Compliance activities

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) clients who assess documents.

Initiatives include:

  • conducting audits on EDR clients to ensure the conditions of approval are being adhered to, assessments are accurate, records are kept, that their systems and procedures adhere to the Directions for Using Electronic Duties Returns; and to identify transactions where duty has not been paid or has been 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 that may be 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

  • using a range of data matching initiatives, based on internal and external data, to ensure compliance by identifying transactions that have not beeen lodged for assessment

  • 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 reviewing the purchaser/transferee declaration to determine whether customers are ordinarily resident or foreign as prescribed under Chapter 2A of the Duties Act 1997

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

  • not complying with legislative and evidentiary requirements

  • not following EDR procedures (including record keeping) as described in the Directions for using Electronic Duties Returns

  • using 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

  • processing vacant land and non-residential transactions as off-the-plan

  • not including Goods and Services tax (GST) when assessing liability for duty

  • applying exemptions or concessions incorrectly when making assessments.

Land tax/land tax surcharge

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 include:

  • providing online services to allow customers to view and update their land ownership details

  • 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 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 land tax surcharge. This may include existing customers and new property owners

  • working closely with other agencies to better share information

  • providing webinars and seminars to our customers to better inform them of their land tax obligations

  • meeting with peak industry bodies.

Common errors for land tax returns include:

  • not advising that a property, for which a PPR exemption has been claimed, 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

  • incorrectly declaring foreign status.

First home benefits (FHB)

Our first home benefits (FHB) compliance program focuses on ensuring that first home buyers benefiting from any first home buyer duty concession or exemption under the Duties Act 1997 (Such as the First Home Buyers Assistance Scheme) or the First Home Owner Grant (FHOG) under the First Home Owner Grant (New Home) Act 2001 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, which may include penalties and interest

Initiatives include:

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

  • identifying transactions that may not meet the eligibility and residency criteria through a range of data matching initiatives using internal and third party sources (such as utility companies, financial institutions and Government agencies)

  • 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

  • continuing to audit Approved Financial Institutions who process First Home Owner Grant applications on our behalf to ensure that appropriate system, record keeping and processing controls are in place

  • investigating anonymous disclosures reported through the Compliance line.

Common errors for first home benefits (FHB) include:

  • FHB recipients not understanding the definition of defacto relationships as it applies to the Duties Act 1997 and the First Home Owner Grant (New Homes) Act 2000
  • FHB recipients not understanding that leasing the property for 12 months under a residential tenancy agreement that grants a right of exclusive occupation to the tenant. The landlord (i.e. the FHOG recipient) does not have permission to occupy it as their principal place of residence, 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 principal place of residence. ‘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 principal place of residence 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 include:

  • using data to ensure correct exemptions are claimed

  • liaising with property owners to educate them on their responsibilities

  • conducting field audits, which 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 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 premiums received for 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

  • verifying that insurers have correctly apportioned premiums for different risks covered under a single policy and paid duty accordingly

  • verifying that premiums received for all policies have been included in duty calculations

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

  • verifying that the correct duty has been paid on insurance policies placed with foreign insurers

  • verifying that duty has been paid on policies of self-insurance

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

Common errors for insurance duty include:

  • applying incorrect classification of Type A and Type B risks for general insurance products

  • applying incorrect classification of policies between life and general insurance

  • using incorrect methods of apportionment in cases where a single policy covers risks in multiple jurisdictions

  • claiming refunds of duty paid on life insurance premiums where the policy is cancelled more than 30 days after it commenced

  • claiming exemptions being claimed for exemptexemptions for 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 include:

  • verifying that the levy paid has been correctly calculated

  • verifying that any contributors excluded from the calculation are eligible

  • 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.

Common errors for health insurance levy include:

  • failing to correctly determine the number of contributors to the fund on the first day of each month

  • not modifying the number of days in the month when calculating the levy

  • not adjusting the yearly rate after the March quarter of each year

  • not keeping adequate records.

Mineral royalties

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

Initiatives include:

  • verifying that royalty has been calculated in accordance with the regulations

  • verifying that the correct quantity of minerals recovered has been returned

  • verifying that the correct value of minerals disposed of has been returned

  • 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.

Common errors for mineral royalties include:

  • not declaring all minerals recovered

  • calculating royalty using the incorrect rate

  • incorrectly calculating foreign exchange gains and losses

  • not keeping adequate records.

Last updated: 9 August 2018