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Accountants are being told to check that clients have correctly registered as some fail to grasp their tax obligations.
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Business clients need tutoring in tax obligations, ATO says
14 March 2023
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The ATO is urging accountants to check their clients’ registrations after finding some fail to grasp the tax obligations of their businesses.
With the business information to hand, accountants should educate their clients on the implications of their activities as well as the requirements of ABN and GST, the office said.
The ATO said different business structures were making different mistakes.
Sole traders needed an individual tax file number (TFN) to lodge their income tax return and to register for GST if their annual turnover was $75,000 or more. Sole trader clients were not required to lodge a separate business return and should ensure all income was reported in their individual tax return under the section for business items.
Clients in business partnerships had to lodge an annual partnership return that showed all business income and deductions, including how income or losses were distributed to partners.
The ATO said BAS were required if a business was registered for GST and had employer obligations such as pay-as-you-go (PAYG) withholding or PAYG instalments.
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Despite being a separate legal entity, clients with businesses classified as companies also needed to know their tax obligations, the ATO said.
Companies had similar tax obligations to partnerships but had to lodge an annual company tax return, pay tax at the applicable company tax rate, and issue distribution statements to any shareholders paid a dividend.
The ATO said the businesses in a company structure own the money earnt which meant the client would be required to pay tax on money taken out for personal use.
A trust had similar obligations to a company because it was required to have its own TFN, lodge an annual trust tax return that included a statement of how its income was distributed, and had to use an ABN for all business activities.
The ATO also warned accountants that clients who failed to understand their tax obligations would incur penalties.
These ranged from five penalty units for failing to pay an amount electronically when required or failing to lodge an activity statement when needed, up to 20 penalty units for failing to keep or retain records as mandated or failing to provide access and reasonable facilities to an authorised tax officer.
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