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Black economy action extends to road freight

ATO reveals details for comment on industry-focused measures as government hits illegal phoenixing


The Australian Taxation Office (ATO) has sought industry responses on how laws passed this year against the ‘black economy’ will affect road freight.

The ATO’s taxable payments reporting system (TPRS) is to be expanded under Draft Law Companion Ruling LCR 2018/D8 related to Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Act 2018, which was passed fully on November 29.

“The Amending Act requires entities that provide particular services to report details of transactions where they pay contractors to provide those services for them,” the ATO says, of the move that will bring road freight into to same focus as the building and construction industry was in 2012 and courier services in July.

“The reporting requirement will apply to such payments made on or after 1 July 2019, unless a reporting exemption applies.”

It relates to any concern that has an Australian business number (ABN), if payment was for services on their behalf wholly or in part and if exemptions do not apply.

While road freight forwarding services come within the ambit, those businesses that don’t include

  • road freight terminal operators
  • crating and packing providers for road freight transport
  • the leasing or hiring trucks without drivers.

Also untouched are integrated, ancillary or incidental deliveries, which is viewed as ‘composite supply, thought ‘mixed supply’ related to delivery being a “significant component” of freight service will be covered.

Consultation ends on February 1.

According to financial services giant Deloitte, road freight, along with certain other sectors, is viewed as one of the “high-risk industries” for taxation.

Fellow financial services firm BDO Australia has already flagged the issue of unintended consequences in he way the ‘black economy’ is addressed.

“BDO acknowledges that the black economy imposes significant costs to Australia and, in particular, on honest businesses and individuals,” it says.

“However, we hope to see the Government’s implementation of its proposed measures to ensure that they do not impose significant new compliance burdens on honest businesses, in order to capture the cheats.

“Businesses who are engaging in the black economy should be on edge, given the significant funding that has been allocated to combating such behaviour.”

Read how the ATO is viewing claimable amounts for drivers, here

The developments come as the federal government also moves to deny an income tax deduction for certain employee/contractor payments if the associated withholding obligations have not been complied with.

This aims to encourage compliance under Pay As You Go (PAYG) withholding tax, one of the major issues government has identified in tackling the cash economy.

Meanwhile, action to deter and disrupt illegal phoenix activity has been bolstered by new Insolvency Practice Rules.

According to assistant treasurer Stuart Robert, “will ensure that illegal phoenix operators and those who collude with them are unable to stack votes to the detriment of honest creditors.

“The Government will also provide an additional $8.7 million over four years from 2018-19 to increase funding for the Assetless Administration Fund.”

The Fund is administered by the Australian Securities and Investments Commission (ASIC) to finance preliminary investigations and reports by liquidators into the failure of companies with few or no assets, where this may lead to ASIC enforcement action, with a particular focus on curbing fraudulent phoenix activity.

“This additional funding will increase ASIC’s ability to fund liquidators, who play a vital role in investigating and reporting illegal phoenix activity, including supporting the new liquidator avenues to recover assets lost through illegal asset stripping activity,” Robert says.

Other recent actions include introducing a new Phoenix Hotline, which makes it easier to report suspected phoenix behaviour to the ATO, the introduction of legislation to address corporate misuse of the Fair Entitlements Guarantee scheme and the establishment of the Phoenix, Black Economy and Serious Financial Crime taskforces.

An explanatory statement can be found here.

The full Draft Law Companion Ruling LCR 2018/D8 can be found here.


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