Australia's largest ever payroll fraud

What happened - at a glance

Plutus Payroll Australia Pty Ltd and associated entities (Plutus) provided payroll services to businesses, including responsibility for paying remuneration to their clients' employees, and remitting Pay As You Go Withholding (PAYGW) tax to the Australian Taxation Office (ATO) on a periodic basis. For these services, clients would generally pay to Plutus the gross remuneration required to fund payments to their employees.

A joint operation (Operation Elbrus) between the Australian Federal Police (AFP) and the ATO identified that Plutus had not been remitting the full amount of PAYGW tax due to the ATO, or superannuation contributions due to be paid into superannuation funds. It has been alleged by the AFP and ATO that the funds ‘withheld’ were inappropriately used by a number of individuals involved in the Plutus structure for personal purposes.

The future for payroll services - what happens next?

It is important to recognise that the alleged actions being investigated under Operation Elbrus are not viewed as being a result of any tax loop holes, or systemic poor governance across the industry. There is no suggestion that other payroll providers are guilty of similar actions.

In any case, the confidence of businesses that utilise the services of a payroll provider, or are considering outsourcing this vital organisational function, will have taken a hit. While most outsourced payroll providers will already have their processes under control – the industry will no doubt be challenged to demonstrate the robustness of their governance, and to offer sufficient transparency and even insurance to their clients as to how their funds have been appropriated.

It may also be that the revenue authorities will impose an additional level of reporting processes onto this industry – however, we are hopeful that any such reaction will be measured.  It is worth noting that the forthcoming introduction of Single Touch Payroll will already provide an increase in transparency without requiring further reporting by taxpayers. 

IGOT Review into the ATO’s employer obligations compliance activities (Cth)

The Inspector General of Taxation (IGOT) has released his report in relation to the Review into the ATO’s employer obligations compliance activities. The IGOT has made various recommendations including:

·       two recommendations for the Government’s consideration which are aimed at reducing compliance costs through a review of the Fringe Benefits Tax regime and expanding the Taxable Payments Reporting System to the engagement of contractors across all industries, and

·       nine recommendations to the ATO which address the compliance burden and deal with a number of other important issues such as the classification of workers as contractors or employees, the ATO’s capability framework and risk identification processes as well as the implementation of the Single Touch Payroll initiative. The ATO has agreed in full or in part with seven of the nine recommendations.

2017-18 QLD Budget

The Queensland Budget for the 2017-18 financial year was handed down during the month. Among other measures, the Budget extends the existing payroll tax rebate on the wages of apprentices and trainees at the rate of 50 per cent until 30 June 2018. This rebate was previously scheduled to end on 30 June 2017.

Tasmania Premier announces payroll tax relief for new trainees and apprentices

The Tasmanian Premier has announced that from 1 July 2017, if a business employs a new apprentice or trainee, payroll tax relief will be available on that new position for two years.  Additionally, if a business employs a young Tasmanian aged between 15 and 24 who isn’t a trainee or an apprentice, the employer will be eligible for payroll tax relief for up to 12 months.

This follows an earlier announcement of an AUD2 million pilot program to support small businesses below the payroll tax threshold to employ apprentices and trainees, with incentive payments of up to AUD4,000 for each job created.

Release of FY18 PAYG withholding tables (Cth)

The Taxation Administration Act Withholding Schedules 2017 were released during the month and outlined the correct PAYG withholding rates to apply from 1 July 2017 to a number of payments including payments to employees, unused leave payments, bonuses and payments to working holiday makers.

Simplified approaching for calculating car fringe benefits on fleet cars (Cth)

Following the recent release of PCG 2016/10 by the ATO, a series of frequently asked questions have been made available to assist taxpayers in their interpretation of the application of PCG 2016/10 Fleet Cars: simplified approach for calculating car fringe benefits.

Any taxpayers currently using PCG 2016/10 or planning to use this practical compliance guideline in future Fringe Benefits Tax (FBT) years in calculating the taxable value of their fleet vehicles under the operating costs method should refer to this information when determining their eligibility to apply PCG 2016/10.

Changes to employee declarations for FBT

The ATO has updated five employee declaration forms for FBT to reflect changes to FBT laws starting 1 April 2016.

The employee’s car declaration has changed to show that the ‘33 1/3%’ method is no longer used. The other declarations have been updated to reflect the 'multiple cents per kilometre rates based on engine type and capacity' no longer applies.

The affected employee declarations include:

·       employee's car declaration,

·       employment interview or selection test declaration – transport in employee's care,

·       declaration of car travel to work-related medical examination, medical screening, preventative health care, counselling or migrant language training,

·       relocation transport declaration, and

·       remote area holiday transport declaration.

State Revenue Office of Victoria replaces paper-based payroll tax forms

The State Revenue Office of Victoria has replaced following paper-based payroll tax forms with online SmartForms:

·       Nomination of designated group employer – PTA-Form-02

·       Employment agency contracts declaration by exempt client – PTA-Form-03

·       Employment agency contracts chain of on-hire declaration – PTA-Form-04

·       Application for exclusion from grouping – PTA-Form-05

Taxpayers that need to complete any of the above forms can now use the corresponding online SmartForm as an alternative to the existing paper form.

Supreme Court of Victoria rules on exemption from payroll tax

The Supreme Court of Victoria in Telecommunications Industry Ombudsman Ltd v Commissioner of State Revenue has held that wages paid by the Telecommunications Industry Ombudsman (TIO) are exempt from payroll tax pursuant to section 48(1) of the Payroll Tax Act 2007 (VIC), as the TIO is a “non-profit organisation having as its ... dominant purpose a charitable ... purpose”.