Monday
ATO warning re contractors and the cash economy
The ATO has warned that dodgy contractors trying to keep income “off-the-books” and businesses helping them do so are being “put on notice”. In particular, the ATO warns that by the taxable payment reporting system (TPRS) allows the ATO to investigate this type of conduct and that around $350bn in payments made to 950,000 contractors were reported to the ATO in the last financial year. The ATO reminded taxpayers that TPRS obligations apply to businesses in the building and construction industry, as well as businesses that provide cleaning, courier, road freight, information technology and security, investigation, or surveillance services and have paid sub-contractors in relation to these services. The ATO also reminded these businesses that they will have to lodge a TPAR with the ATO by 28 August.
Discussion paper: Multinationals and tax
The Government has released a discussion paper for public consultation on its election commitment to ensure that multinationals pay their fair share of tax. It will be aimed at closing tax loopholes exploited by multinationals and improving tax transparency. The discussion paper is aimed at addressing the Government’s commitments to: strengthening the interest limitation rules for multinationals; denying deductions for payments relating to intangibles and royalties that lead to insufficient tax being paid; and enhancing multinationals’ disclosure of tax information, to ensure the public is better informed of multinationals’ tax arrangements. Submissions close on 2 September 2022. The discussion papers can be accessed here.
ATO reminder: know client’s family details
The ATO has reminded tax-agents that when completing their client’s tax return, they need to know the client’s personal circumstances for that financial year. In this regard, the ATO emphasised that accurately reporting their family’s details is critical to correctly calculate the Medicare levy, Medicare levy surcharge and private health insurance rebate – and that getting this right will help avoid an audit or delays in processing.
Federal Court upholds decision to terminate registration of agent
The Tax Practitioners’ Board (TPB) has advised that the Federal Court has upheld its finding that a Sydney tax agent was not a fit and proper person to hold registration as a tax agent due to poor compliance with taxation laws. The TPB terminated the registration of both the tax agent and his firm. In addition, the agent was banned from reapplying for registration for 2 years. Among other things, the tax agent failed to lodge outstanding tax obligations over several years. He also had a long history of non-compliance with their personal tax obligations, Furthermore, clients of his firm had been audited multiple times due to excessive work-related expense claims of clients which resulted in a tax shortfall of approximately $193,000 with $65,000 of penalties being imposed.
APRA performance tests for super Choice products deferred
The Superannuation Industry (Supervision) Amendment (Your Future, Your Super – Addressing Underperformance in Superannuation) Regulations 2022 have been registered. The instrument supports the deferral of the extension of the APRA annual superannuation performance test for trustee-directed “Choice products” for 12 months to 1 July 2023.
Taxation statistics for 2019–20 released
The ATO has released its Taxation Statistics for 2019–20. It is an overview of statistics from tax returns and related schedules for the 2019–20 income year. It covers: individuals (including postcode maps); companies; super funds; partnerships; trusts; and industry benchmarks. It also includes data for the 3 main phases of the JobKeeper Payment Scheme, noting that these payments spanned the 2019–20 and 2020–21 financial years.
APRA’s latest corporate plan
APRA has published its updated plan to reinforce the financial soundness of the banking, insurance and superannuation industries over the next four years. As with last year’s version, the priorities in APRA’s new Corporate Plan for 2022-2023 are based around the twin themes of “protecting the community today”, as well as ensuring the Australian financial system is “prepared for tomorrow”. In particular, the plan is designed to respond to rapid changes in APRA’s operating environment, including geopolitical tensions, inflationary pressures and rising interest rates, and the impact of new technologies.
COVID support for SMSFs ends
The ATO has issued a reminder that the various forms of relief for SMSF trustees financially impacted by COVID-19 for the 2019–20, 2020–21 and 2021–22 income years ended on 30 June 2022. As a result, the ATO states that it expects trustees to now comply with their obligations under the income tax and super laws previously covered by the relief and that approved SMSF auditors must report contraventions to us via the Auditor/actuary contravention report (ACR) where the reporting criteria is met. Furthermore, the ATO states that if contraventions occur, trustees should use the ATO’s voluntary disclosure service and make a plan to rectify the contravention as soon as possible.
Company fails to show assessments for $4.4m are “excessive”
The AAT has affirmed the decision of the Commissioner to treat “unexplained credit card deposits” of some $4.4m paid to a company as assessable. The taxpayer claimed the deposits were amounts credited to its “merchant facility account” which it processed for an unrelated overseas company. (Corresponding amounts were transferred from the taxpayer’s account to another related company which in turn transferred funds of some $3.8m to several companies incorporated in the British Virgin Islands). In affirming the relevant assessments, the AAT found the taxpayer failed to discharge the onus of showing the assessments were excessive. Among other things, there were minimal contemporaneous records available to the support the taxpayer’s claims. Furthermore, while the company’s director provided witness statements, for health reasons he was unavailable for cross examination on those statements. (TOC Processing Pty Ltd and FCT [2022] AATA 2479, 4 August 2022.)
ATO reminder: SG obligations due on 28 July
The ATO has reminded employers that super guarantee (SG) obligations were due on 28 July for the last quarter. The ATO also advised that if employers missed or didn’t pay the full amount of their employees’ SG, they will need to lodge a SG statement by 29 August to disclose any missed or late super pay the SG charge. The ATO emphasised that even if an employer cannot make the payments by the due date, they still need to lodge the SG statement by the due date and by doing so they will avoid a late lodgment penalty.
No election – payments from SMSF pension not super lump sums
The AAT has confirmed that payments received by a taxpayer from his SMSF pension could not be treated as superannuation lump sums (instead of income stream benefits) for tax purposes. The AAT ruled the taxpayer had not made the required election before each payment was made to him (as required by former reg 995-1.03 of the Income Tax Assessment Regulations 1997) to treat the pension payments as superannuation lump sums. In dismissing the taxpayer’s arguments, the AAT found that the common law doctrine of “election” had no application in the circumstances where regulations required that a specific election be made as evidenced by “words or conduct”. Furthermore, the AAT found the correspondence between the taxpayer and the investment manager did not support the proposition that a complying election (choice) was made. (Prescott and FCT [2022] AATA 2478, 4 August 2022.)
“Div 7A and UPE” related rulings updated
The ATO has advised that following the release of Taxation Determination TD 2022/11 (Div 7A: when will an unpaid present entitlement or amount held on sub-trust become the provision of ‘financial accommodation’?), the following rulings and guidelines are being updated (as set out in their “history” sections): Taxation Determination TD 2011/15: Div 7A – unpaid present entitlements – factors the Commissioner will take into account in determining the amount of any deemed entitlement arising under s 109XI of the ITAA1936; Taxation Determination TD 2015/20: Div 7A: is a release by a private company of its unpaid present entitlement a ‘payment’ within the meaning of Div 7A of Part III of the Income Tax Assessment Act 1936?; Taxation Ruling TR 2015/4: CGT small business concessions: UPEs and the maximum net asset value test; and Practical Compliance Guideline PCG 2017/13: Div 7A – PS LA 2010/4 sub-trust arrangements maturing on or after the 2016-17 income year.
Draft update: GST ruling re financial supplies
A draft update has been issued for GSTR 2002/2 Goods and service tax: GST treatment of financial supplies and related supplies and acquisitions. The draft update amends this Ruling to reflect changes in the GST law (for instance, changes to the GST legislation applicable to cross-border supplies and in relation to digital currency) and include new references to public guidance released relating to financial supplies. It also contains a new buy-now pay-later example that applies the ATO’s longstanding view on interest free loans and a number of updates to Sch 2 of the Ruling to indicate when certain foreign currency-denominated products and overseas payment products are GST-free.
Failure to discharge onus or proof re $2.4m assessment
A taxpayer has failed to discharge the onus of proving that an assessment for the 2012 income year arising from bank account deposits was “excessive”. The assessment resulted in tax liability of $2.4m. The taxpayer claimed that the amounts were loans from various parties. However, the AAT found that the taxpayer had not adduced relevant evidence (eg of his income earning activities) or made submissions to discharge the burden of proving what his actual taxable income was the 2012 income year. The AAT was also satisfied that the taxpayer had been given an appropriate opportunity to make his case, despite his health issues. (Goldsworthy and FCT [2022] AATA 2472, 4 August 2022.)
ASIC: Super trustees – review dispute resolution processes
ASIC has urged super trustees to review their internal dispute resolution arrangements after the first stage of an ASIC surveillance found indicators of significant compliance issues. ASIC’s surveillance examines trustees’ compliance with the new enforceable requirements in Regulatory Guide 271 Internal dispute resolution (RG 271), which took effect on 5 October 2021. It follows ASIC’s earlier survey of trustees’ preparedness for compliance with RG 271, which highlighted focus areas for trustees before the new requirements commenced (refer 21-230MR).
TPB launches new corporate plan 2022-23
The Tax Practitioners Board (TPB) has launched its new Corporate Plan for 2022-23. Its central focus will be to safeguard the consumers of tax practitioner services and ensure that the community trusts the tax profession and the integrity of the tax system is enhanced. The TPB also announced that in the year ahead, it will strive for excellence, not just sufficiency, in both itself and the profession that it regulates.
The AAT has extended a stay order in relation to the decision of the Tax Practitioners Board (TPB) to terminate a tax agent’s registration and to ban him for 2 years. The extended stay order applies until the agent’s review is heard by the AAT. However, the order was subject to a range of conditions, including that the agent agreed not to take on any new clients and to undertake to continue to negotiate with the ATO in relation to a settlement of his tax debt. In addition, the tax agent was required to inform his clients of the administrative action taken by the TPB and that proceedings were currently on foot before the AAT. (Borella and Tax Practitioners Board [2022] AATA 2489, 8 August 2022.)
No entitlement to CFB – no purported salary
The AAT has confirmed that a trust that operated a knife-sharpening business for the meat industry was not eligible for the cash flow boost (CFB) as it had not satisfied requirement of making relevant PAYG payments in the necessary period. Despite claims the trustee paid salary to its employee in early January 2020 and lodging related BAS with withheld amounts, the AAT found that the purported salary was not paid, “either actually or constructively”. The taxpayer also failed to disprove the Commissioner’s claim that Pt IVA applied in the circumstances. (The Trustee for JC Mobile Sharpening Discretionary Trust and FCT [2022] AATA 2482, 5 August 2022.)
ASIC: 44% of retail investors hold crypto
ASIC has released Report 735 Retail investor research. Among other things, it reported that of the 1,053 retail investors surveyed, 44% reported holding cryptocurrency – making it the second most common product type held after Australian shares at 73%. According to the survey, only 20% of cryptocurrency owners considered their investment approach to be “risk-taking”, raising concerns that investors did not understand the risks of this asset class. ASIC also expressed concern that there are limited protections for crypto-asset investments given they have become increasingly mainstream and that are heavily advertised and promoted. Furthermore, ASIC said that there was a strong case for regulation of crypto-assets to better protect investors.
