By Garrett Douglas

I don’t know about you, but I feel the last couple of years has been weird for a variety of reasons. One of these being that the Australian Tax Office was playing nice. Although nothing would have been any different for a lot of people, for many, this was a welcome change of heart. During Covid the Tax Office was supporting taxpayers with debts. They were also supporting taxpayers who were lodging late. They were not following up on debt, not raising penalties and waiving interest charges. That has all changed. Read on …

While this was a welcomed stance during a trying time for many people, in the last few months we have seen the Tax Office returning to their old ways. Penalties are being issued for late lodgements, higher interest rates are being incurred on outstanding debt, taxpayers are being contacted about their debt and taxpayers are having greater difficulty in requesting payment plans. For those who are yet to see this, great. For those who have and may be worried about the Tax Office clamping down on them, it is best to get on the front foot before they take action.

If you currently have a debt, or have one that is due soon that you know can’t be paid in time, the best thing to do is get in contact either with your accountant or the Tax Office directly to discuss your situation. Where cashflow is an issue and you don’t have previous issues with the Tax Office, they are usually happy to have a payment plan set up. This will entail a debt to be paid over time whilst also requiring future BAS and PAYG obligations to be lodged and paid on time.

It is becoming more common where you are negotiating payment of a debt with the Tax office that they will ask for “capacity to pay”. This is where no arrangements will be agreed on without proof that you have the ability to pay off the debt. For individuals this can be as simple as providing details of income and expenses. For businesses this may be a bit trickier as the Tax Office may want to assess your business’ viability. They may look into this where you have a bad record with them due to defaulted payment plans or a history of late lodgements and payments.

For a business to be considered viable by the Tax Office, the business must be either:

Returning a profit that is sufficient to provide a return to the business owner while also meeting its commitments to business creditors, or
Have sufficient cash resources to sustain itself through a period when it is not returning a profit.

In short, the Tax Office wants to make sure you will be able to meet the obligations of any arrangements entered into. To do so they consider a range of factors. These include:

Gross margin
Cash flow
Asset/liability position (including working capital)
Liquidity
Debtor/creditor position
Availability of funding

The above terms may make zero sense to you, but they do help draw a picture of how a business is performing and how viable it may be going forward. In determining these the Tax Office will require quite a few documents from you such as bank statements, various reports and financial statements. On top of this, they will also require a proposal on how the debt will be paid, details of the factors that led to the debt arising and steps taken to lessen the debt.

This may seem like a lot to deal with, and hopefully you will never have to go through this process. Always remember that your accountant is here to help you navigate this if required. Call us on 9841 1200 if you need help dealing with your ATO debt.

Believe it or not… there are lessons from the Optus data breach

The Optus data breach is top of mind for a lot of Australians, particularly those who have had their data breached.

For business, the breach is a timely warning on the importance of understanding what data is held on your customers (and should you hold it?), how it is secured, how your systems work and the process to identify gaps and deficiencies, the appropriate actions if and when a breach occurs, and the impact on your relationship to your customer. This is not something that can be outsourced to IT but a whole of business issue.

The obligations on business

We all know that no system is 100% secure. For Optus, this is not the first time. In 2015, Optus agreed to an enforceable undertaking for breaching the Privacy Act in 2015.

A data breach happens when personal information is accessed or disclosed without authorisation or is lost. If the Privacy Act 1988 covers your business, you must notify affected individuals and the Office of the Australian Information Commissioner when a data breach involving personal information is likely to result in serious harm. The notification must be as soon as practicable but is expected to be no later than 30 days. Every day counts.

A business must take all reasonable steps to comply with its obligations to prevent data breaches occurring. These obligations are not limited to preventing cyber attacks.

The stats show that the source of all reported data breaches come from:

Malicious or criminal attacks - 55%
Human error - 41%
System faults - 4%

Where human error was involved:

43% was where personal information was emailed to the wrong recipient; and
21% the unintended release or publication of personal information.

How to apologise

Your relationship with your client is about trust. Beyond the breach notification requirements, the other issue is the client relationship.

So, how should a business apologise? The apology must come at a cost to be effective. That cost can be reputational, a commitment to do better in the future (the cost is the higher standard), or a monetary cost. Three tips for making an apology:

Apologies are not a panacea - the efficacy of an apology and whether it may backfire depend on how the apology is made.
Money speaks louder than words - the best form of apology is to include a coupon or voucher for future use.
In some cases sending an apology is worse than sending nothing at all, particularly for repeated apologies and those that promise to do better.

Helping to protect against data breaches

Understand your Privacy Act obligations. Specific industries and businesses that hold specific types of data often have advanced requirements.
Review the personal information held on customers. Is their full date of birth a necessary part of what your business does? If you need to verify identify, do those identification documents really need to be stored once they have been validated? Or is positive confirmation enough? Is the data held securely and is access limited to only those who require access?
Ensuring systems have multifactor authentication
Improving staff awareness of not only cyber threats and how to prevent them - phishing, fraudulent messages etc, but reviewing how personal data is managed and accessed.
Understanding your systems and how they work together to prevent security gaps or ‘backdoor’ systems access.

Attention Directors, you now need a Director ID

A director ID is a unique identifier that a director will apply for once and keep forever. This initiative has been introduced by the Australian Business Registry Services to prevent the use of false or fraudulent director identities.

All existing directors of a company, registered Australian body, registered foreign company, or a director of corporate trustees of an SMSF are required to apply for a director ID by 30 November 2022.

Penalties may be applicable if you don’t apply for a director ID. The fastest way to apply is by using the myGovID app to log in to ABRS online.

Once you have your director ID, keep it safe until you need to use it. It can be shared with your accountant, company secretary, ASIC registered agent or tax professional.

If you need help to set up your Director ID call us on 9841 1200 and we’ll help you through the process.

A Coffee With… Joyce Toone

What do you see yourself doing at 92 years old?

Still living independently, overseeing the running of your sheep farm and growing 200 Como Polly Dahlias each year for the sheer joy of it? That’s what Joyce Toone is doing, and she has no plans to stop anytime soon. This month, Gavin and Bec were delighted to sit with Joyce in her cosy kitchen warmed by her 60-year-old wood stove and hear her story over a cuppa and some double coated Tim Tams. Read More

Here’s how to avoid ATO Debt and assess your capacity to pay