Practice Update – December 2022

Lowe Lippmann Chartered Accountants

ATO warning to SMSFs: "Paying the price for non-compliance"


There are various courses of action available to the ATO when trustees of self-managed super funds (SMSFs) have not complied with the super laws, including applying administrative penalties.


A number of factors determine the amount of the administrative penalty, including:

  • the type of contravention;
  • when it occurred; and
  • the number of penalty units that apply.


For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320. This could be even more if there are multiple contraventions.


We note that the Government recently introduced a Bill to Parliament to increase the value of a penalty unit for Commonwealth offences committed on or after 1 January 2023 from $222 to $275, which may make an SMSF trustee exposed to an even larger amount after 1 January 2023.


The ATO imposed total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions such as trustees illegally accessing super benefits, loans, or financial assistance given to members.


Also, just because a trustee receives an administrative penalty doesn’t mean the ATO won't undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.

ATO's record-keeping tips


The ATO has reminded taxpayers that they should understand the record-keeping requirements for their business and keep accurate and complete records as they occur, as this should help them avoid penalties that may apply and reduce the possibility of the ATO denying their expense claims.


The following are some of the ATO's top tips to help businesses get it right and avoid record-keeping errors (based on common record-keeping errors the ATO sees):

  • Keep accurate records of all cash and electronic transactions.
  • Reconcile cash and EFTPOS sales regularly (by ensuring payments recorded internally match external records) and enter the amounts into the main business accounting software system.
  • Check for mistakes if things don't add up.
  • For expenses that are for both business and private use, work out and record the business portion accurately.
  • If the taxpayer has used trading stock for private purposes, remember to account for the stock as if the business sold it, and include the value in the business’s assessable income.
  • Don't use estimates to prepare tax returns and business activity statements (BASs).
  • If claiming credits for GST, set aside the GST in a separate ledger account to make record-keeping and calculations easier.
  • Most records must generally be kept for at least 5 years — from when the record was prepared or obtained, or the transaction or related acts were completed, whichever is later. Records relating to the calculation of losses may need to be kept longer, depending on when that loss is deducted (or offset against a capital gain).
  • Accurate and detailed records must also be kept when paying contractors to provide certain services on behalf of the business (so the business can easily complete its taxable payments annual report at the end of each year).
  • Use the ATO's Record-keeping evaluation tool to find out how well the business is currently keeping its records.

Input tax credits denied due to lodging BASs late


The Administrative Appeal Tribunal (AAT) has held that a taxpayer could not claim $91,239 of input tax credits (ITCs) at least partly because it lodged the relevant BASs more than 4 years too late.


Specifically, the GST Act operates such that, if an extension of time to lodge a BAS has not been granted prior to the expiry of 4 years after the day on which it was required to be given to the ATO, the entitlement to ITCs immediately ceases.


The AAT also noted that there is no discretion to circumvent this part of the GST Act, and the ATO cannot provide further time to lodge a BAS retrospectively outside of the relevant 4 year period.


It did not matter that the taxpayer was (for example) involved in a dispute with a franchisor nor that they were impacted by lockdown restrictions.


Therefore, the taxpayer was no longer entitled to claim ITCs in relation to the BASs lodged by the taxpayer 4 years after they were required to have been given (and was also denied other ITCs for BASs that were lodged within the required 4 year period, as a substantial amount of the ITCs claimed remained unsubstantiated by a valid tax invoice).

Chef spending most of a year on cruise ships still a 'resident'


The AAT has also held that a taxpayer, an Australian chef with over 20 years’ experience both in Australia and overseas, was an Australian resident for taxation purposes in the 2016 income year.


During that year, he spent only 86 days in Australia, being the period prior to him leaving Australia to commence employment with a cruise ship company, and a period during which he visited his family between deployments.


However, the AAT noted that he had no intention that any new place of residence be indefinite, and he did not become a resident of a new place.


Importantly, his 'domicile' for tax purposes (being Australia) did not change (and the AAT stated that "a ship cannot be a domicile").

Requesting stapled super fund details for new employees


The ATO is reminding employers that, when they have new employees that have not provided them with their choice of super fund, super contributions should be made into:

  • the employee's stapled super fund; or
  • the employer's nominated account (but only if the ATO advises that the employee does not have a stapled super fund).


A stapled super fund is an employee's existing super account which is linked, or 'stapled', to them and follows them as they change jobs.



In December 2022, the ATO is releasing a solution that enables employer software and payroll products to request stapled super funds. That is, stapled super enabled software will allow the employer to request stapled super details from within their business software, so they will no longer have to request them separately via ATO online services.


Employers should contact their software provider to find out if their software solution will incorporate the stapled super functionality.


The ATO also encourages employers using the 'bulk request process' to begin discussions with their software providers, as the ATO's current bulk request process will be decommissioned from mid-2023.




Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.


Audit Lowe Down – Costs incurred in acquiring / forming a business

September 9, 2025
Costs incurred in acquiring / forming a business. Further to the recent blog about capitalisation of costs when acquiring an asset, we have received a number of questions in relation to costs incurred in setting up / purchasing a business. Formation costs on establishing a business: These costs would include: Incorporation fees ASIC registration fees Legal fees Business name registration Pre-operating costs Pre-opening costs. The relevant standard for these costs is AASB 138 Intangible Assets and paragraph 69a confirms that these start-up costs are expensed when incurred. There is no identifiable asset controlled by the entity when the costs are incurred as the entity does not exist. Business acquisition costs These costs would include: Legal and accounting fees Due diligence and valuation costs Stamp duty Advisory or brokerage fees Project management costs related to the acquisition Internal costs allocated to the transaction In contrast to the asset acquisition discussed previously, AASB 3 Business Combinations requires all acquisition costs to be expensed as incurred. This means that they are not included as part of the consideration paid and therefore do not affect calculated goodwill.  Entities purchasing businesses should be aware that these costs are not able to be capitalised as they can often be substantial, and purchasers often do not expect the costs to be taken directly to the income statement

Practice Update – September 2025

September 8, 2025
ATO to include tax 'debts on hold' in taxpayer account balances From August 2025, the Australian Taxation Office ( ATO ) is progressively including 'debts on hold' in relevant taxpayer ATO account balances. A 'debt on hold' is an outstanding tax debt where the ATO has previously paused debt collection actions. Tax debts will generally be placed on hold where the ATO decides it is not cost effective to collect the debt at the time. The ATO is currently required by law to offset such 'debts on hold' against any refunds or credits the taxpayer is entitled to. The difficulty with these debts is that the ATO has not traditionally recorded them on taxpayer's ATO account balances. Taxpayers with 'debts on hold' of $100 or more will receive (or their tax agent will receive) a letter before it is added to their ATO account balance (which can be viewed in the ATO's online services or the statement of account). Taxpayers with a 'debt on hold' of less than $100 will not receive a letter, but the debt will be included in their ATO account balance. The ATO has advised it will remit the general interest charge ( GIC ) that is applied to 'debts on hold' for periods where they have not been included in account balances. This means that taxpayers have not been charged GIC for this period. The ATO will stop remitting GIC six months from the day the taxpayer's 'debt on hold' is included in their account balance. After this, GIC will start to apply.

Audit Lowe Down – How do we account for the costs incurred when acquiring an asset?

August 26, 2025
How do we account for the costs incurred when acquiring an asset? When we acquire an asset such as property, plant and equipment, intangibles or inventory there are often significant other costs incurred as part of the purchase process, including delivery, stamp duty, installation fees. Whether we capitalise these to the value of the asset or expense them as incurred can make a significant difference to an entity’s reported position or performance. Since we have accounting standards for specific assets, the treatment can vary depending on the asset and the relevant standard. A summary of some common expenses and their treatment under four accounting standards has been included below. The four standards considered are: AASB 102 Inventories AASB 116 Property, Plant and Equipment AASB 138 Intangible Assets AASB 140 Investment Property.
More Posts