Current employment tax challenges

Written by 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

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

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

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
    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

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.

tax administration

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

Members, we welcome your
thoughts via the Vine
Feedback inbox

Kind regards,

Paul Ellis, CTA


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