and Treasury to consult on and design a new regulatory framework for ABNs to support the integrity of the tax system, and ensure the accuracy of ABN data available to businesses, government and the community.

Modernising Business Registers

$19.3m for this years research work

The government has approved funding to develop a detailed business case for modernising business registers in 2018-2019.

GovPass

Impact:  Our security system logging into Government systems including the Portals will change.

The government will accelerate the implementation of the GovPass Program. The DTA will work with relevant agencies to leverage existing capabilities, and those in development, to test the delivery of GovPass across a range of services

The government will provide $20.5 million over four years from 2018-19 for the implementation of new data governance arrangements in line with the recommendations of the Productivity Commission’s 2017 Report on Data Availability and Use. The cost of this measure will be met from within the existing resources of portfolio departments, including the ATO ($2.7 million).

Total Spend of $60m some of which is already allocated in other budget lines.

Other Novel items

Company Directors identification numbers to be implemented

The Government again announced that NBN will completed by 2020.  We are hoping the definition of “completed” means it is effective.

Government allocated $29.9m to the “AI capability growth”

The winner - $20m+ for regulating “Drones”

References

ATO Budget Summary

Government Website

  • 14 May 2018
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