Written by Paul Ellis
Paul
Ellis
is an Employment Taxes partner with EY’s People Advisory Services practice. He
chairs The Tax Institute’s National FBT and Employment Taxes Technical
Committee.
Current
employment tax challenges
Taking a
proactive approach in identifying key trends and issues and recommending
improvements to the employment tax and superannuation systems is an important
focus of the Institute’s National FBT and Employment Taxes Technical
Committee.
Employment taxes
present a uniquely interlocking web of State and Federal obligations, which
continue to present increasing challenges. At the same time, it is becoming
increasingly more difficult to resolve complex issues, whether with the tax
authorities or through legislative change, where required. In addition to these
challenges, we are also simultaneously on the cusp of a growing digital tax
administration era, which is already shaping future employment tax compliance
strategies.
Resolving
complex matters
Certainty of
treatment is of critical importance to taxpayers. However, in employment taxes,
there are now a number of key areas where taxpayers have had to live with
uncertainty through multiple compliance cycles, the most notable being:
- Defining “commercial car park” for FBT purposes – The Qantas decision in 2014
extended the potential reach of the FBT car parking provisions beyond CBDs
and the ATO has had Taxation Ruling TR 96/26 under review since that time.
In the meantime, expansion in the type and nature of car parking
arrangements continues to create uncertainty and catch taxpayers well
beyond the original intended reach of the rules. Urgent clarification
and/or legislative change are required to arrest this unintended scope
creep of the parking rules.
- FBT taxi travel exemption – State-based taxi licensing
laws are evolving in response to Uber and other similar operators changing
the face of the taxi industry. However, the ATO continues to resist,
insisting that FBT taxi travel exemptions be limited to licensed taxis and
exclude ride sharing services (see link),
notwithstanding that the 2017 Uber
GST case provides a basis to broaden the exemption to a more practical and
commercial approach.
- FIFO workers – The John
Holland case in 2015 provided a welcome approach to updating
FBT rules applicable to FIFO workers. However, the ATO has been slow to
embrace this change with objections filed by many taxpayers to recover FBT
previously paid in relation to FIFO workers still bogged down in ATO red
tape, in some cases for periods approaching 3 years.
- Business travel – Consultation with the ATO to update
its approach to business travel more broadly has also been ongoing.
However, finalisation of TR 2017/D6 is still pending.
- Contractors – As the gig economy continues to grow, the
labyrinth of State and Federal employment tax obligations in relation to
contractors make the engagement of contractors a potential
minefield.
Many of these
have been ongoing issues for too long already. If existing ATO processes can’t
resolve these issues, which impact a broad range of taxpayers, maybe it is time
to investigate alternative mechanisms that can.
Digital
tax administration
Tax
administrations around the world are increasingly embracing the digital world
at a rapid pace, with Australia being no exception. Two common characteristics
are readily identifiable. The first is the ever-increasing requirements for
source data to be provided in digital form. In the Australian employment tax
environment, the advent of Single Touch Payroll is a key development here, as well
as the expanding electronic collection of contractor data. The second
characteristic is the increasingly advanced use of data matching and data
analytics. Indeed, the ATO recently hired a digital tax specialist to head up
its data analytics function and increase its capability in this area.
Future employment
tax strategies need to be driven by the increasing availability of real time
data rather than by reaction to historical filings. The key lies both in
developing a data strategy for proactive compliance that keeps taxpayers ahead
of the revenue authorities as their data analytics becomes more sophisticated,
as well as finding ways to utilise business knowledge to harness data and
develop processes that are both more efficient and provide valuable business
insights.
Members, we welcome your
thoughts via the Vine
Feedback inbox.
Kind regards,
Paul Ellis, CTA