The Importance of Compliance

Both (death and taxes) are essentially unavoidable. Whether you’re a private business or family-owned, a sole-trader, partnership or not-for-profit, a small business, large multinational organisation or even just an individual earning an income, tax compliance affects us all.

A lot of hard work goes into running a small business, and you often end up wearing many “hats”. One of the most important ones is compliance and ensuring your tax obligations are met. Failing to do so or getting it wrong, can lead to large penalties, back-charges, even a trip to court. Do you know all your tax obligations? Are you compliant?

What is Compliance?

Tax compliance is the degree to which a taxpayer complies (or does not comply) with the tax rules of their country. For example, declaring income, filing a tax return, and paying the tax due in a timely manner. These examples are the main ones that most people know and are applicable for individuals and businesses. But there are many other taxes and reporting that are required to be compliant. Often, this depends on the turnover of your business, the type of business or industry and the number of your employees. Some taxes are administered by the ATO and others are state based taxes. Some examples are:

• Company income tax
• Capital gains tax (CGT)
• Fringe benefit tax (FBT)
• Pay as you go withholding (PAYGW)
• Goods and services tax (GST)
• Fuel tax credit
• Luxury car tax
• Payroll tax

Not all compliance is based on reporting and paying tax – we all know Superannuation is an obligation that requires payment to your employees’ super funds, along with reporting to the ATO. Other “non-tax” compliances are:

• Single touch payroll reporting (STP)
• Taxable payments annual report (TPAR)
• Fairwork obligations
• Workers Compensation
• Registration of your business
• Recording keeping (5years)

How can you make sure you are compliant?

The first step is to understand your obligations. Speak to your accountant to get a thorough understanding of the requirements and deadlines. You can also do your own research by visiting the ATO website or you may want to log in to the government’s Online Services site to view your accounts and statements. Pacific Accounting lists Key Dates on our monthly newsletter or you can visit our website to find due dates and useful links.

Tax compliance is required by law, so precision and timeliness are crucial. Keeping up-to-date accurate financial records will allow you to stay on-top of your requirements—making lodgement and reporting simple. If you don’t have the time or the know-how to manage your financial records and accounts, take on the service of a trusted Bookkeeper. This can’t be recommended highly enough. You will gain the confidence that you are getting accurate records delivered on time. Plus, not only will this help with your compliance—accurate and timely records and reporting will help you run your business better.

The ATO love to be kept in the loop. Lodge on time every time. If you can’t, communicate that to them. If you don’t have the funds to pay when lodgement is due, still lodge on time. Payment arrangements can be applied for and if lodged on time, penalties and interest are often waived. The ATO will chase and penalise when lodgement and payment is late for:

• Business Activity Statement (BAS)
• Company Tax Return
• Superannuation Guaranteed

Your accountant or BAS Agent can help with the preparation of these lodgements and assist with communications with the ATO, applying for deferrals and arranging payment plans.

Tax legislation, compliance orders and other obligations can change from year to year. Some are well advertised. You may see on the news the increase of Super payment or changes to GST, but there are a lot that can be easily missed. Get the support and advice you need to help you stay up to date. Your accountant or bookkeeper should be knowledgeable of upcoming changes to legislation and inform you well in advance of any changes that will affect the running of your business or your compliance needs. Having the right tools like a cloud based financial software will also assist in the changes to tax rates and STP reporting. It also makes lodgement of BAS, Superannuation, TPAR and other obligations, more accurate and efficient.