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 clients to ensure the conditions of approval are being adhered to, assessments are accurate, records are kept, and 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 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 been 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) in assessing liability for duty

  • applying exemptions or concessions incorrectly when making assessments.

Case study, surcharge purchaser duty: temporary resident

Mrs M signed a contract to purchase a home on 14 October 2016. Mrs M 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 M has lived in Australia since 1 July 2015 and has not left the country since.

Mrs M 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 M was ordinarily resident in Australia at the contract date. We issued a notice of assessment for surcharge purchaser duty, plus interest and penalties.

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:

  • 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:

  • not advising that a property, for which 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.

Case study: principal place of residence

Mr A purchases vacant land with a land value of $1,000,000 which he intends to build his PPR. However, he already owns a small residence with a land value of $200,000 that he uses as his principal place of residence (PPR).

Mr A is not eligible for the intended PPR exemption because he is living in a property which he owns. The property with the smaller land value will be considered to be his PPR, even though the other property has a higher land value.

Case study: land tax and primary production land

Mr and Mrs T own a small acreage property that they visit during the weekends. On this property they have a small number of fruit trees which they harvest and give the produce to their friends and family. Mr and Mrs T lodge a primary production land application form because they have fruit trees on the property. The application is not allowed as it is determined that the land is used in pursuit of a hobby.

First home benefits compliance

Our first home benefits (FHB) compliance program focuses on ensuring that first home buyers benefiting from any first home buyer duty concession or exemptions 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 residence 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 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.

Case study: first home owner grant

A recipient, Mr L received FHOG and FHNH benefits. Mr L moved some of his belongings to the ‘property’ for which he received the benefits. He decided to keep his bed and other belongings at his parents place.

Mr L signed a statutory declaration claiming he resided at the property during the required period and he supported this with energy and water bills and bank statements which had been addressed to the grant property. However, his bank statements showed regular withdrawals from various sources near his parents’ property during the required period and his water bills confirmed low water consumption.

It transpired that Mr L was only visiting the property for which he received the benefits to take out the bins and pick up his mail. He slept and performed other domestic duties such as laundry at his parents’ property, where he was actually residing.

The Chief Commissioner was not satisfied that Mr L met the residence requirement as he did not treat the property as his principal place of residence. The Chief Commissioner revoked the benefit under s12 of the First Home Owner Grant (New Homes) Act 2000 and the benefit under s76 of the Duties Act 1997.

Mr L had to repay the $15,000 grant as well as an additional penalty. He also had to repay the stamp duty with interest and penalty.

Parking space levy compliance

This program ensures liable property owners correctly pay levies.

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

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 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:

  • 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.

Case study: payroll tax grouping

Mr and Mrs W 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 payments to 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

  • 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:

  • 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 for insurance products and insurance customers where not eligible.

Case study: insurance duty - 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 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 that fail to lodge 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

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 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.

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 fraudulent 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 2017-18 compliance results

As part of our compliance results for 2017-18, we:

  • conducted 162 duties audits and identified over $920,000 in additional duty

  • conducted audits of 4125 EDR transactions, identifying $785,000 in additional duty

  • conducted investigations of 33 transactions relating to surcharge purchaser duty, identifying $832,000

  • conducted investigations of 657 transactions relating motor vehicle investigations, identifying $1.45m

  • conducted investigations of 26 transactions relating to duty investigations, identifying $359,000

  • investigated over 25,000 landholders that were either not assessed for land tax or had incorrect exemptions applied. This resulted in 17,172 new liabilities and identified $224.6 million in additional land tax

  • conducted 232 duties landholder and land rich investigations, which identified an additional $40.5 million in duty

  • audited 5,530 registered payroll tax customers which identified $180.6 million in additional payroll tax revenue

  • undertook 179 audits of refund request claims resulting in the amount of the claims being reduced by $1.8m

  • contacted over 2,077 employers not registered for payroll tax that our data matching suggested may be liable. Of these, 2,018 were found to be liable which identified $63.3 million in additional payroll tax revenue

  • audited 79 Job Action Plan claims resulting in a reduction of $62.1m in amounts approved for payment

  • completed 79 First Home Owner Grant investigations, which resulted in 54 recipients having to repay the grant with a value of $965,000 including penalties

  • completed 158 First Home Plus and First Home-New Home investigations, which resulted in 41 duties exemptions or concessions being repaid. The cancellation of these exemptions and concessions resulted in $849,000 in additional duty, including interest and penalties

  • conducted 25 Insurance Duties investigations identifying over $6.3 million in additional revenue

  • Completed two Health Insurance Levy investigations identifying $200,000 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, however we are unable to disclose the results of any compliance action taken as a result of a disclosure made against another person or business.

Phone
1800 806 592*
8.30am - 5.00pm Monday to Friday
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Last updated: 9 August 2018