Start-ups warned of latest ATO crackdown

An employment tax expert says start-ups should ensure they have the correct systems in place to avoid being fined by the Australian Tax Office in its latest crackdown on employer obligations.

Frank Klasic, an employment taxes partner at Deloitte, says businesses can expect greater scrutiny from the ATO in the next 12 months, particularly in relation to fringe benefits tax, PAYG withholding and superannuation guarantee.

According to Klasic, the reviews will bring many employers under the ATO’s radar for the first time, citing incorrect positions taken under tax law and a lack of substantiation or record-keeping as key reasons for getting into trouble.

“Employers who have never had their employer obligations reviewed should jump on the front foot and do a quick health check with their tax advisor before the ATO comes knocking on the door,” Klasic says.

“What many employers may not be aware of is that the ATO can assess these employer obligations for a much broader period than [for] most other taxes.”

“Fringe benefits tax, for example, can be assessed retrospectively for up to six years or even longer in certain circumstances.”

“Any shortfalls in superannuation guarantee can be for an even longer period. Getting it wrong can therefore add up to costly repayments of tax, penalties and interest charges.”

Klasic says shortfalls in FBT incur a range of penalties of up to 75% of the original amount, so if an employer makes a $50,000 mistake, it could end up costing them $300,000 over six years.

“Identifying an issue before the ATO undertake an audit allows employers to make voluntary disclosures and lessen the chance of penalties,” he says.

“It comes back to making sure you understand your obligations… [However,] keeping up with changes to tax law can be quite difficult, especially when you’re trying to juggle that on top of other obligations.”

“Hiring a tax agent helps, and employers can also attend annual training for things like FBT. There is also assistance on the ATO website in the form of guides and factsheets.”

Klasic says businesses should get their tax agent to conduct a review of their tax practices at least every few years.

Earlier this year, the ATO flagged a focused review of employer obligations of up to 5,000 businesses. Klasic predicts there will be a particular focus on FBT.

A similar review last year reaped the ATO an extra $717 million, and Klasic says he expects that number to be even higher this year.