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Review into the ATO’s employer obligations audits

The Inspector-General of Taxation (IGT), Mr Ali Noroozi, today announced terms of reference for his review into the Australian Taxation Office’s (ATO) employer obligations audits and called for stakeholder submissions.

Employers have to comply with a range of taxation and legal obligations for themselves as well as their employees both at the Federal and state levels. These include obligations under the superannuation, Pay As You Go (PAYG) withholding and Fringe Benefits Tax (FBT) regimes. The ATO reports that 846,500 employers collected half the total tax revenue ($419.26 billion in the 2013‑14 financial year) which includes PAYG withholding and Superannuation Guarantee Charge (SGC). Employers also remitted $79.19 billion to employees’ superannuation funds in the 2014‑15 financial year.

“Employers play a vital role in the economy including collecting taxes from their employees and paying their entitlements,” Mr Noroozi said. “It is important to provide them with as much support as possible with these obligations so that their main focus continues to be on their core commercial goals,” he added.

A key area of concern raised by stakeholders is the employee and contractor distinction which may be determined by different tests in the relevant Federal and state legislation.  

“Difficulties in determining employee or independent contractor status may give rise to large unexpected liabilities across a number of years under audit. This review will seek opportunities to improve certainty of outcomes and minimise unexpected liabilities,” said Mr Noroozi.

By contrast, the IGT has also received concerns that situations do arise where genuine employees cannot recover their unpaid entitlements. The IGT has considered this issue with respect to the administration of SGC in a previous review.

“This review will also seek further means for ensuring that employee entitlements are paid promptly,” said Mr Noroozi.

Other concerns raised include the conduct of ATO employer obligations audits which, amongst other things, may involve onerous information requests and an unwillingness to discuss issues and practical solutions leading to unnecessary compliance costs.

“This review will explore the issues raised with a particular focus on small businesses who represent approximately 97% of all businesses in Australia,” said Mr Noroozi. “My aim is for balanced thinking on managing revenue risk, easing the compliance burden and achieving better outcomes for employers, employees, contractors and the ATO,” he added.

Terms of reference and submission guidelines for the review are available on the IGT website. Submissions will be treated as confidential and are due by 11 December 2015.

29 October 2015
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