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How we ensure compliance

We employ a range of compliance programs across the taxes and benefits we administer.

Duties compliance

This compliance program focuses on individual transactions and Electronic Duties Returns (EDR) clients who assess documents on behalf of customers.

Initiatives include:

  • conducting audits on EDR customers to ensure the accuracy of their assessments as well as systems and procedural compliance

  • identifying transactions where duty has not been paid or was underpaid

  • identifying and investigating the duty payable in transfers of motor vehicle registrations if there are discrepancies between the declared value by the ‘seller’ and ‘buyer’ of the vehicle

  • reviewing high value property transfers reviewing and investigating the duty paid in property transfers with a dutiable value over $3 million

  • reviewing and investigating recipients of the new home grant where information indicates that the grant was paid to ineligible applicants, multiple grants were paid to a purchaser within a financial year or multiple grants have been paid against the same parcel of land

  • 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:

  • 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

  • not including goods and services tax (GST) in assessing liability for duty on conveyances

  • failing to declare the correct status of the purchaser/transferee to Revenue NSW

  • not reviewing the purchaser/transferee declaration to determine whether customers are ordinarily resident or foreign under chapter 2A of the Duties Act 1997.

Case study on surcharge purchaser duty: a permanent resident who did not meet the residency requirement

Mr Lee signed a contract to purchase a home on 4 July 2016. Mr Lee was granted a Skilled Independent Visa (SI-189) visa on 1 June 2016 and remains on this visa to date.

Mr Lee travelled overseas on 4 January 2016 and returned on 3 July 2016 to sign the contract for his home the next day. He returned overseas on 31 December 2016, and came back to Australia on 31 March 2017. In the year preceding the contract date (i.e. 4 July 2015 to 4 July 2016), Mr Lee was in Australia for 184 days (from 4 July 2015 to 3 January 2016, and on 4 July 2016). In the year following the contract date (4 July 2016 to 4 July 2017), Mr Lee was in Australia for 273 days.

While Mr Lee holds a permanent visa, he would be liable for surcharge purchaser duty as he was not in Australia for greater than 200 days (aggregate) in the year preceding the contract date. Therefore he did not meet the requirements under section 104J of the Duties Act 1997.

The Chief Commissioner was not satisfied that Mr Lee was ordinarily resident in Australia at the contract date and subsequently, Revenue NSW issued a notice of assessment to for surcharge purchaser duty, plus interest and penalties.

Case study on surcharge purchaser duty: temporary resident

Mrs Murphy signed a contract to purchase a home on 14 October 2016. Mrs Murphy was granted a Student Guardian (TU-580) Visa on 1 January 2016 and remains on this visa to date. Her visa expires on 1 January 2020. Mrs Murphy has lived in Australia since 1 July 2015 and has not left the country since.

Mrs Murphy is liable for surcharge purchaser duty because she holds a temporary visa and her continued presence in Australia is subject to a limitation imposed by law.

The Chief Commissioner was not satisfied that Mrs Murphy was ordinarily resident in Australia at the contract date we issued a notice of assessment for surcharge purchaser duty, plus interest and penalties.

First home benefits compliance

The first home benefits (FHB) compliance program focuses on ensuring that applicants under first home buyer schemes satisfy the eligibility and residency criteria. Such schemes include: the first home owner grant (FHOG); FHOG (new home); and first home benefits available under the Duties Act 1997 such as first home plus (FHP); first home new home (FHNH); and first home buyers assistance (FHBA).

All first home buyers who receive benefits under the various schemes are matched against information held by third parties, to determine that they have met these criteria. Applicants found to be ineligible for the schemes are required to repay the benefits back to us, which may include additional penalties and interest.

Initiatives include:

  • identifying and investigating applicants who fail to meet the residency 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 contracts which may have been granted during the transitional period

  • continuing to audit financial institutions that process applications on our behalf

  • investigating anonymous disclosures reported through the compliance line.

Common errors:

  • recipients leaving the property vacant for six months or more while renovating, and claiming they have occupied the property as their principal place of residence

  • recipients leasing the property under a residential tenancy agreement that grants a right of exclusive occupation of the property to the tenant. In most cases, the landlord (i.e. the recipient) does not have permission to occupy it as their principle place of residence

  • recipients do not understand what constitutes occupying a property as their principle place of residence during the required period.

Case study: first home owner grant

A caller contacted the compliance line to report a FHOG recipient, Mr Smith, who had privately rented out his property since its purchase. The caller stated Mr Smith had attempted to hide the fact he wasn’t living at the property by having all his mail delivered to the property.

Mr Smith signed a statutory declaration claiming he had resided at the property during the required residency period, and supported this with utility bills, however his bank account statements showed regular cash deposits. We visited the property and spoke to the tenants who confirmed they paid cash rental deposits to Mr Smith. The tenants claimed Mr Smith lived with them in the property as they were friends. Further investigation showed the property only had two bedrooms and the tenants were residing in the property without Mr Smith.

The Chief Commissioner was not satisfied that Mr Smith met the residence requirement under s12 of the First Home Owner Grant (New Homes) Act 2000. Mr Smith had to repay the $15,000 grant as well as an additional penalty.

Land tax compliance

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

Initiatives include:

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

  • identifying and auditing land owners who received the benefit of multiple thresholds because they failed to provide information relating to aggregation

  • investigating and contacting customers where information available to us suggests claims for exemptions are incorrect, particularly around principal place of residence and primary production land

  • 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, which may include existing customers and new property owners.

Common errors:

  • not advising that a property which has claimed a principle place of residence exemption is now rented to another person

  • incorrectly claiming the primary production land 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 a change in land use

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

Case study: land tax and unit trust

A company purchased land as trustee for a unit trust. The trust was not registered on the deed of title and our information stated the land was held by the company. An assessment was issued based on the information in the company’s name.

Data matching against external data identified the land was held in the trust and the company was investigated. As most trusts don't receive the threshold, we needed to determine the type of trust to see if it was liable.

After reviewing the trust deed, we found it to be a special trust and should not be receiving the threshold. We issued amended assessments including further liability.

Case study: land tax and primary production land

Mr and Mrs Brown own a small acreage property but do not reside there. The property is rented to tenants who also keep a small number of grazing livestock on the property. The Browns lodged a primary production land application because of the livestock on the property. We reviewed the application and determined that the rental aspect of the property was the dominant use and therefore the primary production land exemption did not apply.

Parking space levy compliance

This program ensures liable property owners correctly pay levies.

Initiatives include:

  • investigating property owners to validate 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

This 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 include:

  • continuing to audit unregistered businesses that may be liable for payroll tax

  • investigating businesses where taxable wages may have been understated

  • conducting specific reviews where the fringe benefits component may have been under-declared

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

  • reviewing all refund requests and investigating high value requests, as well as employers whose taxable wage declarations appear to be anomalous with other available data

  • reviewing selected Jobs Action Plan payroll tax rebate applications

  • targeting non-complying employers in various industries including construction, IT, real estate, security, labour hire, and cleaning or employers who fail to declare payments to payroll-tax-liable contractors

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

Common errors:

  • 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

  • not using the correct grossing-up factor when 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

  • not declaring wages paid to workers on-hired to clients under a labour hire arrangement.

Case study: payroll tax grouping

Mr and Mrs Adams own and operate two real estate agencies. They are the only directors and shareholders of both companies. Both businesses employ staff in NSW and individually each business has wages less than the payroll tax threshold.

We investigated the businesses, and determined they should be grouped for payroll tax because of common shareholding and directorship. We issued payroll tax assessments to the businesses based on the aggregate total of the wages.

Case study: payroll tax and contractors

We investigated a building company that engaged a significant number of contractors. The company was unaware that some contractor payments are liable, and thought that if a contractor obtained an ABN and was not paid wages, the company would not be liable for payroll tax.

Our investigation found 15 contractors should have been included as taxable wages because they did not satisfy any of the nine exemptions available. We found these contractors were mainly sole traders and companies with one employee that did not engage labour and had worked the entire financial year providing labour to the building company. These contractor payments were subsequently  included as taxable wages for payroll tax.

Insurance duty

This program focuses on ensuring that insurers have paid the correct duty on their policies.

Initiatives 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:

  • 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

  • non-eligible exemptions being claimed for insurance products and insurance clients.

Case study: insurance duty and incorrect classification and rates

Classifying plant and machinery policies as motor vehicle insurance duty is a common error. Motor vehicle insurance duty is deemed to be type B insurance and insurance duty is payable at a rate of five per cent of the premium.

Recent compliance audits identified insurers including items of plant and equipment not permanently attached to the primary vehicle or a trailer, as motor vehicle insurance. These items are not considered motor vehicle insurance and duty should be calculated as type A insurance, payable at nine per cent of the premium.

If a Plant and Equipment policy includes items of equipment that meet the definition of motor vehicles and other items that are usually removed for use, from the vehicle or trailer, the insurer must apportion duty as both Type A and Type B insurance.

Health insurance levy

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

Initiatives include:

  • verifying the correct levy was paid

  • verifying any exemption claimed

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

  • following up funds that fail to lodge monthly returns.

Mineral royalties

This program focuses on ensuring that leaseholders in NSW have correctly paid royalty.

Initiatives include:

  • verifying that royalty was calculated in accordance with the regulations

  • verifying foreign exchange gains and losses were 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.

Prosecuting evasion and fraud

We prosecute deliberate evasion and fraud to ensure NSW taxes and benefits are fair and equitable.

Initiatives include:

  • conducting extensive data matching with third parties to ensure customers comply with their tax and benefits obligations

  • investigating suspected cases with a view to prosecution

  • instigating prosecution action against customers who deliberately provide false and misleading information concerning their tax and benefit liabilities

  • initiating prosecution action for failure to comply with formal notices requesting information

  • publicising prosecution outcomes to raise public awareness.

Phoenix activity

We are a member of an interagency Phoenix Taskforce that aims to establish a coordinated approach to identify individuals and entities engaging in fraudulent activity. This activity allows these operators to avoid obligations such as state and federal taxes and employee entitlements. The Taskforce allows government agencies to share information across jurisdictions and develop strategies to minimise revenue loss.

Computer assisted verification for payroll tax

If you maintain electronic financial records, Revenue NSW may employ computer assisted verification (CAV) techniques to analyse your records when conducting payroll tax audits and investigations. These techniques will not be appropriate in every case.

CAV allows us to:

  • minimise disruption to business activities by reducing the time investigators spend on your business premises

  • improve case turn-around times

  • save costs, reduce paper and increase efficiency by providing information electronically.

Summary of our 2016-17 compliance results

As part of our compliance results for 2016-17, we:

  • conducted 533 duties investigations and identified over $1.8m in additional duty

  • conducted audits of 2,918 EDR transactions, identifying $364,000  in additional duty

  • investigated over 21,200 landholders that were either not assessed for land tax or had incorrect exemptions applied. This resulted in 15,500 new liabilities and identified $175.5 million in additional land tax

  • conducted 260 duties landholder and land rich investigations, which identified an additional $42 million in duty and land tax

  • audited 5,631 registered payroll tax clients which identified $177.5 million in additional payroll tax revenue

  • undertook 121 audits of refund request claims resulting in the amount of the claims being reduced by $4.5m

  • contacted over 2,326 employers not registered for payroll tax that our data matching suggested may be liable. Of these, 2,264 were found to be liable which identified $54.7 million in additional payroll tax revenue

  • audits of 63 Job Action Plan claims resulted in a reduction of $35.4m in amounts approved for payment.

  • completed 204 First Home Owner Grant investigations, which resulted in 76 recipients having to repay the grant with a value of $1 million, including penalties

  • completed 80 First Home Plus and First Home-New Home investigations, which resulted in 45 duties exemptions or concessions being repaid. The cancellation of these exemptions and concessions resulted in $874,000 in additional duty, including interest and penalties

  • conducted 39 Insurance Duties investigations identifying over $2 million in additional revenue.

  • Completed 7 Health Insurance Levy investigations identifying $90,000 in additional revenue.

Compliance hotline

Contact us to make a voluntary disclosure of understated liability or to report a member of the public. Voluntary disclosures attract a reduced level of interest compared to cases where we identify the understatement.

We assure confidentiality and welcome any information about non-compliance relating to the taxes, duties and grants we administer.

Phone
1800 806 592*
8.30am - 5.00pm Monday to Friday
Email
 

Last updated: 30 October 2017