17th November 2016
The government has rejected a joint proposal in the Senate to lower the ‘backpacker tax’ from the government’s favoured 19% rate to a recommendation of 10.5%. Jacqui Lambie, an Independent Senator of Tasmania, proposed the drop as opposition parties, including Labour, Greens, and One Nation, came together on the issue.
A backpacker tax affects those on a working holiday visa issued by the government, allowing them to live, work, and travel throughout Australia. Many of these backpackers end up working on farms or plantations picking fruit or doing other odd jobs. To qualify, applicants must be under the age of 31 and hold a passport from one of the 19 eligible countries.
The amendment was rebuffed on Thursday before the bill was sent to the House to have the measure removed as the government has enough seats to kill it. The rejection signifies a return to a rate of 32.5% on the first day of 2017 unless the opposition can revise their proposal to a compromise the government would accept. The Senate will convene next week to consider legislation. It will be the final sitting week for the federal parliament of the year.
Prime Minister Malcolm Turnbull stated that if the backpacker tax reverted back to 32.5% that the Labour party would be to blame. When asked why the government did not accept the Senate’s suggested tax rate, Treasurer Scott Morrison said that the opposition was proposing a lower tax rate for foreigners working in Australia. Morrison said the opposition’s cuts to the backpacker tax would cost Australian tax payers upwards of $500 million.
Just before the crucial Senate vote Thursday afternoon, the Turnbull government attempted to convince One Nation Senators to drop out of the opposition’s coalition and accept the government's 19% proposed tax rate. In return, Turnbull’s government would restore volunteer programs allowing vacationers to work on farms in stints in return for room and board.
A spokesman for One Nation said they were only interested in the right outcome for farmers, but if the 10.5% tax rate did not pass, they would have accepted a higher rate between 12% and 15% which would fall in line with promises made to their constituents.
From 2014-15 Australia granted nearly 227,000 working holiday visas with the United Kingdom, Taiwan, Germany, and South Korea being the top recipient nations. According to AusVeg, a vegetable grower organisation, backpackers make up nearly 40,000 of the 75,000 workers in the horticulture industry making them a substantial part of the workforce.
The government has received heightened criticism from politicians, farmers, tourism operators, and grower associations who depend of foreigners to meet their manpower demands each harvest in regard to the looming 32.5% tax rate. They claim that the higher tax rate will see Australia lose its status as a work holiday capital as travelers look for a more temperate tax climate elsewhere. In years past, backpackers had not paid any tax on their income which could approach 20,000 Australian dollars which is the maximum a holiday worker would make.
28th October 2016
KPMG Australia has recently released its findings in the form of a report on the earnings disparity between male and female workers. Despite growing efforts to increase awareness and address discrimination issues the study found that the gap between what men and women make may be widening, instead of shrinking.
Currently, women make on average about 16.2 percent less than their male counterparts as they have for roughly the last 20 years, but the findings KPMG Australia released found that number is heading in the wrong direction.
Work experience, training, education, and status quo discrimination within the labour market are all key contributors to deflated women’s wages, the research revealed. KPMG Australia’s findings show systematic and endemic discrimination becoming even more widespread, with this factor making up around 40 percent of the gender pay gap this year.
The other findings from the study include: The over-representation of women in the part-time workforce is still prevalent despite the proportion of the gap attributable to this factor decreasing by 10 percent in the last seven years; women still make up nearly 72 percent of the part-time workforce. ‘Traditional’ gender roles for men and women played a significant part in the wage gap, accounting for nearly a third of the disparity. Also the part of the gap attributable to time spent out of the workforce went up by 11 percent, furthering beliefs that interruptions in work history continue to play a substantial role in the pay gap.
Some gender equality advocacy groups have applauded KPMG Australia’s research and have urged Australian businesses, as well as the government, to take its findings as motivation to strive for more equitable wage solutions. Although the numbers in the research speak volumes, and while individual companies and businesses can do their part to close the wage gap within their workplaces, the government, communities, and industries would all need to become more active in order to invoke broad sweeping reform.
The report included a section on how to combat gender discrimination, and address and reform their position on the wage gap. The section entitled ‘The Executive Companion’ outlines the six steps businesses can take to bring about the necessary changes in the office.
The steps start by understanding not only the vast disparity in the gender pay gap, but also what factors cause it; workplace culture, environment, and business behaviours are all considered, among others. Another step focuses on how businesses can improve upon retaining female employees during their early to mid-30’s when many women have children. The Executive Companion also makes recommendations in regard to training in skill development, networking to help career progression, and changing the culture of the office to discourage the behavioural factors that have led to the wage gap.
It’s important to take what the research has revealed and use it to further efforts to create a happy and equal workplace for all. While the issue has its hurdles, some seemingly too large to overcome, open dialogue, education, and outreach are key to fixing this problem.
23rd September 2016
In what some have called an attempt to ward off further tax regulations, BHP Billiton, the Anglo-Australian multi-national mining company based out of Melbourne has publicly released its tax reports in the wake of more aggressive inquests from the Federal government and the Australian Tax Office (ATO). The heightened scrutiny from law makers is a response to suspicions of tax minimisation and evasion practices by large Australian businesses.
For the second time, BHP released its Economic Contribution and Payments to Governments report, an audited account that complies with United Kingdom (UK) tax law. This is in accordance with Britain’s requirement of large companies to publicly release detailed reports of tax strategies. BHP, along with other large Australian companies operating in the UK are also included.
In 2016, BHP reported that it has paid US$3.7 billion in taxes, royalties, and other payments of a similar nature thus far. That amount is down by nearly half from what the company reported in 2015. Of this year’s payments, the report stated that US$2.5 billion was paid to the Australian government—US$1 billion in taxes, US$1.5 billion in royalties, and US$230 million in other payments. The company reported it paid US$5.25 billion to the Australian government the year before. The drop in tax money paid to the government compared to the previous year is attributed to the fall in global commodity prices to which, as a mining company, BHP’s earnings rely so heavily upon.
While the numbers in the report might seem big, the disclosures give hardly any additional data than is provided on the company’s financial statements. Only in the figures on the total taxes and royalties paid by country, government institution, and individual project can the real value of these disclosures be assessed. Although these disclosures adhere to the laws in the UK and have received independent audits, there are no figures from previous years available for scrutiny.
The report also included the names and some information of some of BHP’s subsidiaries in low-tax jurisdictions. This is the first time the report has divulge such information since the European Commission made the distinction for the incorporation of low tax-jurisdictions in 2015.
A few other large Australian companies also have publicly released their tax reports. Companies such as ANZ, National Australian Bank and others have released tax documents seemingly to stem the tide of more regulation coming from law makers.
Much like in the UK, the Australian government is starting to require the ATO to publicly disclose large company’s taxable income and the taxes they pay under its ‘tax transparency framework.’
The details in these reports, however, still lack transparency and in some cases were unaudited.
7th August 2016
When it comes to tax season stress and anxiety can run high. Every year most Australian taxpayers and their accountants do their best to leave no stone uncovered in order to submit a comprehensive and accurate tax return to the Australian Tax Office. But what about those who don’t quite get everything or try to get a little too much?
At the beginning of this year the Australian Tax Office (ATO) had somewhat of a crisis on its hands.
During the 2014-15 tax cycle it was estimated that false or ‘dodgy’ claims netted Australian taxpayers close to $3.5 billion in fraudulent refunds and deductions, costing the Australian government upwards of $800 million in turn. During the 2014-2015 fiscal year, the ATO performed about 450,000 audits and reviews of individual tax returns which lead to an adjustment of more than $1.1 billion in income tax.
However the blame of these false claims cannot and should not be entirely placed on the taxpayer. In most cases it was their accountant, perhaps looking to get their client a better return to boost return business, who falsely gave deductions where sufficient grounds to do so did not exist.
These claims often attempted to tie-in personal expenditures on vehicles, air travel, and office expenses, for instance. While mistakes and carelessness can and do happen within reason when it comes to filing taxes, experts point to the magnitude of the numbers as proof that the threshold of ‘honest mistakes’ has been passed and we are now in the realm of malfeasance.
The situation became so increasingly ubiquitous and out of control that many experts doubted what the ATO could do to stem the tide of dodgy claims made. The ATO appeared not to have the resources or the reach to bring the instances of ‘dodgy claims’ down.
That is until recently.
ATO assistant commissioner Graham Whyte recently announced that the ATO would take action against any individual or firm making falsified claims. The ATO has introduced new real-time checks of deductions for tax returns completed online which can be cross-checked with the claims of others with similar jobs, incomes, and living conditions to see if a claim is substantially higher. In addition each return will be assiduously examined using hi-tech tools and data analytics. This new technology would then identify and red flag any irregularities so they can be reviewed.
It should be noted that this is not meant to be a witch hunt to accuse, intimidate, or disrupt the honest taxpayers, accountants, or tax professionals in Australia. It is simply root out and discipline those who have taken advantage whilst sending a message that ‘dodgy claims’ will not be tolerated.
At Accountancy Insurance we take pride in informing our clients of not only the world of accounting, but also business, finance, and economics. Accountancy Insurance now offers Audit Shield in three commonwealth countries—Australia, New Zealand, and Canada. For top quality tax audit insurance, contact Accountancy Insurance about Audit Shield today.
18th July 2016
In late June, the United Kingdom (UK) voted to leave the European Union (EU) by a close 52-48 margin. To say the result came as a surprise to the world and even some Britons would be an understatement. Many credit fear and uncertainty in regard to the UK’s immigration issues as a cause for Brexit’s success. Others believe the people of Great Britain and Northern Ireland thought it was past time they were allowed to steer the destiny of their homeland without being beholden to rule of law on mainland Europe. Still, most experts believed the majority of the voting public would see that the positives outweighed the negatives of staying in the European Union and that leaving wouldn’t necessarily sate the influx of immigrants arriving on the UK’s shores.
Yet here we are in Australia like much of the rest of the world, twiddling our thumbs, waiting to see how the economy will be affected while the pound hits a 41-year low. To clear the air and possibly alleviate any concerns in the process, lets examine Brexit’s effect on Australia.
Obviously economic uncertainty is a key component in a depressed economy. For this reason, the Brexit result hasn’t affected any economy in a positive way, least of all the UK’s. That being said, these affects have all been relatively small. The Australian Stock Exchange (ASX) did take a hit in the immediate wake of the Brexit vote. The reason was investments started moving away from the UK because keeping them there was seen as too risky. Also due to deflation in Britain, Australia’s already very low interest rates went even lower and while this might seem like great news to those in the market for a house, it doesn’t portend good things for investors. Investments in commodities and oil will also decrease.
Traditionally, the UK and Australia have been strong trade partners, although neither one is the other’s largest trading partner. For this reason, things don’t look too bad, but experts predict there will be ripples—if only little ones—felt in businesses of all sizes in Australia. One suggestion in the short term for mid-level companies to larger multi-nationals is to reduce or avoid trade with the UK until more of the wrinkles get ironed out and markets stabilise. Also small businesses can make better judgments about the future by taking to currency hedging. There are also some experts who believe Brexit could make investors think twice about pouring their money into the UK at this point. Some of these investors could look for other countries to invest in and although Australia’s low interest rates aren’t terribly attractive to investors, its stability and certainty looking forward could be.
20th June 2016
As one of the leading providers of tax audit insurance for the last thirteen years, Accountancy Insurance knows mistakes happen. As humans it’s in our nature to err. It’s what sews us together as people. More often than not, a mistake can be forgiven and forgotten with a sincere apology and a promise to try harder next time.
Unfortunately, when dealing with tax auditing, the old adage, ‘everyone makes mistakes’ loses some of the warmth and takes on a new meaning. A mistake on a tax return can mean more dire consequences. Receiving a notice through the post or a call from the taxperson usually evokes feelings of trepidation and dread. That’s why Accountancy Insurance has Audit Shield, a comprehensive coverage plan that protects regular people and businesses from the costs that arise with having to sort through the audit requirements.
In 2015, the Australian Tax Office (ATO) estimated that around 350,000 Australian tax payers would receive enquiries regarding errors, omissions, or inconsistencies on their tax forms. Tax officials diligently examined each and every return form. Most of the errors were honest, commonly made mistakes of the typographical nature such as misspelt names, addresses, wrong bank details, birthdates, or the detail of a spouse. In addition to closely scrutinizing the paper return, The Australian Tax Office (ATO) has other tricks up its sleeve. It uses third parties such as banks, employers, and insurance providers to ‘cross-check’ the numbers of each return. These ‘cross-checks’ netted the ATO somewhere in the neighbourhood of $100 million dollars in 2014 so it’s clear they’ll continue to monitor these third parties in the future.
With an increasingly aggressive audit market and the ATO using more sophisticated tactics for finding delinquent returns, where is the honest, yet cautious Aussie taxpayer to turn?
Audit Shield takes the worry, pressure, and anxiety out of the process of filing a tax return. With Audit Shield, the client is covered for the professional fees incurred while their accountant assists them through an audit enquiry. It provides a safety net for clients and accountants alike as neither one has to worry about increased costs or lost man hours.
The benefits don’t only apply to the client. More and more accountancy and auditing firms are attracted to the positives Audit Shield presents. With fees paid directly to the firm and zero cost to offer the product to clients, Audit Shield is a win-win for all parties. Plus, having such a robust, industry leading product on hand will give clients the assurance that they are in good hands when they walk in to hand in their returns.
For the best in tax audit insurance, there is no substitute for Audit Shield from Accountancy Insurance. Since 2003, Accountancy Insurance has amassed the experience, knowhow, and diligence to lead the industry. Now providing its services and expertise in three commonwealth countries—Australia, New Zealand, and Canada—Audit Shield gives the accountants who use it a leg up against their competitors.
26th May 2016
Here in Australia, Accountancy Insurance is proud to announce the introduction of a new line of insurance protection for accountants: cyber insurance. As is familiar from the multitude of news stories of events of cyber-crime, such as hacking and phishing, involving well-known companies and figures in the worlds of business and government, electronic malfeasance is a real and growing danger to firms in all business sectors, not just Internet and computing firms.
As the business world becomes more connected electronically, and as firms continue to use the internet for communications, sales, and data storage, the business environment becomes more dynamic and also more exposed to internet crimes. High-profile security breaches in recent years have impacted retail and financial firms, entertainment conglomerates, social networks and dating websites, and an American political party's national committee have experienced the consequences of data breaches, deliberate hacks, and DDOS attacks. Personal photographs, business communications, and sensitive financial data have all become exposed in data breaches that have impacted global corporations, famous celebrities, and millions of ordinary individuals—with a financial and legal impact that cannot yet be completely measured.
Worried yet? Consider the following events:
* In November 2014, hackers believed connected to the North Korean government accessed and released information from Sony Pictures' computer systems, including intellectual property, salary data, and employees personal information;
* In July 2014, 83 million customers' personal information and contact information was stolen from J.P. Morgan's systems;
* In June 2015, personal information from millions of U.S. government employees—at least 4 million, and as many as more than 20 million—was stolen from the computer systems of the Office of Personnel Management.
To be sure, not every event is so large or newsworthy. But for businesses who take seriously the need to protect their clients' information, the susceptibility of these victims speaks for itself - even the largest companies, financial institutions, and even governments can be victims of financial crimes. When your business depends on protecting the sensitive financial and personal information of your most important clients, this vulnerability has become one of your most pressing concerns.
Many companies, including accounting firms, are under the misimpression that general liability or professional indemnity insurance covers client losses resulting from cyber-crime. Unfortunately, this is commonly not true, as typical insurance policies cover client losses from the policyholder's own negligence but not from the actions of a malicious third party—which includes hackers, spammers, phishers, and other Internet criminals.
It is a sad irony that your insurance can protect your clients from losses resulting from your innocent mistakes, but not from the deliberate actions of anonymous actors deliberately attacking their personal and financial data. This makes it especially urgent for today's business firms to address their exposure to potential liability from Internet breaches and data losses from hackers.
Accountancy Insurance now offers a new solution for accounting firms in the service of cyber insurance. Business leaders who are concerned with their firms' possible exposure to losses stemming from malicious online attacks—and who isn't?—can rest assured with cyber insurance from Accountancy Insurance.
15th April 2016
The government’s recently-published 2016-17 federal budget offers an illuminating look at what’s in store for the country – as well as the types of changes that professional accountants across Australia will be working with. First we’ll look at some of the new personal and professional tax guidelines, and then we’ll examine what the consequences are likely to be for businesses, wealthy taxpayers and accountants.
For personal income tax, the threshold to enter the second-highest tax rate will be raised, allowing earners to pay 32.5% tax until they make $87,000 per year. By raising that amount from the previous level of $80,000, the government will keep up to 500,000 Australians at the lower tax rate rather than the 37% tax rate for income earned above that amount.
Small businesses will also find themselves on the receiving end of a tax break, as henceforth they will pay just 27.5% tax if they have a turnover of less than $10 million. The unincorporated small business tax discount will also be raised to 8% (eventually rising to 16%) for companies with an annual turnover of less than $5 million, up from the current amount of $2 million.
New restrictions for Australian citizens include a superannuation transfer balance cap of $1.6 million going into retirement phase accounts, as well as a $500,000 lifetime cap for non-concessional contributions. The rules and benefits surrounding superannuation have been adjusted in several other areas as well, to prevent superannuation from being used as a tax minimisation strategy.
Businesses and individuals should be aware of a new Tax Avoidance Taskforce and a Tax Transparency Code, set up to identify and prosecute entities for underpayment of taxes. In just the next 4 years, the government expects these additions to result in an additional $3.7 billion in revenue, a large part of which will apparently come after audits and investigations.
These changes in tax policy, and particularly the addition of qualitatively new methods of enforcing the letter of the law, mean that services like Audit Shield and PI Shield are becoming ever more necessary for professional accountants and their clients. These programs, both offered by Accountancy Insurance, protect accountants – and by extension, their clients, who are also on the hook for any special scrutiny of their tax reports.
Here’s how they work: In case of an audit, investigation, or other type of government scrutiny, Audit Shield covers the accounting firm’s additional labour cost that would otherwise be passed down to the client. Our Professional Indemnity Shield covers accounting firms that would otherwise need to pay costs resulting from legal action due to many different varieties of malpractice, from honest mistakes to lost documents and more.
In a changing system, the failure to use a safety net might be the biggest mistake an accounting firm could make.
22nd March 2016
In Australia, the required practice of setting up funding for retirement can take many forms. One of these forms is the self managed super fund, better known as an ‘SMSF’. There are always pluses and minuses when choosing a form of retirement option, and if you’re serious about handling the commitment involved with managing retirement funds, SMSF just might be the one for your clients.
The main advantage of SMSFs is that when Australian citizens set up this program, they (and their accountants) are left completely in charge of it. However, even as they decide on the investment schemes for the fund, they are also completely responsible for complying with the associated regulations for both SMSF and regular taxes. Opting for an SMSF is a critical and time-consuming decision, and the relative financial freedom it provides is offset by the extra layer of responsibility it demands; one of the major drawbacks of an SMSF is the extra time, attention and know-how required to properly manage it.
What AI can do
Fortunately, Accountancy Insurance is there to protect accountants who decide to set up compliant SMSFs for their clients, particularly if complications arise. For those dealing with the Australian Tax Office (ATO) on this and other matters, resolving legal and accounting issues can be a real nightmare even when no rules have been broken. As many around the country have learned through experience, even honest compliance with rules and regulations on taxes, superannuation funds and other delicate responsibilities does not guarantee that the ATO will leave you alone.
Whenever the ATO demands an audit or investigation of a personal financial statement, significant expenses can and will incur. The auditors and investigators that may be summoned or required by the ATO come at a hefty price. Accountancy Insurance offers its Audit Shield specifically to protect accountants from these sorts of external costs. If your clients are ever audited or investigated, the decision to rely on Audit Shield for complete coverage could save you a world of trouble.
We are proud to provide an extra layer of financial protection through our Audit Shield coverage, which covers a range of outcomes related to official reviews of SMSFs. Get in touch with us now to help set up Audit Shield for your clients.
19th February 2016
Taxpayers recently got a rude awakening at the hands of the federal government. Despite complaints of “heavy-handed and unfair treatment” at the hands of the Australian Tax Office, as well as formal recommendations to restrain that department’s powers to target people and organisations with invasive audits without any proof of wrongdoing, the government announced that it saw no need to roll back the ATO’s authority to initiate proactive investigations.
Moreover, the government also rejected formal requests to separate the ATO’s compliance from its appeals section – meaning that the same people who pronounce a verdict on tax compliance could also be the ones handling a potential appeal of that verdict.
Such a system increases the likelihood that individual taxpayers and businesses around the country could experience drawn-out investigations at the hands of the ATO, even if the lodgments under scrutiny were completed correctly. While the end result of a detailed audit will normally yield a fair resolution of the issue, the time, effort and expense of getting to that point can be enormously inconvenient. Independent expert analysts and other specialists may well be called in to contribute to the investigation, and the resulting bills will not be cheap.
Fortunately, there is a remedy for the cost. Accountancy Insurance’s Audit Shield protects individuals, businesses and Self Managed Superannuation Funds by insuring them against the cost of paying accountants and experts in the event that they are called upon by the government to prepare for official audits, enquiries, investigations and reviews. The protection is provided by you - the accountant - who must take out the cover with Accountancy Insurance and then offer the service to clients.
With Audit Shield, even if the government initiates an audit of a previous tax lodgment, clients of accountants are covered as long as the request itself comes during the period covered by the Audit Shield service. Without Audit Shield, on the other hand, ordinary accounting services – no matter how well they are performed – can still lead to costs spiraling out of control if the government decides to order a drawn-out investigation.
That’s why so many tax and advisory professionals are including Audit Shield as part of the standard package they offer to their clients. Ordinary individuals and businesses use accounting services as a bulwark to protect them from exposure to government fees, but without Audit Shield, they can find themselves facing significant fees from their own accountants if the government so much as initiates an audit or official enquiry.
A growing number of accounting firms across Australia, therefore, are bundling Audit Shield with their regular client services as a matter of course. Their customers, sensitive to the risks and the costs that come with government scrutiny, appreciate the extra layer of protection that Audit Shield offers. The accountants themselves are in a better position as well, since it can be difficult indeed to be reimbursed for the troubles incurred by the Australian Taxation Office.
For reliable coverage Accountancy Insurance’s Audit Shield can give both tax advisory companies and general businesses across Australia the freedom they need to get on with their work, without having to worry about what happens if the government decides to investigate their financial statements.
6th September 2016
Our perceptions can deceive us. Some accountants believe that if they are efficient, they do not need tax audit insurance. Their perception is far from reality as audit activity is not purely linked to the quality of an accountant’s work.
The common misconception is heard regularly by the team at Accountancy Insurance. However, the proof really is in the pudding. More than 3,000 claims are submitted each year in Australia by Audit Shield (tax audit insurance) client accounting firms. A substantial number of the lodged returns under scrutiny do not actually require further adjustments to be made.
The reality is that the Australian Taxation Office (ATO) has been provided with additional resources, in fact audit funding by the government will increase by a proposed 55% over the next four years, which is anticipated to dramatically increase the number of transactions reviewed.
The ATO and other government agencies are flexing their muscles and investing in resources in order to thoroughly review every possible transaction. Recently the ATO Assistant Commissioner Graham Whyte said “Every tax return is scrutinised using increasingly sophisticated tools and data analytics developed by our ‘data doctors’ at the ATO.”
In the first instance these transactions do not discriminate between ‘good’ and ‘bad’. If an individual, business or SMSF has been selected for scrutiny, despite whether the return was lodged correctly and no further adjustments are required, subsequent professional fees are likely to be incurred as a result. As an accountant, you can either absorb these fees or pass the cost of the professional fees onto your client. Either option is not ideal. With Audit Shield the professional fees associated with the instigation are covered.
In excess of 180,000 clients of accountants are currently participating in Audit Shield, and more than 2500 accounting firms in Australia, New Zealand and Canada offer the tax audit insurance solution to their clients. More than $1,000,000* in claim payments for professional fees is processed per month by Accountancy Insurance.
*Figures are based on an average monthly total from Accountancy Insurance’s claims data since June 2015 of client accounting firms in Australia and New Zealand.