Practice Update December 2019

9 December 2019

 

P r a c t i c eU p d a t e

December2019

PAYG and deductions for payments to workers

The ATO has reminded business taxpayers they can no longer claim deductions for certain payments to workers if they have not met their PAYG withholding obligations from 1 July 2019.

If the PAYG withholding rules require an amount to be withheld, to claim a deduction for most payments to a worker, a business taxpayer must:

withhold the amount from the payment before they pay their worker; and

report that amount to the ATO.

Importantly, where a taxpayer simply makes a mistake and withholds or reports an incorrect amount, they will not lose their deduction, although any such errors should be corrected as soon as possible so as to minimise penalties.

Additionally, a deduction is still available if they voluntarily disclose to the ATO prior to the commencement of an audit or other ATO compliance activity involving their PAYG withholding obligations or deduction claims.

Ref: ATO website, 18 November 2019

STP and superannuation guarantee

In a presentation at the Australian Institute of Superannuation Trustees Chairs Forum, the ATO's Deputy Commissioner confirmed that as a result of STP, the ATO now has an "unprecedented level of visibility" of super information.

In particular, the ATO's examination of Super Guarantee ('SG') contributions of some 75 million payment transactions for the first three quarters of 2019 (for approximately 400,000 employers) has shown that 90 - 92% of contribution transactions by volume and 85 - 90% of transactions by dollar value were paid on time.

The ATO is now starting to actively use this data to warn employers who appear not to be paying the required SG on time (or at all).

As a result, it has notified 2,500 employers that they have paid their SG contributions late during 2019.Due-date reminders were also sent to a further 4,000 employers.

Ref: ATO Presentation, ATO insights and actions across superannuation, 14 October 2019

No CGT main residence exemption for non-residents

The Government recently tabled legislation, making its second attempt to deny access to the CGT main residence exemption for individuals who are foreign residents (i.e., non-resident taxpayers for Australian tax purposes).

The restrictions to this CGT exemption will apply to taxpayers who are a non-resident at the time of the relevant CGT event (i.e., generally as at the contract date).

If enacted, the proposed changes will potentially impact foreign residents in the two ways outlined below.

1. Transitional rules for properties held before 7:30pm (AEST) on 9 May 2017

Firstly, for properties held prior to the 2017 Federal Budget (i.e., before 7:30pm AEST on 9 May 2017), the CGT main residence exemption will only be able to be claimed, for a non-resident, for disposals that occur up until 30 June 2020 .

For disposals of properties occurring on or after 1 July 2020, foreign residents will have no access to the CGT main residence exemption, unless specified ‘life events’ occur within a continuous period of six years of the taxpayer becoming a foreign resident. These 'life events' include:

The terminal illness of the taxpayer, their spouse or a child under the age of 18 years.

The death of a spouse or child under the age of 18.

A transfer of the relevant asset as a result of a divorce, separation or similar maintenance agreement.

2. Properties acquired at or after 7:30pm (AEST) 9 May 2017

Secondly, for properties acquired at or after the 2017 Budget night, the CGT main residence exemption will no longer be available for non-resident taxpayers, unless the same specified ‘life events’ (as outlined above) occur within a continuous period of six years of the taxpayer becoming a foreign resident.

Ref: ATO Website, 29 October 2019

ATO November 2019 bushfire assistance

Following the devastating bushfires across large parts of NSW and Queensland in November, the ATO has offered ongoing support.

In particular, a specific helpline ( 1800 806 218 ) has been established that can be used by those impacted to seek assistance, such as to:

obtain extra time to pay tax debt or lodge tax forms;

obtain assistance in finding lost TFNs;

obtain re-issued income tax returns, activity statements and notices of assessment;

obtain assistance in re-constructing tax records that are lost or damaged;

have any refunds owed fast tracked;

negotiate payment plans tailored to individual circumstances (including interest-free periods); and

negotiate the remission of penalties or interest charged during the time a taxpayer has been affected.

Editor: Should you find yourself impacted by a natural disaster, even an alternative disaster to the November 2019 bushfires,please contact our office so we can provide you with any additional assistance you may need at this difficult time.

Ref: ATO website, 21 November 2019

 

SMSs for SMSFs!

In the interests of protecting SMSF members and their retirement savings from fraud and misconduct, the ATO has announced it will send out an email and/or a text message via an SMS when changes (including updates to the SMSF financial details or member information) are made.

Accordingly, the ATO has urged all SMSF members to ensure they update their contact details either:

online at abr.gov.au (with an AUSkey or an ABN linked to their myGov account);

through their registered tax agent;

by phoning 13 10 20 (for authorised contacts of the relevant SMSF); or

by lodging the paper form (NAT 3036).

The ATO has urged SMSF members who are concerned about notified changes to first speak with the other trustees of the SMSF or the authorised agent of their SMSF, before contacting the ATO.

Editor: As the ATO moves over to the digital world at a rapidly increasing pace, it has also reminded SMSF members that any ATO sanctioned emails and text messages would never ask for the recipient to reply by text or email, or to provide otherwise personal information.

Importantly, where an SMSF member is concerned about the authenticity of an email or text purportedly from the ATO, the ATO’s current SMS and email activities can be viewed on its website by searching for QC 40936.

Ref: ATO website, 22 November 2019

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

 

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A foreign entrepreneur’s guide to starting a business in Australia Starting a business as a foreign entrepreneur can be an exhilarating way to access new markets, diversify investment portfolios, and create fresh opportunities. Many countries around the globe provide pathways for non-residents and foreign nationals to register businesses. However, understanding different countries’ legal requirements, procedures, and opportunities is crucial for success. In this issue, we will navigate the process of establishing a business in Australia to help foreign entrepreneurs looking to register a company in Australia. Key takeaways Foreign entrepreneurs can fully own Australian businesses with no restrictions on ownership. Registered office and resident director requirements are key legal considerations. ABN and ACN are essential for business registration. The application process can be done online, simplifying the process for foreign entrepreneurs. Why register a business as a foreign entrepreneur? There are various reasons why a foreigner may want to register a company in another country. These reasons include expanding into a foreign market, taking advantage of favourable tax laws, leveraging local resources, or benefiting from business-friendly regulatory environments. Before registering, conducting thorough market research to assess whether establishing a business abroad aligns with your objectives is essential. Understanding the country’s political and economic climate, legal framework, and tax system will help ensure the success of your venture. The general process for registering a business as a foreign entrepreneur While the exact requirements may differ from country to country, some common steps apply to most jurisdictions when registering a company as a foreign entrepreneur: Choosing the business structure The first step is deciding on the appropriate business structure. The structure determines liability, taxation, and governance. Common types of business structure include: Sole proprietorship: A single-owner business where the entrepreneur has complete control and entire liability. Limited Liability Company (LLC): Offers liability protection to the owners, meaning their assets are not at risk. Corporation (Inc.): A more complex structure that can issue shares and offers limited liability to its shareholders. Different countries have varying rules regarding foreign ownership, so understanding the options available is essential before registering a company. Registering with local authorities Regardless of the jurisdiction, most countries require you to register your company with the relevant local authorities. This process typically includes submitting documents such as: Company name and business activities: You need to choose a unique company name that adheres to local naming regulations. Articles of incorporation: This document outlines the company’s structure, activities, and bylaws. Proof of identity : As a foreign entrepreneur, you will likely need to provide a passport and other identification documents. Proof of address: Many countries require a physical address for the business, which may be the address of a registered agent or office. Tax Identification Number (TIN) and bank accounts After registering the company, you will typically need to apply for a tax identification number (TIN), employer identification number (EIN), or equivalent, depending on the jurisdiction. This number is used for tax filing and reporting purposes. Opening a business bank account is another critical step. Some countries require a local bank account for business transactions, and you may need to visit the bank in person or appoint a local representative to help with the process. Complying with local regulations Depending on the type of business, specific licenses and permits may be required to operate legally. For example, food service, healthcare, or transportation companies may need specific licenses. Compliance with local labour laws and intellectual property protections may also be necessary. Appoint directors and shareholders To register a company, you’ll need to appoint at least one director who resides in Australia. The director will be responsible for ensuring the company meets its legal obligations. You will also need to appoint shareholders, who can be either individuals or corporations. For foreign entrepreneurs, the requirement for a resident director is one of the key challenges. If you don’t have a trusted individual in Australia to act as the director, you can engage a professional service to fulfil this role. This ensures your business remains compliant with local regulations. Choose a company name Next, you need to choose a company name. The name should reflect your business but must be unique and available for registration. You can check the availability of a name through the Australian Securities & Investments Commission (ASIC) website. Remember that the name must meet legal requirements and cannot be similar to an existing registered company. If you’re unsure, seeking professional advice is always a good move. Apply for an Australian Business Number (ABN) and Australian Company Number (ACN) Once you’ve selected your business structure and appointed your directors, it’s time to apply for an Australian Business Number (ABN) and an Australian Company Number (ACN). These are essential for running your business in Australia. ABN: This unique 11-digit number allows your business to interact with the Australian Taxation Office (ATO) and other government agencies. ACN: This 9-digit number is allocated to your company upon registration with ASIC and serves as your business’s unique identifier. You can easily apply for both numbers online through the Australian Business Register (ABR) and the ASIC websites. Register for Goods and Services Tax (GST) If your business expects to earn more than $75,000 in revenue annually, you must register for GST. This means your business will charge customers an additional 10% on goods and services. The GST registration threshold for non-profit organisations is higher at $150,000 annually. If your company is below these thresholds, registering for GST is optional, but registration becomes mandatory once it exceeds the limit. Set up a registered office Every Australian company must have a registered office in Australia. This is where all official government documents, including legal notices, are sent. You can use your premises or hire a foreign company registration service to provide a virtual office address. Common challenges for foreign entrepreneurs While the process is relatively simple, there are a few hurdles that foreign entrepreneurs may encounter when registering a company in Australia: Resident director requirement: You’ll need a director residing in Australia. If you don’t have one, you’ll need to engage a service provider to fulfil this role. Understanding local tax laws: Australia has a corporate tax rate of 25% for small businesses with annual turnovers of less than $50 million. However, larger companies with turnovers exceeding $50 million are subject to a standard corporate tax rate of 30%. Foreign entrepreneurs must also understand the implications of the Goods and Services Tax (GST) and payroll tax. Compliance with Australian regulations: Navigating Australia’s various regulations and compliance requirements can be time-consuming. An accountant or adviser can help you in this regard. FAQs Can I register a company in Australia as a foreigner? Yes, foreign entrepreneurs can register a company in Australia. The only requirement is to have a resident director. Do I need to be in Australia to register a company? No, you can complete the registration process online. However, you must appoint a resident director. Do I need an Australian bank account to start a business in Australia? You will need an Australian bank account to handle your business’s finances and transactions. Can I operate my Australian company from abroad? Yes, you can operate your company remotely, but you must comply with all local tax laws and regulations.