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The Tax Office has sent letters to people living overseas who have made claims as non-residents for tax purposes.
The pro-forma letter asks for a response within 28 days to establish that the receiver is indeed a non-resident, and states that if no such response is forthcoming it will issue and assessment on the basis that the taxpayer is an Australian resident for tax purposes.
The Australian tax regime operates on source of the income. Non-residents only pay tax on Australian sourced income, and that has not been subject to withholding tax. Whereas Australian tax residents pay tax on their worldwide income.
This assessment will bring into the Australian tax net all known foreign-sourced income.
It is understood that the Tax Office is using information obtained from the “bank transparency” data matching program that targets overseas banks. This initiative was announced last year (see it here, which also lists the banks involved).
We strongly recommend that expats consult with their tax professional prior to responding to this letter as international tax matters further compound the already complex tax rules.
Legitimate expat, but retained “connection”
Australians who live and work in other countries but who retain some residual connections to Australia seem to be prime targets for this type of audit activity. The Tax Office letter asks the question of expats that they should consider their residency status and provide evidence to support their position.
The “connections” mentioned, or “continuity of association” as the Tax Office has put it, can include retaining an interest in land or a building in Australia, maintaining health insurance cover in Australia, and transferring a significant amount of earnings into an Australian bank account.
The Tax Office has had mixed results in various court cases in relation to these matters. In Shord v Commissioner , the taxpayer lost the case, and in Dempsey v FC of T the court found in the favour of the taxpayer.
The Tax Office issued a “decision impact statement” after the decision in Dempsey. It indicated that it is going to keep on pursuing expats claiming non-resident status, particularly where people working overseas may be retaining some form of connection to their country of birth.
The Tax Office has announced that it is contacting certain businesses in the building and construction industry that have lodged an annual “taxable payments annual report” about some of the information that has been provided.
The triggers for Tax Office contact include businesses that have:
– provided a report with missing or invalid ABNs
– included amounts paid for GST when the business isn’t registered for GST
– not lodged a report, or advised the Tax Office they don’t have to, when Tax Office records indicate they should.
The taxable payments report should show the total yearly payments made to each contractor that has provided services to a business for building and construction work. The data provided enables the Tax Office to data match information it has about contractors working in the industry, and allow it to detect if these have included all income on their tax returns.
The Tax Office has also provided guidance for businesses that have already lodged their taxable payments annual report but that need to correct the information already provided. Access this guidance here. Here is a copy of a worksheet for the taxable payments report from the Tax Office to help keep your records in order. (Note this just a worksheet for your own records.)
Such is the very real threat nowadays of identity theft that the Tax Office has set up a Client Identity Support Centre (find it here) to help taxpayers who have had their identities stolen or misused.
The Tax Office says it will give every assistance it can, and will provide information and advice to help people re-establish a stolen identity. If taxpayers believe their tax file number (TFN) may have been compromised, they are advised to call the support centre on 1800 467 033 (8am to 6pm Monday to Friday).
Your TFN is used to identify you in your dealings with the Tax Office. Should you discard or recycle any records or other documents, the Tax Office’s advice is to destroy or delete your TFN from these documents beforehand, as the TFN and other personal information can be used to lodge tax returns and other tax forms.
A first step may be to check that you haven’t simply temporarily misplaced your TFN, rather than assuming it has been misused. “For example, let us know if you have received a notice of assessment about a return you haven’t lodged, or if you have included your TFN in a profile you posted online while looking for work,” the Tax Office says.
If your TFN has been compromised, the first steps the Tax Office will take will be to re-establish and confirm your identity with you and to check your tax records. Other action taken will depend on your situation and circumstances.
Re-establish and confirm your identity
You may need to re-establish your identity by providing the Tax Office with proof — this may include details of personal information, such as your date of birth, address, bank account details, or TFN if you have that listed somewhere else. (See the list of agencies and departments that may be of use at the end of this article.) You may also need to provide the Tax Office with information sourced from identification documentation, such as a previous notice of assessment you may have filed away.
“We may ask you for original or certified copies of your identification, depending on your situation,” the Tax Office said. “If you have set up a secret question and answer with us, then we may ask you for those details as part of this process to re-establish your identity.”
Once original or certified copies of documents have been supplied to the Tax Office, it will need to confirm the authenticity of your identification documents, which it warns can take a number of weeks.
Check your tax records
Once your personal details have been confirmed, the Tax Office will check your tax records by looking at:
– TFN declarations
– tax returns (income reported, bank accounts used, tax agents involved and other details)
– Australian business numbers (ABNs) applied for and being used, and
– employer superannuation guarantee payments made.
The revenue collection agency may ask you to confirm the information on file so it can determine which activity is yours, and which are those from another person who may be using your TFN.
The length of the investigation will vary depending on how much information is in your record, whether another person has actually used your TFN or not, and how easy it is to confirm authenticity.
Third party confirmation of identity
The following offices, agencies, and government departments may be of help in compiling records to help re-establish your identity, depending on your past interactions with any of them.
Australian Securities & Investments Commission
Child Support Agency
Department of Immigration and Border Protection
Office of the Australian Information Commissioner
There’s an online tool on the Tax Office’s website that is designed to provide answers to various questions that small businesses may have regarding tax or superannuation.
Named “Small Business Assist”, the tool offers both new and established businesses an easier way to access relevant information on a range of topics.
Click here to go to the Tax Office’s Small Business Assist tool, which can be accessed from a range of devices. Type in a question in the field provided to get information not just from the Tax Office but other government sites.
After hours call-backs and web chats
Busy business owners may find that there’s little time to discuss tax matters during business hours, so there’s an option to get information after hours. If you type in “after hours call back” you can book in a call from the Tax Office between 6pm and 9pm, Monday to Thursday.
You can also conduct a conversation live online with a tax officer by typing in “web chat”. This service is available from 3pm to 9pm Monday to Friday, but also from 10am to 4pm Saturdays.
For advice and support in your state or territory, see the links below.
– New South Wales. The Small Business website provides information about support and assistance for home-based businesses.
– Northern Territory. Advice for home-based businesses in the NT from the Department of Business & Employment. A home-based business information kit is available from the Northern Territory government website to help you start or grow your business from home.
– Queensland. Read about starting a home business on the Queensland government website.
– South Australia. Read about starting a business.
– Western Australia. Find home-based business information through the Small Business Development Corporation.
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