Director Penalty Notices (DPNs)

By Heaney Business Group
Above view of business team sitting around table and working

Director Penalty Notices (DPNs) are a way of the ATO collecting companies outstanding tax liabilities. These penalties make directors legally responsible if their company has any unpaid Superannuation Guarantee (SGC) or Pay As You Go (PAYG). Although personal liability doesn’t expand to GST that hasn’t yet been recorded or paid, receipts can still be handed out by the ATO at their own judgement including to companies previously liquidated.

To ensure a companies’ director isn’t issued with a DPN it is important to:

  • Ensure a Companies Reporting is a Priority
  • Understand the Types of DPN
  • Know the Fore Warnings
  • Act Immediately

Ensure a Companies Reporting is a Priority

If a companies’ PAYG is overdue by more than 3 months or their SGC has not been given to the ATO by the deadline, a director will not be able to put a company into voluntary administration or liquidation. This is often done so the director can be cleared of any personal liability. Paying the outstanding amount owed, is the only way to stop a director being personally responsible.

The ATO can use an estimate to give a DPN to a company with overdue lodgements. Once the required information has been reported, the ATO’s estimate can be reduced if the amount owing is less, however the DPN must still be paid.

Understand the Types of DPN

The ATO can issue two types of DPN’s – lockdown and non-lockdown. These notices can be given to companies concurrently depending on their debt. A non-lockdown DPN can be cancelled if the debt is paid, the company is under administration or is in the process of being closed. A lockdown DPN will only be cancelled if the required reporting is completed and debts owing paid.  

Directors Warning

If a company has past, unresolved PAYG or SGC liabilities, it is important for a new director to understand these liabilities can be passed on to them 30 days after their employment. If a director resigns during this time, it does not mean they are no longer liable for the debt either. Settling any amounts owing, appointing an administrator or the company being put into liquidation within the 30 days is the only way to stop a director being personally responsible.

Act Immediately

When receiving a DPN, a director must act immediately as the 21 days given to resolve the issue is not calculated from when a director receives the notice, but the date of issue. Although the ATO may send a copy of a DPN to the director’s accountant, this cannot be relied upon, meaning companies must make updating and reporting any changes to a director’s address a priority. It is encouraged to promptly seek expert advice when receiving a DPN.

Need expert advice – Contact HBG Tax and Accounting

HBG Tax and Accounting work closely with their clients and are passionate about giving them extra and much needed support. Contact the team today on 9594 1963 or visit their office at Unit 7, 12 Belgravia Terrace, Rockingham.

The material and contents provided in this article is of informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained

Personal Income Tax Changes Cause Uncertainty for Taxpayers

By Heaney Business Group
Are You Paying Tax on Your Shares?

Taxpayers expecting to receive the recent income tax cut subsidy of $1,080 have been left disappointed and confused when lodging their tax returns. This new tax cut does not entitle all taxpayers to receive this subsidy when lodging their 2018-2019 tax return leading to the Australian Taxation Office (ATO) being swamped with queries from taxpayers.

Changes Effective from 1 July 2018

The 2018-2019 Federal Budget saw the establishment of a low and middle income tax offset (LMITO) applicable to those taxpayers with a taxable income below $125,333. Further recent changes now see the LMITO paid to more taxpayers as the threshold increased to $126,000 (previously $125,333), the LMITO rise to $1,080 (previously $530) and the base amount rise to $255 (previously $200)

The Australian Taxation Office (ATO) are reminding taxpayers this is not a simple case of you receiving this money back and have communicated on their website “It doesn’t mean that you will get an extra $1,080 in your tax return.” It is a tax offset meaning it is subtracted from the amount of tax you owe based on your taxable income. If you have tax owing, the LMITO will simply decrease this amount first.   

Taxpayers entitled to the offset are reminded it pertains to their taxable income from the 2018/2019 financial year and only after lodging their 2018/2019 tax return will they be given any amount owed.

Taxable income* Offset minimum Offset maximum
<$37,000 $255 $255
>$37,000 – <$48,000** $255 $1,080
>$48,000 – <$90,000   $1,080
>$90,000 – <$126,000***   $1,080
$126,000+ $0 $0

 * Your taxable income is the income you earn less any deductions you claim – not your salary.
** offset entitlement is $255, plus 7.5% of the excess to a maximum of $1,080.
*** offset entitlement is $1,080, less 3% of the excess on taxable income above $90,000.

Did you earn a taxable income in the 2018-2019 financial year? Read on to discover how the LMITO applies to you.

If your taxable income for this period was less than $21,885 you do qualify for LMITO to the amount of $255, but you would not have paid personal income tax so are unable to take advantage of the offset.

A taxable income of $45,000 makes you possibly entitled to a low income tax offset (LITO). This figures also qualifies you for a tax reduction of $855. This figure is reached by calculating $255 plus 7.5% on each dollar between $37000 and $45000.

A taxable income of $85,000 or more qualifies you to be given a $1,080 tax deduction.

What Is a Low Income Tax Offset (LITO)?

A Low-Income Tax Offset (LITO) is a tax offset which decreasing the amount of tax paid by any taxpayer whose taxable income was less than $66,667 in a financial year. A taxpayer with a taxable income of $37,000 or less is entitled to the maximum offset amount of $445 however if you do not pay personal income tax, you are not entitled to the offset in the form of cash. It’s important to know that for every dollar you earn over $37,000 up to $66,667 (the LITO threshold) your tax offset decreases by 1.5%.

What changes will occur from 1 July 2022

As of 1st July 2022, assuming the Government doesn’t make changes, the income tax rate thresholds will be changing. These changes include a tax cut to both resident taxpayers and those taxpayers on a working holiday who earn over $18,200. This tax cut is courtesy of the 19% personal income tax bracket increasing from $37,000 to $45,000.

This new financial period will also see the low-income tax offset (LITO) rise for those taxpayers with a taxable income lower than $66,677 with the base amount rising $255 in total. However, the LITO will also decrease quicker than it does now. Amounts above $37,500 will decrease by 5% for amounts up to $45,000 and by 1.5% for amounts up to $66,667.

What changes will occur from 1 July 2024

The 2024/2025 financial year will see a change for several people (both resident and working holiday taxpayers) as the marginal tax rate decreases by 2.5% to 30% plus the maximum threshold rises to $200,000 (currently $120,000). These changes are once again dependent on the government not changing these amounts in a future Federal Budget.

Needing to Know More About Income Tax Changes?

The team at HBG Tax & Accounting are your local accountants in Rockingham who have all your tax needs covered for individual tax returns and business accounting matters too.

Call the team to make an appointment on 08 9594 1963 to discuss all your tax needs.

This article was written based on information supplied from Knowledge Shop Newsletter August 2019.

The material and contents provided in this article is of informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained by contacting HBG Tax and Accounting.

  Category: Tax
  Comments: None

The ATO airs ‘Dirty Laundry’ on Laundry Expenses

By Heaney Business Group
Laundry business

The ATO (Australian Taxation Office) has issued a warning that it is scrutinising claims for work-related clothing and laundry expenses.  The ATO Assistant Commissioner Kath Anderson stating “Last year around 6 million people claimed work-related clothing and laundry expenses, with total claims adding up to nearly $1.8 billion. While many of these claims will be legitimate, we don’t think that half of all taxpayers would have been required to wear uniforms, protective clothing, or occupation-specific clothing.”

Over the last 5 years, clothing claims have jumped nearly 20%. Occasionally, the ATO will even ask employers if they require their employees to wear a uniform to justify claims. The ATO deems taxpayers are making common errors including:

  • Claiming clothing that is unacceptable
  • Not buying something but still attempting to make a claim
  • Being unable to justify the basis for how the amount of the claim was calculated

One scenario saw work related laundry expenses of $20,000 per year over a 2 year period be attempted to be claimed by a car detailer. It appeared the taxpayer calculated the hours he spent doing his laundry then multiplied that by what he considered to be a fair hourly rate ($227 per hour because he regarded his personal time of high value). Suffice to say, his claim was reduced to $0.

Claims over $150 are to have supporting receipts, however claims below $150 don’t require taxpayers to have records leading the ATO to assume many taxpayers are ticking the box assuming the claim is a standard deduction and it’s not only sizeable businesses they are scrutinising.

“Just to be clear, the $150 limit is there to reduce the record keeping burden, but it is not an automatic entitlement for everyone. While you don’t need written evidence for claims under $150, you must have spent the money, it must have been for uniform, protective or occupation specific clothing that you were required to wear to earn your income, and you must be able to show us how you calculated your claim,” Ms Anderson said.

This article was written based on information supplied from Knowledge Shop Newsletter July 2019.

The material and contents provided in this article is of an informative nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

  Category: Tax
  Comments: None