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Wage underpayment issues are continuing to create issues for Australia’s tax practitioners, according to two experts in the space.
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Wage underpayment issues continue
01 November 2021
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Speaking as part of the Tax Institute’s latest TaxVine, Paul Ellis, CTA, chair and Greg Kent, CTA, deputy chair, of The Tax Institute’s national FBT and employment taxes technical committee flagged growing concern in wage and/or superannuation underpayments.
“Wage underpayment issues continue to create headlines,” the pair wrote.
“Not so well understood though are the potential payroll tax complications that flow from wage and/or superannuation underpayments.
“The State revenue authorities looking to make up for revenue shortfalls due to COVID-19 are looking more critically at this issue and, in many cases, asserting that payroll tax returns need to be amended to include the underpaid amounts in the years that the original shortfalls related to, rather than the year of remediation.”
Mr Ellis and Mr Kent noted that the making up for these shortfalls can have a knock-on effect.
“This results in considerably more complicated adjustments, as well as potentially higher penalty and interest charges. However, there has been a distinct lack of uniformity of approach with revenue authorities changing their approach over time, as well as there being variations between revenue authorities,” they said.
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“This will be one of the key focus areas in the upcoming The Tax Institute’s 21st Annual States’ Taxation Conference and, with representatives of the various State revenue authorities present, an opportunity to obtain some further clarity.”
In a similar vein, Mr Ellis and Mr Kent said the ATO’s “stricter approach” to FBT interpretation is something for practitioners to be wary of.
“The last few months has seen the ATO finalise its approach to a number of long-standing issues that have previously been on this Committee’s radar,” they said.
“Sadly, there hasn’t been much good news for taxpayers, with some recently released FBT rulings perhaps missing an opportunity to better reflect business reality in the ATO’s interpretations.
“For example, the long-awaited release of TR 2021/2 – Fringe Benefits Tax: car parking benefits, will see many more employers fall into the ‘FBT on car parking’ net from 1 April 2022, particularly those outside CBDs. Affected employers will need to start planning and budgeting for this new impost and should not underestimate the compliance burden to identify and assess car parking fringe benefits.
“Similarly, the release of two long-awaited business travel rulings, TR 2021/1 and TR 2021/4, setting out the ATO’s revised views on when transport and other travel costs will satisfy the ‘otherwise deductible’ rule, seem to reflect a tightened approach by the ATO that will potentially result in employers being liable to pay FBT on travel costs that are clearly work-related in the ordinary sense. Employers who utilise fly-in fly-out (FIFO) workforces or supplement their workforces with short-term foreign based workers, will potentially be impacted.
“It is also worth noting that the ATO recently flagged a perceived gap between actual FBT revenue collected and what it believes should be paid if all taxpayers were fully compliant. For 2018-19, the net FBT gap estimate was around $1.13 billion or 22.6 per cent. It remains to be seen though whether this will result in increased compliance enforcement activity.”
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