Taxation compliance rules
Issued pursuant to the Financial Management Act 1994
Issued July 2005 (last update March 2014)
The Secretary
Department of Treasury and Finance
1 Treasury Place
Melbourne Victoria 3002
Australia
Telephone: +61 3 9651 5111
Facsimile: +61 3 9651 5298
www.dtf.vic.gov.au
Authorised by the Victorian Government
1 Treasury Place, Melbourne, 3002
© State of Victoria 2014
This work is licensed under a Creative Commons Attribution 3.0 Australia licence. You are
free to re-use the work under that licence, on the condition that you credit the State of
Victoria as author. The licence does not apply to any images, photographs or branding,
including the Victorian Coat of Arms, the Victorian Government logo and the Department of
Treasury and Finance logo.
Copyright queries may be directed to IPpolicy@dtf.vic.gov.au
ISBN 978-1-92222-219-0 (pdf)
Published April 2014
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Contents
A. Introduction ................................................................................................... 1
B. Definitions ...................................................................................................... 2
C. Overview ........................................................................................................ 3
D. Role of agencies ............................................................................................. 4
E. Portfolio and whole of government roles ....................................................... 5
Department of Treasury and Finance .............................................................................................. 5
Portfolio departments ...................................................................................................................... 5
F. Standing Directions of the Minister for Finance.............................................. 6
G. Taxation compliance rules ............................................................................. 7
1.
2.
3.
4.
5.
Registration .............................................................................................................................. 7
Tax focus and planning............................................................................................................. 8
Tax technical compliance ......................................................................................................... 9
Knowledge management ....................................................................................................... 14
Cash flow ................................................................................................................................ 14
H. Taxation compliance review questionnaire .................................................. 16
I. Instructions for use........................................................................................ 17
Appendix: Relevant web links........................................................................... 37
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
i
A. Introduction
Purpose
The purpose of this document is to outline the application of
the Taxation Compliance Rules (the Rules) to VPS agencies.
Relevant Direction
The Rules support Direction 4.5.2 Taxation of the Standing
Directions of the Minister of Finance.
Application
The Rules apply to all VPS agencies that:
 have an Australian Business Number (ABN); and
 have Commonwealth taxation obligations (including goods
and services tax (GST), fringe benefits tax (FBT), pay as you
go (PAYG) and elements of superannuation guarantee (SG).
VPS Agency refers to any public body as defined in section 3 of
the Financial Management Act 1994 or any Government
Department.
Operative date
The updated Rules apply from March 2014.
Requirements
All VPS agencies to which these instructions apply must apply
the Rules in determining their compliance with
Commonwealth taxation obligations.
The Rules include a checklist that must be used in determining
the compliance of the VPS agency with the relevant
Commonwealth taxation obligations. The Rules primarily cover
GST, FBT, PAYG and elements of SG. The Rules also cover
further tax obligations.
Supporting information
Use of the Rules may be supplemented by further checklist
questions as appropriate, dependent on the nature of
activities undertaken by the VPS agency.
Further information –
Taxation web page
Victorian public sector (VPS) agencies can find Department of
Treasury and Finance (DTF) guides on a range of VPS taxation
issues on the DTF taxation web page:
http://www.dtf.vic.gov.au/Government-FinancialManagement/Taxation
Some content may only be accessed by Victorian Government
departments, agencies and entities using a username and
password. Victorian Government users can request access by
contacting the DTF website administrator at
dtfweb@dtf.vic.gov.au and stating the name of the
organisation and job title of the user, and providing details of
the content you require access to.
All references to the taxation web page throughout this
document are to be read as references to the web page that
can be accessed via these internet links.
DTF reference materials on Commonwealth taxation issues can
be obtained via the web page listed above. Links to guidance
material from the Australian Tax Office is also available from
this web page.
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
1
B. Definitions
Defined words are used throughout the Taxation Compliance Rules (the Rules). Where a
conflict occurs between the words defined in the Rules and the words used in any rules or
policies issued by agencies, the definitions in the Rules prevail.
Accountable officer has the same meaning as in section 3 of the Financial Management Act
1994.
Agency/agencies has the same meaning as public sector agency in the Standing Directions
of the Minister for Finance under the Financial Management Act 1994.
Audit Committee has the same meaning as in Direction 2.2 of the Standing Directions of the
Minister for Finance.
Australian Business Number (ABN) is a single identification number that enables businesses
in Australia to deal with the ATO and a range of other government agencies. The ABN is an
11 digit number. An agency will need to have an ABN to register for GST purposes.
Business Activity Statement (BAS) is a form sent to the Australian Taxation Office to report
tax entitlements and obligations.
Chief Finance and Accounting Officer (CFAO) has the same meaning as in section 3 of the
Financial Management Act 1994.
Australian Tax Office (ATO) is the Commonwealth Government’s principal revenue
collection agency.
Fringe benefits tax (FBT) is a tax imposed on a non-salary benefit provided to an agency’s
employee.
Goods and services tax (GST) is a broad-based tax of 10 per cent on most supplies of goods
and services consumed in Australia.
Pay as you go withholding (PAYG) is a single, integrated system for reporting and
withholding amounts and tax on business and investment income.
Minister means the Minister for Finance.
Relevant Minister has the same meaning as in section 3 of the Financial Management Act
1994.
Taxation compliance review questionnaire (Questionnaire) refers to the requirement that
all VPS agencies conduct an ‘independent’ assurance review of taxation compliance at least
annually using the Questionnaire included in the Rules. This was previously referred to as
the taxation compliance review checklist or the checklist.
VPS Agency refers to any public body as defined in section 3 of the Financial Management
Act 1994 or any Government Department.
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Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
C. Overview
The Rules supplement Direction 4.5.2 to assist VPS agencies in meeting their Direction
requirements.
The Rules set out principles and specific procedures to follow so that compliance with
Direction 4.5.2 is achieved. Specifically, the Rules assist VPS agencies to meet their
compliance obligations in relation to:
 Australian Business Number (ABN);
 goods and services tax (GST);
 pay as you go (PAYG);
 fringe benefits tax (FBT);
 deductible ggift recipient (DGR);
 income tax exempt charity (ITEC);
 fuel tax credits (FTC);
 elements of superannuation guarantee (SG), specifically reportable contribution and
contractors; and
 customs duty – tariff concessions orders (TCO)/enhanced project by-laws scheme (EPBS).
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
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D. Role of agencies
Those agencies under the Financial Management Compliance Framework (the Framework)
are required to annually certify that they have met the requirements of Direction 4.5.2
made under the Financial Management Act 1994. For taxation compliance purposes,
Direction 4.5.2 is supplemented by the Rules. Compliance with the Rules assists in meeting
the requirements of this Direction.
The Questionnaire is used to assess compliance with the Rules. This should be the starting
point of the annual taxation compliance assessment process.
Responsibility for taxation compliance rests with individual VPS agencies.
It is anticipated that the Chief Finance and Accounting Officer, the Accountable Officer and
the Audit Committee are actively involved in taxation compliance matters.
Some of the roles of agencies in complying with the Rules include:
 identification and rectification of taxation compliance issues;
 formulation and implementation strategies to promote taxation compliance throughout
the agency;
 provision and dissemination of agency knowledge and issues management;
 monitoring compliance with the Rules; and
 reporting of tax compliance status to agency management and to the relevant Minister.
For further information on the role of agencies, please refer to the Framework. Other
agencies not subject to the Framework are encouraged to apply the Rules as best practice.
Portfolio departments may wish to make arrangements for monitoring the taxation
compliance status of agencies not subject to the Rules.
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Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
E. Portfolio and whole of government roles
Under the Framework and the Rules, the Department of Treasury and Finance and portfolio
departments have specific roles to play. Each of these is detailed below.
Department of Treasury and Finance
DTF undertakes the role of adviser to the Minister for Finance in respect to compliance with
the Framework, which monitors public sector financial management in accordance with the
Standing Directions of the Minister for Finance. This involves:
 formulation and implementation of strategies to promote compliance throughout the
VPS;
 conducting assurance reviews on agency compliance;
 monitoring whole of government compliance;
 maintenance of guidance material on compliance, including the taxation web page,
http://www.dtf.vic.gov.au/Government-Financial-Management/Taxation;
 provision of whole of government briefings to the Minister for Finance on significant
taxation issues; and
 where appropriate, leading the Victorian Government’s response to significant taxation
issues with whole of government impacts.
Portfolio departments
Portfolio departments advise relevant Ministers in respect to portfolio agencies’ compliance
with the Framework. This involves:
 formulating and implementing strategies to promote taxation compliance throughout
portfolios;
 dissemination of whole of government taxation knowledge and issues management;
 provision of portfolio specific taxation knowledge and issues management;
 provision of briefings to relevant Ministers; and
 monitoring portfolio compliance with the Rules.
For further information please refer to the Framework web page:
http://www.dtf.vic.gov.au/Government-Financial-Management/Financial-ManagementCompliance-Framework.
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
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F. Standing Directions of the Minister for Finance
The following Direction, made under the Financial Management Act 1994, relates
specifically to the Rules:
4.5.2 Taxation
Direction
Public sector agencies must demonstrate that they are complying with the legal
requirements of the Commonwealth of Australia relating to taxation obligations and
concessions.
Procedures
Public sector agencies must in respect of the requirements and regimes established under
the laws of the Commonwealth of Australia:
a) certify annually that they have met requirements in relation to taxation compliance
and concessions;
b) conduct an annual review of compliance with requirements in relation to taxation and
concessions;
c) develop and maintain taxation policies and procedures for use by agency staff;
d) develop and implement a taxation education program for agency staff; and
e) identify and rectify any taxation compliance issues.
Guideline
Compliance with Direction 4.5.2 Taxation is monitored through the Rules and associated
guidance.
Certification of compliance should be made annually to the responsibly body and/or audit
committee (or equivalent). Those public sector agencies subject to the Framework are also
expected to certify their taxation compliance status annually to their relevant Minister in
accordance with the requirements of the Framework.
For more information on the Rules, refer to the Department of Treasury and Finance
website.
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Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
G. Taxation compliance rules
1. Registration
All VPS agencies are to ensure they are registered and maintain their registration for an
ABN, and comply with all the appropriate Commonwealth taxation obligations and
concessions. This may entail additional registrations as required.
Taxation obligations are the following taxes and/or obligations contained in:
 GST;
 FBT;
 PAYG;
 SG;
 Taxation Administration Act 1953;
 other ‘A New Tax System’ legislation;
 income tax legislation; and
 ATO publications including, but not limited to, GST rulings, FBT rulings, interpretative
decisions, and determinations.
Taxation concessions that may be applicable are:
 DGR status;
 public benevolent institution status;
 FTC scheme;
 GST import deferral scheme;
 GST grouping of public bodies (where appropriate);
 GST treatment of the non-commercial activities of charitable institutions; and
 customs duty.
The ‘no-ABN withholding’ provisions within the PAYG legislation will not normally apply to
payments received by VPS agencies, as these payments will be exempt from income tax.
However, VPS agencies may have to apply the no-ABN withholding provisions to non-VPS
agencies they deal with (i.e. purchasing goods and services).
Where a VPS agency does not register for a specific tax obligation (GST, FBT, and PAYG) it
should document the reason(s) why registration is not required. The VPS agency should
regularly (at least annually) review the decision to ensure it is still relevant.
One or more of the Commonwealth tax concessions may be applicable to VPS agency. These
concessions can assist a VPS agency’s cash flow position by either entitling it to specific tax
credits, or allowing it to make GST-free supplies. Responsibility to ensure a VPS agency is
appropriately registered for these concessions rests with the individual VPS agency.
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
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2. Tax focus and planning
It is important that all VPS agencies apply the correct rules, guidelines and procedures to
ensure compliance.
2.1 Taxation consciousness needs to be appropriate across VPS agencies and needs to be
integrated into planning decisions of all VPS agencies to ensure that taxation
compliance is not compromised.
2.2 All VPS agencies are to ensure that the Questionnaire recommended in the Rules is
carried out annually.
2.3 All VPS agencies are to ensure that compliance issues identified during the previous
years’ certification processes (under the Framework) and/or independent taxation
compliance reviews have been rectified.
2.4 All VPS agencies are to ensure that taxation consciousness is appropriate across the
VPS agency, such that relevant business decisions of the agency are taken with
appropriate regard to the taxation implications.
2.5 All VPS agencies are to ensure that appropriate risk management is adopted with
respect to taxation compliance. This includes providing regular reports/updates on the
tax position to the responsible body, audit committee, risk management committee
and/or senior management.
2.6 All VPS agencies are to ensure appropriate resources are allocated for taxation
compliance. This includes ensuring that an officer is appointed with formal
responsibility for taxation compliance.
2.7 All VPS agencies must have systems and processes in place to enable the BAS to be
prepared accurately, lodged, and where applicable, appropriate tax payments paid by
the due date.
Business activity statement (BAS)
It is important that all VPS agencies lodge their BAS, and pay any tax outstanding, by the due
date. Failure to lodge and remit payment could affect a VPS agency’s financial position with
penalties being imposed by the ATO. Where the VPS agency is in a refund situation it is
recommended that the BAS be prepared, and lodged, as soon as practicable after the end of
the taxation period to maximise cash flow benefits.
Review
VPS agencies should have an independent review process in place prior to lodging the BAS.
The review process should include reconciliations at a number of levels in relation to the
data which is used to populate the BAS. For instance, best practice tax management would
include where possible:
 a reconciliation performed between the balance of the GST control accounts (if used)
back to the underlying source data; and
 a reconciliation performed between the financial accounts and the BAS data
(i.e. compare the relevant Profit and Loss data to the GST calculation sheet).
VPS agencies should also examine/investigate significant transactions each tax period to
ensure tax requirements for these transactions are dealt with correctly and appropriately on
the VPS agency’s BAS.
It is up to individual VPS agencies to determine the costs and benefits of undertaking these
reconciliations. It may be that the reconciliations are performed at various frequencies
(i.e. monthly versus annually) depending upon the tax compliance risks, benefits obtained
and resources available within individual VPS agencies.
The review process will assist in ensuring that the BAS is correct at the time of lodgement.
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Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
3. Tax technical compliance
It must be noted that the Rules are in addition to the compliance requirements of VPS
agencies under the Commonwealth taxation laws.
There are a number of specific requirements within the taxation laws which are considered
worthy of re-stating. These mainly relate to the administrative requirements with respect to
taxation compliance.
VPS agencies should ensure that all ATO taxation lodgement and remittance obligations are
met in a timely manner. Further, VPS agencies must ensure that all ATO substantiation
requirements are met (for instance, with respect to retention of business records as
required under the Taxation Administration Act 1953).
3.1 All VPS agencies are to advise their portfolio departments of all major, strategic tax
technical issues/risks as soon as they are identified.
3.2 All VPS agencies are to refer to their departmental contact any taxation issue which
may not be unique to their agencies, for consideration of potential portfolio-wide
implications.
3.3 Departments should refer the matter to DTF if there are considered to be potential
whole of government risks, issues or opportunities.
3.4 All major, strategic ATO ruling requests with whole of government implications are to
be referred to DTF.
3.5 All agencies are to ensure that DTF, channelled through portfolio departments, is
advised in a timely manner of any significant incidents of non-compliance.
GST policy
3.6 All VPS agencies are to ensure they comply with the GST legislation, with particular
attention being paid to:
 maximisation of input tax credits (including fuel tax credits);
 correct classification of all supplies made, including out-of-scope transactions; and
 review of all taxes, fees and charges to ensure that the GST treatment is correct
under the revised Division 81 legislation, new regulations and ATO rulings and
guidance material.
This rule helps to ensure that GST is not an additional cost to VPS agencies.
Maximising input tax credits
Two common areas where VPS agencies could look to maximising input tax credits are petty
cash and, where appropriate, moving from allowances to reimbursements. Although petty
cash and employee reimbursements may only involve minor levels of expenditure, the
volume of transactions and industrial relations sensitivities, (i.e. reimbursing employees
even where no documentation is obtained), imply that there may potentially be loss of input
tax credits in these areas.
Petty cash is an area that can be easily addressed through appropriate policies and correct
application of those policies by VPS agencies. All VPS agencies should require documentary
evidence of expenditure incurred by employees (even if below the $82.50 GST inclusive
threshold). To be absolutely certain of being able to attribute the input tax credits, VPS
agencies could build a statutory declaration pro forma into petty cash/employee
reimbursement forms.
Employees would have to ask the supplier if there was GST in the purchase price (if a tax
invoice was not obtained) and then could sign the statutory declaration accordingly. This
could then make it clear that VPS agencies were entitled to claim the input tax credit and
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
9
attribute it to the correct period. This process would then help to ensure minimal leakage of
input tax credits.
The payment of allowances by VPS agencies to employees results in an inability for VPS
agencies to claim input tax credits. This is because once the allowance is paid to the
employee; it is the employee who is incurring the expenditure, not the VPS agency.
In order to claim input tax credits, the employee should be reimbursed for the actual
expense incurred, rather than provided with an allowance. Under the reimbursement
scenario, it is the VPS agency that is incurring the expenditure; the employee only incurs the
expenditure as agent of the employer.
Consequently to maximise claims for input tax credits, VPS agencies should consider moving
allowances to reimbursement arrangements wherever possible.
The rule should also extend to prompt collection of input tax credits by VPS agencies. There
are a number of ways that this can occur, for example:
 a centralised invoice system;
 invoices could be receipted within the existing financial management system; and
 advancing the movement to e-commerce where tax invoices are submitted electronically
by suppliers.
Classifying all supplies correctly
By ensuring that supplies made are classified correctly for GST purposes, VPS agencies are
reducing their exposure to interest and/or penalties being imposed resulting from an ATO
review. Failure to correctly classify supplies made will result in additional GST (interest or
penalties may also be applied) being payable by the agency, which it may not be able to
recoup from the customer. Alternatively, it could result in the VPS agency remitting GST
when there was no need (for example, where a GST-free supply is incorrectly treated as
taxable). This would also occur where an out-of-scope transaction is treated as taxable.
Compliance with this Rule will assist VPS agencies in complying with Rule 5 relating to cash
flow (refer to page 16).
Review of taxes, fees and charges
The A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges)
Determination 2011 (No. 1) (the Determination 2011 (No. 1) is the last Division 81
Determination.
From 1 July 2013, all government fees and charges in particular may be subject to GST if
they:
 do not fall within the exemptions provided under the amended Division 81 and
consolidated regulations, and
 satisfy the requirements of a taxable supply.
However, the ATO have issued Practice Statement for Legal Administration (General
Administration) 2013/2 (PS LA 2013/2(GA)) to preserve the GST-exempt status of fees and
charges appropriately listed on the Determination 2011 (No. 1) up until 30 June 2013.
Further information in relation to self-determining the GST status of government charges is
available on the ATO Division 81 webpage:
http://www.ato.gov.au/Business/GST/In-detail/Non-profit-and-governmentorganisations/Government-organisations/Payments-to-government-agencies-underDivision-81
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Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
GST registration
Only GST-registered suppliers should be charging VPS agencies GST. General practice
requires suppliers’ GST registration status to be checked when first input into the system.
However, as GST registration status can change over time, VPS agencies should ensure that
a supplier remains registered for GST and has not restructured (e.g. partnership to company
or machinery of government changes). This ensures that VPS agencies are only paying GST
and claiming corresponding input tax credits where appropriate.
VPS agencies can verify their suppliers’ registration status by downloading the Australian
Business Number look-up tool from: http://abr.business.gov.au/LookupTool.aspx. The
software allows users to quickly confirm the GST status of any particular business or
company.
PAYG policy
This Rule relates to specific issues within the PAYG provisions.
3.7 All VPS agencies are to ensure they comply with the PAYG legislation, with particular
attention being paid to:
 payments made to Board members and officeholders;
 the no-ABN withholding requirements;
 payment of allowances to employees; and
 payments to contractors.
Payments made to Board members and officeholders
VPS agencies should carefully consider the PAYG and GST provisions for Board members,
officeholders and volunteers. This may include making appropriate PAYG deductions for
payments and ensuring the appropriate treatment of expense reimbursements. Further
information relating to PAYG is contained in the ATO Ruling TR 2002/21 PAYG withholding
from salary, wages, commissions, bonuses or allowances paid to officeholders.
No-ABN withholding requirements
VPS agencies are to ensure that all purchases include the supplier’s ABN. Where a supplier
either does not have an ABN, or fails to provide it, the VPS agency must follow the no-ABN
withholding requirements when making payment.
Information on no-ABN withholding requirements can be found in the document ‘No ABN
withholding – Questions and Answers’ available on the ATO web site:
http://www.ato.gov.au/Business/Australian-business-number/In-detail/Introduction/NoABN-withholding---questions-and-answers
Payment of allowances to employees
Unless subject to FBT or otherwise excluded, allowances paid to employees, whether or not
they are paid in accordance with an award, must be included in the employee’s payment
summary. Further information is available from the ATO:
http://www.ato.gov.au/Business/PAYG-withholding/In-detail/Taxing-of-allowances,bonuses,-commissions-and-leave-payments/Withholding-from-allowances
Payments to contractors
When a sole trader is engaged by a department or agency, it is important to undertake a
review to determine whether the person is a common law employee rather than a
contractor. Where the person is a common law employee, the PAYG withholding rules for
Taxation compliance rules
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11
employees will apply, regardless of whether the person has provided the department or
agency with an ABN.
SG policy
This Rule relates to the SG provisions.
3.8 All VPS agencies are to ensure they comply with the SG legislation, with particular
attention being paid to:
 reportable superannuation; and
 contractors.
Reportable superannuation
From 1 July 2009, superannuation contributions are required to be reported on employee
payment summaries where the contribution is in excess of the required SG contribution and
the employee either influenced the amount of the contribution or has the ability to
influence the contribution amount.
Contractors
For SG purposes, contributions must be made for a contractor who meets the definition of a
common law employee or a contractor that meets the extended definition of an employee
under subsection 12(3) of the Superannuation Guarantee (Administration) Act 1992 as
follows:
 works under a contract that is wholly or principally for their labour;
 the person is required to perform the work personally (i.e. is unable to delegate); and
 the person is engaged for their labour/skills rather than to perform a specified result.
Refer to Superannuation Guarantee Ruling: SGR 2005/1.
FBT policy
This rule is drawn from the policies adopted in the preparation of previous Crown FBT
returns. These may be less relevant for VPS agencies that have never been part of the Crown
FBT return. It is up to individual VPS agencies to determine whether the FBT policies are
relevant and applicable.
3.9 All VPS agencies are to ensure they comply with the FBT legislation, with particular
attention being paid to:
 motor vehicles;
 entertainment; and
 employee declarations.
Motor vehicles
The use of log books is good business practice, especially in relation to ‘pool cars’. Log books
will indicate the proportion of business use for vehicles, which will correctly identify the FBT
liability and potentially allow the operating cost formula to apply where business usage is
high as a proportion of total usage (thereby reducing the FBT liability). It is also preferable
that log books are maintained for the purposes of WorkCover and also for driver
identification purposes in relation to traffic camera infringement notices.
It is important to note that in the absence of a valid log book, the statutory valuation
method for motor vehicles has to be applied.
12
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
For further information on the Victorian government standard motor vehicle policy, please
refer to: http://www.dtf.vic.gov.au/Publications/Fleet-management-publications/Victoriangovernment-standard-motor-vehicle-policy.
Entertainment
Under FBT law, employers have the option of incurring FBT on the basis of:
 actual entertainment expenditure on employees;
 the ‘50/50’ rule – where the FBT paid is 50 per cent of the expenses incurred by the
employer in providing meal entertainment to all persons (employees, clients or
otherwise) during the FBT year; and
 the 12-week method – where the FBT paid is the total of the expenses incurred by the
employer in providing meal entertainment to all persons (employees, clients or
otherwise) during the FBT year multiplied by a ‘register percentage’.
Once the preferred option is selected, it must be applied for a 12 month period.
To use the actual method, a VPS agency must have recorded the data for the expenditure.
This means ensuring that the number of employees that receive the entertainment
expenditure is recorded.
In many cases, the 50/50 method may be the optimal result, but this Rule is designed to
ensure that VPS agencies record the relevant data, so that a meaningful comparison can be
made, and the optimal choice between the ‘Actual’, ‘50/50’, or ‘12-week’ method is
adopted.
Employee declarations
VPS agencies should ensure that the correct declaration forms are completed with respect
to the fringe benefits provided to employees. Declaration forms are required for various
benefits including:
 expense payment benefits;
 no-private use; and
 residual benefits.
Other taxes
This Rule relates to the range of taxation opportunities and concessions, apart from those
covered in the Rules above, available to VPS agencies.
3.95 All VPS agencies are to ensure that, where applicable, they maximise and/or retain tax
concession opportunities, including the following:
 DGR status;
 ITEC – income tax exempt charity;
 public benevolent institution status;
 FTC scheme; and
 customs duty – tariff concessions orders (TCO)/enhanced project by-laws Scheme
(EPBS).
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
13
4. Knowledge management
4.1 All VPS agencies are to develop policies and procedures manuals for compliance within
the department or agency and ensure that the existence of the policies and procedures
manuals is appropriately communicated throughout the VPS agency. Policies and
procedures manuals should be regularly reviewed and updated as required. Any
changes should be communicated throughout the VPS agency.
The establishment of appropriate policies and procedure manuals for compliance is vital for
all VPS agencies. These manuals help to ensure that processes and procedures are known
across the VPS agency and will assist in improving taxation compliance across the VPS.
4.2 All VPS agencies are to ensure that appropriate taxation education programs are
conducted for relevant staff, and that staff are informed of taxation changes.
The taxation education program should be viewed as a continual improvement process. The
dissemination of policies, procedures and updated information to relevant staff helps to
ensure taxation compliance is maintained at a high level.
New staff programs should include information on taxation policies and procedures for each
VPS agency, with on-going training offered to all staff to keep up to date with taxation
changes or on specialised topics. Where appropriate, staff should attend at least one
taxation education refresher and/or update program annually.
VPS agencies may wish to maintain their own internal websites/databases covering taxation
compliance information.
5. Cash flow
All VPS agencies are to have policies and procedures in place designed to maximise their
cash flow position.
This could include:
 BAS period-end input tax accruals for invoices not currently in the accounting system that
are held by the VPS entity prior to lodging the BAS;
 accelerating collection of receipts, so that collection occurs prior to the time payment is
required to the ATO;
 offsetting their periodic PAYG and FBT remittances to the ATO with any significant GST
credit returns; or
 lodging the BAS early when in a refund situation.
This rule also includes managing the cash flow implications of GST taxable grants by,
wherever possible, structuring payments to minimise the cash flow impacts of grants on the
department or public body. An example of this could mean paying the GST portion of the
grant only at the time when the grant recipient has a GST obligation to the ATO. This may
not be practical in all circumstances, but VPS agencies are to consider all possibilities.
The taxation legislation prescribes that the ATO will pay interest if GST refunds have not
been received by the VPS agency within 14 days of the GST return being lodged. As many
VPS agencies are expected to be in GST credit situations, early collection of these GST
refunds would improve the cash flow position of VPS agencies and the Victorian
Government as a whole.
The offsetting of periodic PAYG payments against GST refunds is another way in which VPS
agencies may be able to maximise their cash flow. VPS agencies should consider the
benefits, if any, prior to adopting this option.
For more information about offsetting periodic PAYG payments against GST refunds, VPS
agencies should refer to the ATO publication Large Withholders guide to paying Pay As You
14
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Go withholding liabilities (NAT 3301) (http://www.ato.gov.au/Business/PAYGwithholding/In-detail/Reporting-and-paying-to-ATO/PAYG-withholding-for-largewithholders).
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
15
H. Taxation compliance review questionnaire
This DTF Rule, supporting Direction 4.5.2 Taxation, requires all VPS agencies to conduct an
annual independent review of taxation compliance. A party either internal or external to the
VPS agency may conduct the independent review. It is expected that this review is
undertaken at least annually at each VPS agency.
The review requires someone from outside the area responsible for ensuring compliance
with the Commonwealth taxation laws to perform a review of the level of compliance of the
VPS agency, i.e. not the preparer of the BAS, FBT or PAYG tax returns.
Where tax technical knowledge is required to complete the technical aspects of the review
this can be obtained from various sources, e.g. departmental coordinators, external service
providers, peers, etc.
The annual review requirement will be met if one of the following approaches is adopted:
 VPS agency conducts a review of all taxation compliance annually;
 VPS agency conducts rolling reviews of taxation compliance over a maximum of three
years. By the end of the three years, all taxation compliance matters within the entity
must have been subject to review. Such a program would look at specific risk areas over
this given period, spreading the scope of the reviews over a maximum of three years
instead of the one year; and
 VPS agency may choose to specifically review risks or issues identified in previous tax
technical reviews. This approach will meet the requirement to undertake a review,
provided that, over three years, all taxation compliance matters within the entity are
reviewed.
To assist in undertaking this review, DTF has developed the taxation compliance review
questionnaire (Questionnaire) to assist VPS agencies in meeting their taxation compliance
requirements. The Questionnaire also performs a monitoring/assurance function with the
Direction and the Rules.
The attached Questionnaire is designed as an independent review of controls and risk
management mechanisms, to ensure taxation compliance and manage
financial/budget/cash flow risks. Responsible bodies or accountable officers of VPS agencies
may choose to include annual taxation compliance management as an adjunct to their
internal audit programs. This will be appropriate where, for example, internal processes are
to be reviewed. However, it must be noted that internal auditors may not have the requisite
tax technical skills to undertake all aspects of the Questionnaire. It may be preferable for
this part of the review to be undertaken by independent parties to ensure that an impartial
review is undertaken, which covers the tax technical aspects as well as other risk
management mechanisms.
16
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
I. Instructions for use
The Questionnaire has been developed to assist VPS agencies with the identification of risks associated with the treatment, calculation and recording of,
in particular, GST, FBT and PAYG, but also tax obligations that may apply such as DGR, ITEC, FTC, SG and customs duty. As VPS agencies become
increasingly familiar with the GST and other tax legislation and experienced in identifying the key risk areas the completion of the Questionnaire may be
enhanced.
By answering a series of questions with YES/NO answers the Questionnaire highlights areas of potential risk and provides guidance as to when expert
technical assistance may be required.
Tax focus and planning
VPS agencies maintaining a strong tax focus and planning effectively will reduce the risk that GST and other taxes are incorrectly calculated,
inappropriately recorded and that errors in processing will not be detected.
Section 2 of the Rules requires these levels of focus and planning within VPS agencies (refer to page 8).
The following questions will ensure that VPS agencies maintain the appropriate level of focus on tax and planning. If you are unsure of any answers, or the
implications, you should seek expert tax technical assistance. Guidance can also be found on the taxation web page.
Definitions:
 Words used in this questionnaire which have a defined meaning in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) have the same
meaning as in the GST Act unless the context indicates otherwise.
 Words used in this questionnaire which have a defined meaning in the Fringe Benefits Tax Assessment Act 1986 (FBT Act) have the same meaning as in
the FBT Act unless the context indicates otherwise.
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
17
Question
1.
18
Yes/No/ Reviewed by
n.a
date
Does an appropriate tax culture exist across the VPS agency?
Note: an appropriate tax culture will be evidenced by some or all of
the following:
 tax considerations included in business planning decisions;
 appropriate resources directed at tax compliance;
 regular reporting to the board, audit committee, risk management
committee of tax compliance and issues;
 tax compliance is the specific responsibility of a senior employee
within the VPS agency;
 other appropriate process or policies which indicate that the VPS
agency meets its tax compliance obligations etc.;
 issues identified (if any) as part of the previous year’s review have
been actioned;
 have you acknowledged any changes that may impact the status of
any of your tax registrations (e.g. GST, DGR, machinery of
government etc.);
 have you considered the requirements that must be satisfied in
order for the VPS agency to be deemed a DGR or ITEC e.g. given
recent Federal Government changes impacting ‘charities’ and notfor-profits:
– is the VPS required/entitled to be registered with the Australian
Charities and Not-for-profits Commission (ACNC) and endorsed
by the ATO, or can it self-assess its tax exempt status?
– does the VPS agency comply with all the substantive
requirements in its governing rules?
– does the VPS agency apply its income and assets solely for the
purposes for which it is established?
– If the VPS agency has previously claimed DGR or ITEC
concession, have such entitlements been recently reviewed
given the legislative changes?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
2.
3.
4.
Yes/No/ Reviewed by
n.a
date
Comments
Does the VPS agency perform a reasonableness check on GST
recorded on supplies or acquisitions e.g. multiply the net value of the
taxable supplies and/or creditable acquisitions by 10 per cent to
ensure that it agrees to the amount of GST included in the BAS? Are
there controls in place to ensure the BAS is ‘reality checked’ before it
is lodged?
Are other appropriate reconciliations/checks performed on the BAS
before it is lodged? For instance:
 where appropriate, reconcile GST control accounts (if used) to
underlying source data;
 where appropriate, reconciliation between financial accounts
(profit and loss and GST calculation sheet);
 where appropriate, generation and review of exception reports to
monitor changes in GST classifications, changes in report trends
etc.;
 specific examination of tax treatment of significant, complex or
unusual transactions to ensure the correct GST treatment has been
applied; and
 segregation of responsibility between the staff entering BAS data
and staff authorising lodgement.
Are appropriate controls in place to compile reporting data derived
from a number of sources to consolidate and complete the BAS (e.g.
where several business units utilise different accounting systems and
an excel spreadsheet must be used to compile a consolidated BAS)?
Are information systems regularly tested to ensure they correctly
calculate GST, allocate, record, store and report GST data? Are regular
reviews conducted to ensure that the information systems correctly
classify, attribute, record and report GST?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
19
Question
5.
6.
7.
20
Yes/No/ Reviewed by
n.a
date
If annual turnover is over $20 million, BASs must be lodged monthly
rather than quarterly and must be lodged electronically.
 Is the VPS agency lodging the BAS in accordance with these
requirements?
 Has the VPS agency considered whether it can take advantage of
the Simplified BAS reporting arrangements?
If annual turnover is over $2 million, departments or public bodies
must account for GST on an accruals basis. Department and public
bodies may choose to account for GST on a cash basis if annual
turnover is less than $2 million.
 Is the VPS agency accounting for GST in accordance with these
requirements?
Have BASs been lodged and payments made within 21 days of the end
of the tax period (for monthly reporters) and 28 days of the end of the
quarter (for quarterly reporters)? (Note: payments of monthly returns
must be made electronically.)
8.
Are copies of the BAS retained for audit purposes?
9.
Is there documentation of the audit trail to support the information
contained in the BAS?
10.
Are all appropriate business records retained for at least five years
from lodgement date?
11.
Have appropriate time frames been established for the preparation of
GST information at the sites/divisions/offices and the lodging of these
to the head office system in time for the group consolidation to be
done?
12.
Is the VPS agency monitoring its turnover (i.e. $20 million threshold)
to ensure that it is still correctly registered as either a monthly or
quarterly remitter?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
13.
Yes/No/ Reviewed by
n.a
date
Comments
Attribution of GST
 For VPS agencies accounting on the non-cash basis (i.e. accruals
basis): GST should be included in the BAS for the period in which
the date the invoice is issued or any payment received, whichever
is the earlier:
– is the VPS agency charging/attributing GST to the correct
BAS/tax period?; and
– is the VPS agency claiming input tax credits at the correct time?
 For VPS agencies accounting on the cash basis, GST on taxable
supplies should be charged and included in the BAS for the period
in which payment was received:
– is the VPS agency charging/attributing GST to the correct
BAS/tax period; and
– is the VPS agency claiming input tax credits at the correct time?
Note: GST cannot be claimed until a valid tax invoice is held by the
VPS agency. Does the VPS agency hold all relevant documentation to
support its claims for input tax credits?
Correcting GST errors
 Under certain circumstances, GST errors made on an earlier BAS
can be reported in a later BAS where specific time and value limits
are satisfied (effective 10 May 2013). If these limits are not met,
the BAS must be revised:
– is the correct GST treatment applied by the VPS agency where a
GST error has occurred?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
21
Question
Yes/No/ Reviewed by
n.a
date
Self-assessment regime for indirect taxes
 Effective 1 July 2012, a self-assessment regime for indirect taxes
was implemented to harmonise the administration of indirect taxes
with the income tax self-assessment regime. Under the new
self-assessment regime, the BAS will be the deemed an
assessment, however it can continue to apply to the Commissioner
for an amended assessment. New time limits for amendments and
processes for seeking a GST refund/disputing GST liability have
been implemented:
– has the VPS agency made an objection to an assessment or
requested an amended assessment from the Commissioner
since 1 July 2012?
– what systems or processes have been implemented to track
amendments made during the four year period of review?
Draft GST refund provisions
 An exposure draft to the Tax and Superannuation Laws
Amendment (2014 Measures No.2) Bill 2014 has been published in
February 2014, which will introduce Division 142 into the GST Act
to refund overpaid GST to a taxpayer where the refund will not
result in a windfall gain:
– has the VPS agency been required to determine whether it is
eligible for a refund of excess GST?
– what systems or processes have been implemented to ensure
that there is an entitlement to a refund of overpaid GST (e.g. to
ensure that overpaid GST is reimbursed to the end consumer
etc.)?
22
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
Yes/No/ Reviewed by
n.a
date
Comments
Tax technical compliance
VPS agencies complying with tax legislation will avoid ATO penalties and charges.
Section 3 of the Rules require levels of tax compliance be maintained with respect to GST, FBT, PAYG and SG (refer to page 9).
The following questions will assist VPS agencies to maintain the appropriate level of tax technical compliance. If you are unsure of any answers, or the implications, you
should seek expert tax technical assistance. Guidance can also be found on the taxation web page.
GST compliance questions
14.
Does the VPS agency have significant dealings with
suppliers/customers outside Australia or any other foreign currency
transactions?
15.
Is the VPS agency involved in any transactions which do not involve
monetary consideration e.g. barter, property exchanges?
16.
Does the VPS agency undertake any transactions which involve
holding or paying security deposits?
17.
Does the VPS agency make any supplies or purchases which are of a
progressive or periodic nature?
18.
GST applies to certain financial assistance payments. Does the VPS
agency pay or receive amounts of the financial assistance payments
for which the GST treatment is unclear or inconsistent with the GST
treatment of other financial assistance payments?
Note: GSTR 2012/2: Financial assistance payments replaced GSTR
2000/11: grants of financial assistance (effective 30 May 2012).
Taxpayers can rely on the views expressed in GSTR 2000/11 for
payments made before 1 July 2013 if:
 the arrangement was entered into before 30 May 2012; or
 the GST consequence of the arrangement is conflicted by the views
expressed in GSTR 2012/2 and GSTR 2000/11.
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
23
Question
24
Yes/No/ Reviewed by
n.a
date
19.
Does the VPS agency receive funding or other payments covered by
appropriation pursuant to section 9-17(3) of the GST Act and has the
VPS agency considered the new appropriation provisions (effective
1 July 2012)?
Does the VPS agency have processes/procedures in place to ensure
that the correct GST treatment is being applied to the appropriation
amount?
Note: where section 9-17(3) of the GST Act does not apply to a
payment, the principles detailed in GSTR 2012/2 Financial assistance
payments may be applicable.
20.
Does the VPS agency charge or pay GST on transactions with other
public sector entities? – under section 9-17 of the GST Act, supplies
made by one government entity to another government entity at or
below cost are not subject to GST where the payment is covered by
appropriation.
21.
Does the VPS agency act in an agency capacity, either for purchases,
sales, payments or payment receipts?
Is the VPS agency a party to a subdivision 153-B agency agreement?
22.
Is the VPS agency unsure as to the GST treatment of any sources of
revenue?
23.
GST should not be charged on supplies of goods and services which
are input taxed.
 Does the VPS agency make input taxed supplies?
 Has the VPS agency undertaken a calculation for the purposes of
the de minimus rules for financial supplies (note that the Financial
Acquisition Threshold has increased to $150 000, effective 1 July
2012)?
 Has the VPS agency conducted an apportionment exercise?
 Does the VPS agency monitor the extent to which the use of an
acquisition or importation changes the extent of the GST creditable
purpose for any ‘Division 129 adjustments’?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
Yes/No/ Reviewed by
n.a
date
24.
Is the VPS agency involved in any transactions in which amounts may
be 'netted-off' expenses i.e. recoups of expenditure?
25.
Does the VPS agency make GST-free supplies (i.e. in the areas of
Health, Education etc.) for which the VPS agency is uncertain of the
requirements for GST-free status?
26.
Has the VPS agency reviewed all taxes, fees and charges for which it is
responsible in determining the appropriate GST treatment under the
new Division 81 of the GST Act (effective from 1 July 2011), associated
regulations and ATO rulings and other guidance material?
Under the new Division 81 provisions, the VPS agency will be required
to self-assess the GST classification of supplies that they make for
which Australian fees and charges are received as consideration (i.e.
the VPS agency will no longer be able to rely on the GST exempt
status as detailed in the 2011 Treasurer’s Determination).
However, the GST exempt status of fees and charges detailed in the
2011 Treasurer’s Determination may be preserved up to 30 June 2013
(refer to PS LA 2013/2 (GA)).
27.
Has the VPS agency reviewed the registration status of every supplier
at least once over the course of the year?
28.
Has the VPS agency received any revenue outside the normal course
of business or which are ‘new’ transactions?
Comments
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
25
Question
29.
30.
31.
32.
26
Yes/No/ Reviewed by
n.a
date
Does the standard tax invoice for the VPS agency contain the required
GST information (refer to GSTR 2013/1 Tax invoices)?
If the invoice does not contain the information, the customer will not
be able to claim the GST and the VPS agency may potentially be liable
to ATO penalties. This may impact debtors as the customer is unlikely
to pay until a tax invoice is supplied.
Note that the ATO released Waiver Determinations in 2013, which
provides circumstances where the requirement to hold a valid tax
invoice to claim input tax credits is waived and the information
required for a document to be considered a tax invoice (effective
from 1 July 2010).
 Has the VPS agency considered these waivers?
Is the VPS agency recording adjustments to GST correctly, including
issuing adjustment notes where relevant?
In cases where the VPS agency is the supplier for GST purposes, the
VPS agency may enter into agreements with other VPS agencies or
other eligible non VPS agency suppliers (referred to as the
‘Recipients’) whereby the Recipient issues recipient created tax
invoices (RCTIs). In these cases, the Recipient will issue the tax invoice
in relation to the supply, and not the VPS agency.
 Does the VPS agency maintain the necessary documentation (i.e. a
written RCTI agreement or an embedded agreement within the
body of the RCTI) with its customers to enable the use of RCTIs?
 Where a VPS agency has been affected by machinery of
government changes, have all RCTI agreements been revised to
reflect the identity of the new VPS agency?
 For further information on RCTIs refer to GST Ruling GSTR 2000/10
Recipient Created Tax Invoices (Addendum exists).
Does the VPS agency have appropriate policies and processes in place
in relation to claiming input tax credits for expenses incurred through
petty cash and employee reimbursements?
Are the policies followed?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
Yes/No/ Reviewed by
n.a
date
33.
Has the VPS agency considered moving all of its arrangements relating
to payments of allowances to a reimbursement basis?
VPS agencies cannot claim input tax credits associated with the
payments of allowances to staff and agents etc. These should
generally be moved to a reimbursement arrangement whereby the
VPS agency can claim the input tax credits.
34.
If the VPS agency makes financial supplies and breaches the financial
acquisitions threshold, it must identify acquisitions which relate to the
making of those financial supplies. GST on these acquisitions is not
recoverable. (The financial acquisitions threshold is breached where
the total input tax credits lost annually would be more than either
$150 000 or 10 per cent of total annual input tax credits (effective
from 1 July 2012).
Where the VPS agency makes financial supplies, does the VPS agency
have procedures in place to ensure that unrecoverable GST is
included in the total cost of acquisitions in the accounting records?
For further information on the financial acquisitions threshold refer to
GST Ruling GSTR 2003/9 Financial acquisitions threshold.
35.
In cases where the VPS agency makes financial supplies and breaches
the Financial Acquisitions Threshold, does the VPS agency claim
reduced input tax credits (55 per cent or 75 per cent of full input tax
credits) on certain allowable acquisitions (known as reduced credit
acquisitions) which would ordinarily be denied as these acquisitions
relate to making financial supplies?
The list of reduced credit acquisitions can be found in Division 70 of
the GST Regulations.
Comments
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
27
Question
36.
37.
38.
28
Yes/No/ Reviewed by
n.a
date
Where an acquisition cannot be attributed directly to a single supply
(i.e. it may be used for both private and business use), it must be
apportioned. Methods of apportionment will depend on the type of
business.
 Does the VPS agency have procedures in place to identify
acquisitions which should be apportioned?
 Does the VPS agency have procedures in place to ensure that
where the actual use varies from that expected and declared on a
previous BAS, that subsequent BASs are adjusted to reflect the
difference?
Where the VPS agency is the recipient for GST purposes and creates
its own recipient created tax invoices (RCTI) for goods or services it
receives (as opposed to the supplier creating the invoice), has the VPS
agency either:
 entered into a RCTI agreement; or
 has the necessary agreement been embedded into the text of the
RCTI?
Does the RCTI contain the required information? (This covers the
reverse of Q31 – i.e. where the VPS agency issues the RCTI.)
For further information on RCTIs refer to GST Ruling GSTR 2000/10
Recipient Created Tax Invoices.
Did the VPS agency have any transactions in relation to property,
including:
 selling land under the margin scheme;
 land dealings with other parties, for instance, joint ventures;
 providing residential rental accommodation; or
 selling residential premises?
For supplies of residential rental accommodation and sales of
residential premises, has the VPS agency appropriately denied itself
input tax credits related to these supplies?
Did the VPS agency utilise technical guidance material in relation to all
real property (land and building) transactions?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
Yes/No/ Reviewed by
n.a
date
39.
Is the VPS agency involved in transactions that involve three or more
parties?
With regards to tripartite arrangements, is the VPS agency satisfied
that the GST treatments of either supplies and/or acquisitions made
are correct (refer to paragraphs 114–246 of GSTR 2006/9 Supplies for
further information)?
40.
For all supplies of property by the VPS agency, did any contract
stipulate that, while the VPS agency may or may not be liable to the
ATO for a GST-equivalent amount (e.g. notional GST), the purchaser
agreed to pay GST to the VPS agency regardless; and the VPS agency
undertakes to pay the GST-equivalent to the ATO regardless.
Comments
PAYG compliance questions
 Does the VPS agency comply with the Rules (refer section 3.7 at
41.
pages 12) with respect to the PAYG provisions especially in relation
to:
 board members;
 officeholders;
 volunteers;
 allowances (including travel allowances) paid to employees; and
 contractors?
42.
Does the VPS agency make any payments from which it does not
withhold PAYG? If so, has the VPS agency considered the basis in
which PAYG is not withheld, i.e.:
 kilometre reimbursement (up to 5 000km per year);
 reasonable travel and meal allowances; and
 LAFHA.
43.
Does the VPS agency have procedures in place to identify invoices that
do not contain the supplier’s ABNs?
44.
Where the invoice does not include the supplier’s ABN or the VPS
agency has not been advised of the ABN, has the VPS agency withheld
46.5 per cent of the total amount where appropriate? Has this
amount been remitted to the ATO?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
29
Question
Yes/No/ Reviewed by
n.a
date
45.
Does the VPS agency have procedures in place to identify variations to
normal PAYG withholding rates?
46.
Have payment summaries been issued to employees by 14 July of
each year?
47.
Does the VPS agency perform a reasonableness check on the amount
of salary and wages disclosed at W1 of its BAS to salary and wages
disclosed in its trial balance?
SG compliance questions
30
48.
Does the VPS agency have procedures in place to identify and report
any reportable superannuation contributions on employee payment
summaries?
49.
Does the VPS agency have procedures in place to monitor the
maximum contribution base per quarter for each employee?
50.
Does the VPS agency have procedures in place to determine the
difference between ordinary times earnings (OTE) and the relevant
earnings base?
51.
Does the VPS agency have any procedures in place to identify
payments that have been excluded from OTE and the basis for
exclusion?
52.
Does the VPS agency have procedures in place to ensure timely
contribution payment and that contributions are made to complying
superannuation funds?
53.
Does the VPS agency have policies and procedures in place to take
into account the gradual increase to compulsory SG contributions?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
Yes/No/ Reviewed by
n.a
date
Comments
FBT Compliance Questions
54.
Are any of the following benefits provided by the VPS agency, by an
associate of the VPS agency, or by a third party under an
arrangement, to any employees or associates of employee
(e.g. spouse/child):
 provision of a car for private use (including home to work travel);
 car parking on business premises;
 payment of private expenses relating to an employee;
 provision of property;
 provision of entertainment (whether or not business discussions
take place);
 provision of living-away-from-home allowances (taking into
account the May 2012 FBT law reform), relocation costs, etc.;
 the provision of accommodation where the accommodation is
owned/leased by the VPS agency;
 provision of a loan;
 the waiving of a debt owed to the VPS agency; or
 any other benefit provided (for example the use of the VPS
agency’s property for private purposes)?
If so, an FBT liability may exist.
55.
Has the VPS agency considered the application of the otherwise
deductible rule and various FBT exemptions?
56.
Does the VPS agency perform a reasonableness check of the fringe
benefits identified in the FBT return to what has been recorded in its
trial balance?
57.
Has the VPS agency applied the correct gross up rates and thresholds
for each benefit type?
Please note that effective 1 April 2014, there will be an increase to the
FBT rate to 47 per cent. This change will also affect the Type 1 and
Type 2 gross up rates.
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
31
Question
58.
Does the VPS agency have procedures in place to correctly rectify any
overpayments of salary and wages?
Has the VPS agency considered the FBT implications of overpayments
(i.e. whether a loan fringe benefit has arisen)?
59.
Does the VPS agency have specific FBT systems in place for capturing
the benefits received by employees? For example:
 a register of cars allocated to employees; and
 a central approval and recording process for all expense
reimbursement claims by employees.
Has the VPS agency considered the implication of the changes to
in-house benefits provided under a salary sacrifice arrangements
effective 22 October 2012?
60.
32
Yes/No/ Reviewed by
n.a
date
61.
Does the VPS agency receive any after tax payments/contributions
from employees for fringe benefits?
Have the GST and FBT implications of these arrangements been dealt
with correctly?
62.
Has the VPS agency’s accounting system been developed to take
account of specific FBT requirements, such as appropriate account
codes for entertainment benefits?
63.
Does the VPS agency’s accounting system allow it to obtain the GSTinclusive value of benefits?
64.
Can the VPS agency separately identify each individual employee’s
reportable fringe benefits amount (grossed up value of benefits
provided to them) to be reported on their payment summary? For
example, this will require details of the allocation of cars to
employees, and attendance listings for certain entertainment events
(such as tickets for seats at a sporting event)?
65.
Has the VPS agency disclosed reportable fringe benefit amounts on an
employee’s payment summary where the total taxable value of fringe
benefits provided is greater than $2 000?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Comments
Question
Yes/No/ Reviewed by
n.a
date
66.
Has the VPS agency considered the FBT consequences of benefits
provided to employees under an effective salary sacrifice
arrangement?
67.
Has the VPS agency obtained/retained and reviewed appropriate FBT
documentation such as:
 signed declarations and elections where required under legislation;
 receipts;
 travel diaries;
 car odometer readings; and
 basis of calculation of FBT payable;
for the required time of five years?
Comments
Contractor specific questions (Note: VPS agencies should also consider potential payroll tax and WorkCover implications)
68.
Does the VPS agency have procedures in place to determine whether
personnel engaged as contractors meet the definition of a common
law employee and if so, whether payments made to these persons
have been correctly captured for PAYGW, FBT and SG?
69.
Where personnel engaged as contractors do not meet the definition
of a common law employee, has the VPS agency considered whether
the contractor meets the extended definition of an employee for SG
purposes? Refer to SGR 2005/1 for further information.
70.
Has the VPS agency obtained/retained and reviewed appropriate
supporting documents in determining whether personnel are engaged
as an employee or independent contractors such as:
 copies of invoices
 copy of contractor agreement.
Has the VPS agency entered into voluntary agreements with any
independent contractors to withhold amounts from payments made
to them?
71.
72.
Does the VPS agency’s accounting system allow it to separately
identify each independent contractor and payments made to them?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
33
Question
Yes/No/ Reviewed by
n.a
date
Comments
Tax technical compliance – other taxes
VPS agencies complying with tax legislation are in a position to utilise tax concessions and, in so doing, help to maximise their agency’s financial position.
Section 3 of the Rules requires levels of tax compliance be maintained with respect to FTC and Customs Duty (refer to section 3.95 at page 14).
The following questions will assist VPS agencies to maintain the appropriate level of tax technical compliance. If you are unsure of any answers, or the implications, you
should seek expert tax technical assistance. Guidance can also be found on the taxation web page.
Fuel tax credit compliance questions
73.
Did the VPS agency claim all fuel tax credits (FTCs) to which it was
entitled?
Did the VPS agency correctly reduce any entitlement to a FTC by the
Road User Charge (RUC)?
Has the VPS agency considered the issues addressed in the Linfox case
(i.e. where the RUC may not apply to taxpayers operating heavy
vehicles with ‘auxiliary equipment’)?
Customs Duty compliance questions
74.
Has the VPS agency considered whether any Customs duty
concessions such as TCOs and EPBS can apply to projects, particularly
via including contractual clauses to ensure any duty savings are
‘passed on’ to the VPS?
Knowledge management
Section 4 of the Rules requires a level of knowledge management to be maintained by VPS agencies (refer to page 14).
The following questions will assist in the management of knowledge across VPS agencies to ensure the correct calculations and processes are followed. If you are unsure of
any answers, or the implications, you should seek expert tax technical assistance. Guidance can also be found on the taxation web page.
34
75.
Does the VPS agency have relevant personnel who have detailed
technical knowledge and expertise regarding the treatment of GST,
PAYG and, FBT and, where applicable, FTC, DGR, ITEC, SG and Customs
duty?
If yes, do they receive GST training and updates regularly?
76.
If such personnel do not exist within the VPS agency does
management consult with external specialists?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Question
Yes/No/ Reviewed by
n.a
date
77.
Does the VPS agency have a GST policies and procedures manual
which is updated regularly (to reflect law changes, court
interpretation, and new or updated ATO views) and is available to all
staff responsible for GST?
78.
Does more than one person have working knowledge of all GST
systems processes and relevant regulations?
79.
Does the VPS agency have a FBT policies and procedures manual
which is kept up to date and is available to all staff responsible for
FBT?
80.
Does the VPS agency have written policies and guidelines on the type
of payments made to employees that are subject to SG?
81.
Are there procedures in place for consideration of how to resolve
problems in respect of abnormal transactions or those not previously
identified?
82.
Is a repository available to record issues, questions, answers and
scenarios which staff can access to assist with all tax matters they
encounter or add helpful information for future reference (e.g. issues
log)?
Comments
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
35
Question
Yes/No/ Reviewed by
n.a
date
Comments
Cash flow
Section 5 of the Rules outlines the requirements for VPS agencies to maximise their cash flow (refer to page 15).
The following questions will assist VPS agencies to determine whether they have the appropriate procedures and policies in place to maximize their cash flow. If you are
unsure of any answers, or the implications, you should seek expert tax technical assistance. Guidance can also be found on the taxation web page.
83.
84.
85.
86.
36
Can the accounting system:
 produce a valid tax invoice;
 calculate the correct amount of GST;
 record the GST appropriately in the general ledger
(i.e. control accounts);
 calculate an entitlement to any input tax credit on an
acquisition;
 produce appropriate GST reports to enable accurate
completion of the BAS; and
 produce an acceptable audit trail to verify all information in
the BAS?
Has consideration been given as to how to resolve problems in
respect of systems failure (details – what to do, who to contact)?
Does the VPS agency adopt policies and processes that attempt to
maximise the cash flow position with respect to GST?
Note this will be evidenced by:
 claiming all input tax credits as soon as technically possible;
 month end input tax accruals for invoices not currently in the
accounting system but held prior to the lodgement of the BAS;
 accelerating collection of revenue wherever possible;
 checks and processes for the identification of duplicate tax
invoices in the system.
Where appropriate, is the VPS agency offsetting its PAYG and FBT
payments with any GST credit?
Taxation compliance rules
Issued pursuant to the Financial Management Act 1994, Issued July 2005 (last update March 2014)
Appendix: Relevant web links
DTF website
DTF Taxation
http://www.dtf.vic.gov.au/Government-FinancialManagement/Taxation
Financial Management
Compliance
Framework (FMCF)
http://www.dtf.vic.gov.au/Government-FinancialManagement/Financial-Management-Compliance-Framework
Standing Directions of
the Minister for
Finance
http://www.dtf.vic.gov.au/Publications/Government-FinancialManagement-publications/Financial-Management-ComplianceFramework/Standing-Directions-of-the-Minister-for-Finance
Tax manuals
http://www.dtf.vic.gov.au/Publications/Government-FinancialManagement-publications/Taxation/Tax-manuals
Taxation portfolio
contacts
http://www.dtf.vic.gov.au/Government-FinancialManagement/Taxation/Taxation-contact-details
Taxation reference
materials
http://www.dtf.vic.gov.au/Government-FinancialManagement/Taxation/Taxation-reference-materials
Victorian government
standard motor
vehicle policy
http://www.dtf.vic.gov.au/Publications/Fleet-managementpublications/Victorian-government-standard-motor-vehicle-policy
ATO website
Division 81
http://www.ato.gov.au/Business/GST/In-detail/Non-profit-andgovernment-organisations/Government-organisations/Payments-togovernment-agencies-under-Division-81/
No-ABN witholding
http://www.ato.gov.au/Business/Australian-business-number/Indetail/Introduction/No-ABN-withholding---questions-and-answers
Witholding from
allowances
http://www.ato.gov.au/Business/PAYG-withholding/In-detail/Taxingof-allowances,-bonuses,-commissions-and-leavepayments/Withholding-from-allowances
PAYG withholding for
large witholders
http://www.ato.gov.au/Business/PAYG-withholding/Indetail/Reporting-and-paying-to-ATO/PAYG-withholding-for-largewithholders/
Issued pursuant to the Fina
www.dtf.vic.gov.au
sued July 2005 (last update March 2014)