Crackdown on employer non-compliance The Government has announced a package of reforms to give the ATO near-real-time visibility over employers’ superannuation guarantee (SG) compliance. The package includes measures to: require super funds to report contributions at least monthly to the ATO; roll out Single Touch Payroll (STP); and give the ATO the ability to seek court-ordered penalties in severe cases of non-payment. Salary sacrifice integrity Legislation has also been introduced to prevent employersfrom using an employee’s salary sacrifice contributions to reduce the emplo..
Two recent taxation determinations from the ATO deal with how the foreign equity distribution rules in the Income Tax Assessment Act 1997 apply where the distribution recipient is a corporate partner in a partnership or a corporate beneficiary of a trust. Under the rules, a foreign equity distribution is treated as non-assessable, non-exempt income if the recipient is an Australian corporate tax entity that holds a participation interest of at least 10% in the foreign company making the distribution. The ATO’s view is that a partnership or trust can hold a direct control interest in a ..
The concept of a person’s “total superannuation balance” is now being used to determine whether you are eligible for various super concessions, including the $1.6 million balance limit for non-concessional contributions, Federal Government co-contributions, the spouse contributions tax offset, carrying forward unused concessional contributions and self managed superannuation fund (SMSF) segregation. The ATO has recently agreed to modify the reporting obligation for total superannuation balances, recognising that some funds are not in a position to correctly report their correct accum..
The Federal Government has recently introduced a Bill into Parliament to ensure that companies with more than 80% passive income will not qualify for the reduced company tax rate. Under the Bill’s changes to the Income Tax Rates Act 1986, calculations of a business’s “passive income” would include: Distributions by corporate tax entities (other than non-portfolio dividends); Franking credits attached to such distributions; Non-share dividends; Interest; Royalties; Rent; Gain on qualifying securities; Net capital gains; and ..
The Federal Government has released a consultation paper proposing company and tax law reforms to combat phoenix activities. Phoenix activities involve stripping assets from a company that’s in debt and transferring them to another company to avoid paying the first company’s liabilities – that is, the new company “rises from the ashes” of the old one. The government is considering a range of ways to combat this type of activity, including setting up a hotline for phoenix reporting, adding phoenixing to the offences specifically prohibited under the Corporations Act 2001, making..
The ATO has issued a draft taxation ruling to explain the factors it will consider when deciding whether a company (incorporated under the Corporations Act 2001) is “carrying on a business”. This is one of the tests companies and small businesses must pass to be eligible for the lower corporate tax rate. It’s not possible to definitively state whether a company carries on a business, but the draft ruling says that ATO will consider a range of indicating factors. Specifically, a company is likely to be carrying on a business if it: is established and maintained to make a profit for..
In new Draft Taxation Ruling TR 2017/D8, the ATO explains the methods that taxpayers can use to return income derived and recognise expenses incurred in long-term construction projects. A construction project is considered long-term if it straddles two or more income years. Two methods of accounting are available: the basic approach (essentially the accruals method) and the estimated profits approach. Once a particular method is chosen, the ATO expects the taxpayer to apply it consistently for the entire contract. The same method should also be applied to all of the taxpayer’s similar ..
Earlier in 2017, the Federal Court ruled that UberX drivers must be registered for GST, because they supply “taxi travel”. There has been much discussion of this finding since, and the ATO is now examining whether Uber trips should be eligible for the “taxi travel” FBT exemption. The FBT exemption, introduced in 1995, currently only applies to travel in a vehicle that is state or territory licensed to operate as a taxi. However, with the Federal Court’s decision on GST for Uber, and some recent state and territory moves towards licensing changes, the ATO has decided to review its ..
Crackdown on employer non-compliance The Government has announced a package of reforms to give the ATO near-real-time visibility over employers’ superannuation guarantee (SG) compliance. The package includes measures to: require super funds to report contributions at least monthly to the ATO; roll out Single Touch Payroll (STP); and give the ATO the ability to seek court-ordered penalties in severe cases of non-payment. Salary sacrifice integrity Legislation has also been introduced to prevent employersfrom using an employee’s salary sacrifice contributions to reduce the emp..
After the ATO’s unplanned systems outages, it provided lodgment deferrals, and remitted interest and penalties where the outages affected practitioners and their clients’ lodgments. The ATO has also advised that it assesses claims for compensation in two ways: compensation for legal liability (eg negligence); and compensation under the Compensation for Detriment caused by Defective Administration (CDDA) scheme, which allows the ATO to consider claims and pay compensation for disadvantage or loss because of defective administration. The ATO considers claims in accordance with gu..
The GST Act (A New Tax System (Goods and Services Tax) Act 1999) is being amended to ensure that digital currency, such as Bitcoin, is disregarded for GST purposes unless the supply is made in exchange for a payment of money or digital currency. To achieve this, a definition of “digital currency” will be inserted into the GST Act. Under the new definition, a digital currency has broadly the same features as state fiat currencies (legal tender). In particular, the value of a digital currency must derive from the market’s assessment of its value. A digital currency’s value cannot be b..
The Government has released draft tax legislation to implement elements of its housing affordability plan. The proposed measures include an increased capital gains tax discount for people who hold affordable rental housing investments for at least three years. Under the draft legislation, managed investment trusts would be allowed to hold affordable housing investments with the main aim of deriving long-term rental income, but purchasing residential property that is not affordable housing would no longer be permitted for these trusts. TIP: If this legislation is passed, there will be a t..
If you are aged 65 or over, your home is your main residence for CGT purposes and you have owned it for a minimum of ten years, you could benefit from new draft legislation. You will be able to make additional non-concessional contributions, up to $300,000, from the proceeds of selling your home from 1 July 2018. The downsizer contribution cap of $300,000 will be in addition to existing caps; the capital must come from the proceeds of the sale price and application must be made within 90 days after the home changes ownership. There will also be exemption from the contribution rules for pe..
The ATO has released a draft determination on the choice available to you, if you are a food retailer, to use a simplified accounting method (SAM) to help you to work out your net amount by estimating your GST-free sales and GST-free acquisitions of trading stock. The Draft SAM is substantially the same as the previous determination it replaces. If you were eligible to use a particular SAM specified in the previous determination, you will continue to be eligible to use that SAM under the draft determination. Tip: Are you a food retailer? We can help you to use the sim..
The ATO has released a draft guideline on how they will apply the new “similar business test” to supplement the existing “same business test” used for testing whether a company can utilise an earlier year tax loss. The draft guideline says the similar business test will operate in a way that is comparable to the same business test, and that the overall business of a company must satisfy the similar business test to access losses. The focus remains on the identity of a business, as well as continuity of business activities to generate assessable income...