An ATO tax refund deadline warning, good news for small business tax and compensation introduced for inappropriate financial advice – here’s what you need to know about tax this month.
ATO expects 200,000 to miss out on refunds by failing to lodge
The ATO expects that 200,000 people could miss out on a tax refund this year because they haven’t lodged a tax return.
Assistant Commissioner Kath Anderson has said that many salary and wage earners end up with a tax refund, but some are missing out because they fail to lodge on time.
Taxpayers had until 31 October to either lodge their own return, or ensure they are on an agent’s books, Ms Anderson said. Failing to lodge by the deadline can attract a penalty of $210 for every 28 days that the return is overdue, up to a maximum of $1,050.
Tax on compensation received for inappropriate advice
On the heels of the banking and financial services Royal Commission, the ATO has published information about how tax applies for people who receive compensation from a financial institution that provided inappropriate advice and/or did not provide advice it should have. This can include compensation for the loss of an investment, or a refund of fees or interest.
Capital gains tax comes into play, and the compensation amount may count as part of your assessable income if it’s a refund of adviser fees that you’ve already claimed as a tax deduction.
Tip: Contact us if you’ve received compensation from your bank or adviser and need to know more.
Black economy: electronic sales suppression tools now banned
Activities involving electronic sales suppression tools (ESSTs) and that relate to people or businesses with Australian tax obligations are now legally banned under recent changes to the law.
ESSTs come in many forms, such as:
- an external device connected to a point of sale (POS) system;
- additional software installed into otherwise-compliant software; or
- a feature or modification, like a script or code, that’s part of a POS system or software.
These tools generally misrepresent or hide income by deleting or changing electronic transaction information, and falsifying sales or POS records.
People and businesses may face penalties of up to $1 million if they produce, supply, possess or use an ESST or knowingly assist others to do so.
Tip: The ATO recognises some businesses may have bought POS software without knowing it contains suppression functions. There is a grace period to self-report without penalty. If you think you may be affected, contact us to find out more.
Bringing forward small business tax cuts by five years
The Prime Minister has announced that the Government will bring forward its planned tax cuts for small business by five years. The Labor Party has also indicated it supports bringing forward the tax cuts.
This means businesses with a turnover below $50 million will pay a tax rate of 25% in 2021–2022, rather than from 2026–2027 as currently legislated.