Some may say that the 2019/20 financial year has not been a welcomed one given the range of new initiatives and regulations it has introduced, not all of which are favourable in the eyes of business owners.
Many of these changes will bring with them cashflow pressures that business owners have not experienced in the past. Whether it be through increased reporting requirements or the expansion of ATO powers to hold business owners personally liable, the changes now in place or on their way have something for everyone.
Below is a summary the changes that are likely to bring business owners unstuck if cashflow is not a continuous focus.
1. Single Touch Payroll (STP)
STP is now a requirement for the majority of employers and provides a reporting mechanism to declare tax and superannuation information to the ATO. Employers must report data on each pay run made, providing the ATO with up to date information regarding the wages, PAYG withholding, allowances and superannuation obligations the business has incurred.
So why does the introduction of STP place a greater requirement on cashflow management for businesses? The answer is in how the ATO plan to use the data employers are lodging on a regular basis.
For the first time the STP regime will see the ATO capturing super liability information from employers that they can then match with Super Funds to make sure the relevant payments are being made.
Non-payment of superannuation entitlements can lead to business owners being held personally liable for any unpaid amounts under the Director Penalty Regime so management of cashflow to ensure debts such as this are maintained is vital for any business.
Effective from 1 July 2019 in order to claim as a tax deduction gross wages paid to employees, employers are obligated to PAY and LODGE on time all PAYG Withholding obligations.
STP reporting will be part of this lodge on time requirement and will also provide the ATO with real-time data as to your PAYG Withholding liability owing, allowing them to monitor whether you meet the requirement of paying on time and therefore, protecting your tax deduction.
It is important to note that PAYG Withholding also falls within the Director Penalty Regime, meaning that non-payment of these types of debts can lead to the business owner being held personally liable for unpaid amounts, the data on which the ATO will have at their fingertips.
2. Director Penalty Notices extended to GST (DPNs)
The introduction of Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019, still awaiting approval and therefore not quite yet legislated at the time of writing this article, will provide the ATO with new powers to make directors personally liable for a company’s unpaid GST as well as provide a mechanism to collect GST on the basis of estimates if an entity does not lodge activity statements disclosing their GST commitments.
Effective management of business records and cashflow requirements to ensure lodgement and payment on time of GST associated obligations, whilst always an important factor in operating a successful business, has now become critical in personal risk management for business owners.
3. Disclosure of business tax debts:
Another Bill, originally introduced back in 2018 which has been revived with the Federal Election now out of the way, is Treasury Laws Amendment (2019 Integrity and Other Measures No. 1) Bill 2019. This Bill, if legislated, will see businesses with more than $100,000 in tax debts that have not engaged with the ATO regarding payment may have their debt information disclosed to credit reporting bureaus.
The criteria for reporting will be debts owing of at least $100,000 that have been outstanding for more than 90 days owing by entities that are registered on the Australian Business Register.
The above summary is just a small example of some of the reasons why cashflow forecasting and cashflow management is vital for business success.
Keep an eye out next month for our follow up article that will provide you with tips and guidance on how to get started or improve cashflow forecasting for your business and in the meantime, if you would like to find out more about this topic and how we can help, email us at firstname.lastname@example.org or call our office on 03 52216399.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.