Compliance activities

Compliance

We aim to complete our audits and investigations with the highest possible standards of integrity and least inconvenience to our customers. Our Investigations factsheet provides customers with information about the audit and investigation process, their rights and obligations and avenues of appeal if they are dissatisfied with an assessment of liability.

We use a number of compliance activities within each of the tax and benefit programs we administer.

Duties

Our duties compliance program focuses on individual transactions and Electronic Duties Returns (EDR) customers who assess documents.

Initiatives to ensure duties compliance in 2016–17 include:

  • conducting audits on EDR clients to ensure the accuracy of assessments and that their systems and procedures adhere to the Directions for Using Electronic Duties Returns (the Directions)

  • identifying transactions where duty has not been paid or underpaid

  • reviewing high value property transfers

  • identifying and investigating transfers of motor vehicle registrations where the correct value has not been used to calculate the duty payable

  • reviewing and investigating property transfers with a dutiable value over $3m and liable to premium property duty where the correct amount of duty may not have been paid
  • reviewing and investigating recipients of the New Home Grant where information available indicates that the grant has been paid to ineligible applicants
  • reviewing and investigating landholder lodgements

  • investigating referrals for landholder transactions where the correct duty may not have been paid

  • reviewing and investigating exemptions and concessions, including corporate reconstructions

  • reviewing and investigating transactions involving Surcharge Purchaser Duty.

Common errors for duties include:

  • not aggregating transactions under section 25 of the Duties Act 1997

  • not following EDR procedures as described in the Directions

  • the use of valuations which may not reflect accurate dutiable values when processing a transaction

  • failing to declare the correct dutiable value when transferring the registration of a motor vehicle

  • practitioners processing vacant land transactions as off-the-plan

  • including Goods and Services tax (GST) in assessing liability for duty on conveyances.

Land tax

Our land tax compliance program focuses on the application of exemptions and thresholds, and the identification of land owners who have failed to register for land tax.

Initiatives to ensure land tax compliance in 2016–17 include:

  • identifying and contacting liable landowners who have not registered with us

  • identifying and auditing land owners who receive the benefit of multiple thresholds because of their failure to provide information relating to aggregation

  • investigating and contacting customers where information available to us suggests claims for exemptions are incorrect, with particular focus on principal place of residence (PPR) and primary production land (PPL)

  • contacting lessees of Crown land who may not be aware of their land tax liability or fail to comply with their obligations

  • using duties purchase transactions to identify customers who hold land on trust

  • identifying and auditing related companies who are claiming the benefit of multiple thresholds and/or reduced tax rates by failing to declare group structures

  • reviewing and investigating customers that are liable for the Foreign Investment Surcharge. This may include existing customers and new property owners.

Common errors for land tax returns include:

  • not advising that a property which has claimed a PPR exemption is leased

  • incorrectly claiming a PPL exemption where land is used as a hobby farm or otherwise not for profit

  • not listing ownership by a trust, or incorrectly listing the type of trust

  • not declaring company group structures

  • not advising of a change in land use

  • not advising all land holdings including part interests in land.

First home benefits (FHB)

Our FHB compliance program focuses on ensuring that first home buyers benefiting from the First Home Owner Grant (FHOG), First Home Plus (FHP), First Home—New Home (FHNH) and FHOG (New Home) schemes satisfy the eligibility and residency criteria. All first home buyers who receive benefits under the various first home benefits schemes are matched against information held by third parties to determine that they have met these requirements. Applicants who are found to be ineligible for the schemes are required to repay the benefits back to us, which may include penalties and interest.

Initiatives to ensure first home benefits compliance in 2016–17 include:

  • identifying and investigating applicants who fail to meet the residence requirements

  • verifying information provided by customers against third party data to identify undeclared spouses, prior ownership, understated duty amounts and inconsistencies between property transfers and FHOG applications

  • ensuring applications under the FHOG (New Home) scheme meet all requirements, particularly with regards to contracts made in accordance with options which may have been granted during the transitional period

  • continuing to audit financial institutions who process applications on our behalf to ensure that appropriate system and processing controls are in place

  • investigating anonymous disclosures reported through the Compliance line.

Common errors for first home benefits include:

  • FHB recipients leaving the property vacant for at least 6 months renovating, and claiming that they have occupied the property as their principal place of residence (PPR)
  • FHB recipients leasing the property under a residential tenancy agreement that grants a right of exclusive occupation to the tenant. In most cases, the landlord (i.e. the FHOG recipient) does not have permission to occupy it as their PPR, and hence will not be able to satisfy the residence requirement.
  • FHB recipients not having a clear understanding of what constitutes occupying a property as their PPR. Living in a property on a ‘temporary or transient’ nature generally will not satisfy the residence requirement. The onus is on the recipient of the benefits to prove that they have continuously occupied the property as their PPR during the required residency period.

Parking space levy

Our parking space levy compliance program focuses on ensuring that liable property owners have correctly paid the levy.

Initiatives to ensure parking space levy compliance in 2016-17 include:

  • investigating property owners to validate their methods for determining concessions
  • investigating registered customers where it appears that the customer is overstating exemptions, including customers who continually claim large exemptions
  • identifying and contacting owners who have not registered with us for parking space levy.

Payroll tax

Our payroll tax compliance program focuses on identifying and contacting liable employers who have failed to register with us for payroll tax purposes, and investigating registered customers who appear to have understated their wages.

Initiatives to ensure payroll tax compliance in 2016–17 include:

  • continuing to audit unregistered businesses where there may be a liability to pay payroll tax

  • investigating businesses where we believe taxable wages have been understated

  • conducting specific reviews where we believe the fringe benefits component has been under-declared

  • identifying employers who are claiming the benefit of multiple thresholds by failing to declare group structures for payroll tax

  • reviewing all refund requests and investigating high value requests and anomalies

  • targeting non-complying employers in various industries, including construction, IT, real estate, security, labour hire and cleaning

  • targeting employers who fail to declare payments to contractors that are liable for payroll tax

  • continuing to improve case selection models, and utilising new technology, to identify non-complying customers

  • following up employers who fail to lodge their monthly and/or annual returns on time.

Common errors for payroll tax include:

  • not registering when total liable wages exceed the NSW threshold

  • not including all liable wages in the total wages calculation, including apprentice/trainee wages, superannuation and taxable fringe benefits

  • incorrectly classifying employees as contractors - in certain cases 'contractors' may be considered to be 'employees' under the Payroll Tax Act 2007

  • not declaring fringe benefits

  • incorrectly listing group status, including not registering a related entity such as:

    • holding subsidiary relationships

    • common control relationships (through shareholders/directors/beneficiaries or any combination of these)

    • common use of employees

  • not declaring interstate wages

  • incorrectly claiming an exemption for certain wages

  • classifying arrangements for the provision of labour as arrangements for the provision of services

  • not including in liable wages, the benefit to employees arising from the grant of shares and/or options

  • late lodgement of monthly or annual returns.

Insurance duty

Our insurance duty compliance program focuses on ensuring that insurers have paid the correct duty on their policies.

Initiatives to ensure insurance duty compliance in 2016–17 include:

  • verifying insurers have correctly classified their insurance policies as general or life insurance

  • verifying insurers have applied the correct rate to calculate the duty 

  • identifying insurers who have incorrectly calculated the duty on their insurance policies

  • monitoring insurance policies placed with overseas or unregistered funds

  • following up insurers who fail to lodge their monthly and/or annual returns on time.

Common errors for insurance duty include:

  • Incorrect classification of Type A and Type B risks for general insurance products
  • Incorrect classification of policies between life and general insurance
  • Incorrect methods of apportionment used in cases where a single policy covers risks in multiple jurisdictions
  • Exemptions being claimed for exempt insurance products and exempt insurance clients where not eligible.

Health insurance levy

Our health insurance levy compliance program focuses on ensuring that organisations providing health benefits to NSW contributors have correctly paid the levy.

Initiatives to ensure health insurance levy compliance in 2016–17 include:

  • verifying the correct levy has been paid

  • verifying any exemption that has been claimed

  • investigating interstate funds that have contributors resident in NSW or using the services of a NSW registered agent

  • following up funds who fail to lodge their monthly returns.

Mineral royalties

Our mineral royalty compliance program focuses on ensuring that leaseholders in NSW have correctly paid royalty.

Initiatives to ensure mineral royalty compliance in 2016-17 include:

  • verifying that royalty has been calculated in accordance with the regulations
  • verifying that foreign exchange gains and losses have been returned correctly
  • checking that deductions claimed are allowed and returned in the correct period
  • following up customers who fail to lodge their monthly and/or annual returns on time.
Last updated: 5 July 2017