Corporate tax avoidance: latest ATO targets


The ATO has provided an update on its latest focus areas and the compliance projects it is undertaking to reduce corporate tax avoidance. These include: investigating possible manipulation of the thin capitalisation rules, including 27 taxpayers’ asset revaluations totalling $78 billion; looking into arrangements that move intellectual property assets and rights offshore to multinational entities’ related parties; focusing on the treatment of oil and gas industry labour costs associated with high-value asset construction; examining the arm’s length conditions operating in phar..

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Fringe benefits tax: employees’ private use of vehicles


The ATO has issued guidance for employers on determining an employee’s private use of a vehicle. Draft Practical Compliance Guideline PCG 2017/D14 should provide more certainty and transparency about the circumstances where the ATO won’t apply compliance resources to investigating whether private vehicle use meets the car-related FBT exemptions. Eligible employers who rely on this guideline won’t need to keep records to prove that an employee’s private use of a vehicle is minor, infrequent and irregular.     TIP: The guideline includes specific eligibility cond..

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Tax consequences of trust vesting


The ATO has issued a long-awaited ruling on trust vesting, including changing a trust’s vesting date and the CGT and income tax consequences of vesting. TIP: A trust’s “vesting date” is the day when the beneficiaries’ interests in the trust property become fixed. The trust deed will specify the vesting date and the consequences of that date being reached. Vesting does not, of itself, ordinarily cause the trust to come to an end or cause a new trust to arise. In particular, the underlying trust relationship continues after vesting while the trustee still holds property for the take..

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Foreign equity distributions to corporate entities


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 ..

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ATO guidance: what is “carrying on a business”?


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..

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Superannuation guarantee


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..

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Compensation for ATO systems outages


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..

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GST: simplified accounting for food retailers


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..

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Small businesses with tax debts: setting up a payment plan


The ATO reminds small businesses that if they have a tax debt of $100,000 or less, they can take advantage of the ATO’s self-help service to set up a payment plan in two easy steps: Use the payment plan estimator to work the options. With their Tax File Number (TFN) or Australian Business Number (ABN) on hand, set up a payment plan by either phoning the ATO’s automated service on 13 72 26 or using the online services for sole traders and individuals on their myGov account. In some circumstances, the ATO says, a business may be eligible for interest-free payment plans for activit..

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Contrived trust arrangements in ATO sights


The ATO has cautioned taxpayers against arrangements that seek to minimise tax by creating artificial differences between the taxable net income and distributable income of closely held trusts. Deputy Commissioner Michael Cranston said the ATO is investigating arrangements where trustees are engineering a reduction in trust income to allow taxpayers to improperly gain favourable tax breaks, or sometimes to pay no tax at all. Although he noted that many people use trust structures appropriately and within the law, Mr Cranston said the ATO has seen some trustees exploit the differences betwee..

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