Hi all
My friend in Adelaide is working as an individual contractor(IT services) to my company and I pay him on his ABN incl GST.(as his yearly estimate is above the threshold)
He received this letter from ATO
https://files.ozbargain.com.au/upload/137114/94981/aa52dc9d-…
Is there anything to worry about or can someone give some tips on the type of questions that ATO may ask(if experienced in the past)
Thanks in advance
Thanks
Might want to redact it further 🤣
Auto generated. Stock standard. Your friend will be fine.
It's called an audit
No, this is an inquiry.
Ok. A low level audit?
nobody expects the spanish inquistition
Call ATO, ask for Melinda. She's obviously concerned about your GST registration.
If you google the phone number, you'll see it is really the ATO
https://www.ato.gov.au/about-ato/contact-us/
Best for them to give them a call and sort it out.
Yeah it is legit
Is this shame contracting?
https://www.fairwork.gov.au/find-help-for/independent-contra…
You could be liable for penalties and super.
No it’s not. Client pays to my company(Pty) and I pay him to his sole trader ABN.
Both agreements are contract
What percentage of his income comes you, are you his only client? How long has he worked for you for?
You mean Sham Contracting?
Shame Shame Shame…
Get your friend who just so happens to have given you the letter to contact his accountant and ask them what to do.
That’ll be done tomorrow. Posted here to gather thoughts
@AustriaBargain "What percentage of his income comes you, are you his only client? How long has he worked for you for?"
This is what the "inquiry" is all about. No genuine business = no business deductions and no associated GST credits claimed.
Have a tax professional represent your friend in the phone call - they'll also advise of any weakness with your current arrangement. You IT blokes makes some serious money and your industry is always on their list of potential targets for revenue raising.
Btw, make sure they're getting a tax practice partner/principal or senior accountant to handle dealings with the ATO here. What gets said/written between the ATO and your friend matters to the result. Good luck mate.
Pretend you can't read and throw in the bin
They’ll cancel the GST registration
Maybe your friend has not been declaring his GST income to the ATO and hence the letter.
Have you declared the money given to your friends ABN as part of your TPAR submission? The ATO would have matched your declaration against his tax returns and if there are discrepancies; that would raise flags.
I have my company setup only in Nov’21 and haven’t reached the deadline to declare TPAR(which is August yearly)
My friend did file his first BAS and also paid the GST
Could be anything from a routine enquiry to "less than ideal" business practices have been discovered.
If the former you your friend will be fine after answering whatever questions they have.
If the latter, and it is founded, you your friend may wish to bulk buy some lubricant speak to a professional in this area, take advice, and be prepared to make financial amends with the ATO.
What are these financial amends usually? Fine and interest ?
That's where it starts … and for garden variety breaches that's likely where it finishes. Depending on the situation, it is possible to cop a fine somewhere in the $1,000 region, obviously plus any unpaid taxes and interest.
It's where there is an "intent" to deceive/defraud, coupled with relatively large amounts of unpaid tax that real dramas can begin.
how will they prove the "intent" though? it's not like they can read minds, or can they?
it will be like 'he says, she says' situation
OP’s
Location
sydney
Friend
in Adelaide
🤔
IT consulting doesn’t need to be the same city
Might want to redact the name