Quality Advice Rewards Results

Commissioner’s vision of the tax system by 2030
The Commissioner has outlined the ATO’s vision of the tax system of the future in a speech last week, noting the ATO’s Executive had endorsed a new vision for the ATO to be fully digitalised by 2030. In doing so, he outlined how the system has progressed from historic reporting and payment, through to systems like Single Touch Payroll where reporting happens in real-time, but payment is still made later. The future aim is where reporting, payment and real-time compliance checks coincide with the taxable event. A big part of this transition is the introduction of eInvoicing which is a new way to send and receive invoices directly in software via a secure network. Importantly, he also emphasised that there was no intention to design tax professionals out of the system as technology processes, but that “if your business model is high-volume, low-margin, simple tax returns, your business will not be viable in 3 to 5 years. You should be looking to diversify to remain viable longer-term.”

Draft leg: FBT record keeping reduction
The Government has released the following draft legislation for public consultation: Draft Treasury Laws Amendment (Measures for Consultation) Bill 2022: FBT record keeping. The proposed  legislation is aimed at reducing FBT record keeping compliance costs for employers who maintain good corporate records. It also gives the Commissioner the power to modify, by legislative instrument, existing FBT record keeping obligations to allow employers to rely on existing corporate records, rather than the employee declarations and other prescribed records, to finalise their FBT returns where the Commissioner considers the alternative records adequate.

Super: Draft Regs re “faith based” products
The Government has released for consultation exposure draft regulations underpinning recently introduced legislation in relation to how “faith based” products are treated under the Your Future, Your Super annual performance test. The exposure draft regulations clarify elements of the primary legislation, including how to prescribe the information that must be provided in an application for faith based product status and setting out how APRA is to operate the supplementary performance test for these products.

T & S Australia: 2022-23 pre-budget submission – superannuation
Tax and Super Australia has sent its pre-budget submission on superannuation issues to the Treasurer, Assistant Treasurer and the Minister for Finance. We believe there are a number of measures that can be introduced by the Government that will reduce red tape and help stimulate economic activity. We also believe there are number of bigger picture issues in the superannuation system that should be reviewed. There are many recommendations in our pre-budget submission, which can be accessed here.

director ID deadline – more info
Further to the ATO reminder reported in our Daily Update of 6th September, and as per the article in Issue 16 of our Outlook magazine, directors who have not already obtained their director ID should do so without delay as the deadline for directors appointed on or before 31 October 2021 is 30 November 2022. Directors appointed between 1 November 21021 and 4 April 2022 were required to obtain their director ID within 28 of appointment, and directors appointed from 5 April 2022 were required to obtain their director ID before being appointed. Note: All directors are required to obtain a Director ID by the deadline. It is not sufficient that one of the company directors obtains a Director ID and the other directors do not. This is particularly relevant to “Mum & Dad” companies. It is not sufficient if only Dad gets a Director ID. Where both are directors, both Mum & Dad will each need to obtain a Director ID.

Release of financial accountability regime minister rules
The Government has released the Financial Accountability Regime Minister rules 2022  (Minister rules) for public consultation. They will apply in conjunction with the Financial Accountability Regime Bill 2022 introduced into Parliament last week. The Minister rules would prescribe: particular responsibilities and positions which cause a person to be subject to the Financial Accountability Regime for each industry; enhanced notification threshold (which is the total asset size above which an entity is required to comply with additional notification obligations); and how a written record from an examination can be authenticated in a proceeding as prima facie evidence of the statements it records. Comments are due by 7 October 2022.

Denial of ITCs for failing to lodge BASs in time
The AAT has found that a partnership failed to show that amended assessments issued to it were excessive in respect of the denial of GST input tax credits. The partnership was denied credits of some $16,000 as its BASs for the tax periods in question were lodged outside of the relevant 4-year time limit under s 93-5 of the GST Act. In dismissing the taxpayer’s application, the AAT found that based on the evidence before it, the partnership was not granted any extension of time within which to lodge its BASs and that there was no discretion in either the Commissioner or AAT to grant an extension of time to lodge a BAS after 4 years has expired. (JHKW and FCT [2022] AATA 2875, 5 September 2022.)

ATO: Small Business – Top 5 topics received for advice
The ATO’s Small Business Advice and Guidance team, which actions requests for guidance, private rulings, and determinations about income tax issues, has released statistics around advice requests received for the 3 month period May – July 2022. The most common topics for which advice was requested were:

• Capital gains tax:  32%  – about 80% were about the CGT small business concessions);
• Relating to business: 24% – some 33% were on whether something is income, particularly grants and compensation; 40% were about whether a client is in business, particularly cryptocurrency and shares/options. (For further guidance on crypto, see TSA’s June and August webinars);
• Losses:  19%  – the most common requests were around Commissioner’s discretion requests for non-commercial losses, particularly in relation to COVID impacts. (For further guidance on non-commercial losses, see TSA’s September 2021 webinar, and keep an eye out for our updated webinar later this month); and
• Deductions: 10%  – temporary full expensing and home office expenses for a business, being the most common. (For further guidance on temporary full expensing, see TSA’s July webinar).

ACT Payroll Tax: Liability of nurse placement business affirmed
The ACT Tribunal has upheld the decision of the Commissioner in relation to the imposition of  payroll tax on a business which placed nurses and carers with persons who require their services. It did so on the basis that the exemption for wages paid for work for “not more than 8 days in any month” did not apply. In particular, it found that the word “day” in  s 9(3)(f) of the Payroll Tax Act 1987 (ACT) was not confined to a period of 8 hours but that it applied to any day on which a worker works, irrespective as to the length of time worked. It therefore upheld the relevant assessments. However, it reduced penalty interest imposed by 50% in the circumstances. (ACT Nursing Services Pty Ltd and Commissioner for ACT Revenue [2008] ACTAAT 29, 3 November 2008.)

TR 2022/2 Income tax: the games and sports exemption
The ATO has released TR 2022/2 Income tax: the games and sports exemption. It considers when a society, association or club will qualify as exempt from income tax under section 50-45 of the Income Tax Assessment Act 1997 for the encouragement of a game or sport. It finalises Draft TR 2021/D6 Income tax: the games and sports exemption, which replaced Taxation Ruling TR 97/22 Income tax: exempt sporting clubs. Note: This Ruling does not change the Commissioner’s view expressed in TR 97/22 and reflects case law that has occurred since that Ruling was published.PCG 2022/1: Non-commercial losses – flood, bushfire, COVID-19
The ATO has released PCG 2022/1 Non-commercial business losses – Commissioner’s discretion regarding flood, bushfire or COVID-19. It provides a safe harbour for individuals who make a loss because their non-commercial business was affected by special circumstances of flood, bushfire or some COVID-19 impacts (a government-imposed lockdown, business closure and/or restriction). It allows the individual to offset the loss (but not past year’s deferred losses) against other income in the relevant year. If the Guideline applies, the individual does not need to seek a private ruling on whether the Commissioner would exercise their discretion to allow that loss to be offset.

Draft PCG 2022/D3: GST and residential colleges.
The ATO has released Draft PCG 2022/D3: Goods and services tax and residential colleges. It sets out the Commissioner’s proposed compliance approach for universities and residential colleges supplying accommodation, meals, tertiary residential college courses and religious services to resident students and claiming input tax credits. The purpose of the Guideline is to assist residential colleges to determine if supplies of accommodation, meals, tertiary residential college courses and religious services satisfy s 38-250 of the GST Act 1999 and can be treated as GST-free supplies. It replaces the GST Tool for Residential Colleges, which will be retired from 31 December 2022.

Third party reporting: exclusions for certain shares and units
The Taxation Administration Excluded Classes of Transactions and Entities for Third Party Reports on Shares and Units Determination 2022 has been registered. It exempts specified classes of entities from reporting to the ATO (pursuant to s 396-55 of Sch 1 to the TAA 1953) on certain classes of transactions relating to shares and units. For example, it provides that such an entity is not required to provide relevant information for a transaction that relates to a share in a company that is listed for quotation in the official list of an Australian financial market and in relation to transactions on that Australian financial market is not required to be delivered to the ASIC under the market integrity rules. The determination applies from 1 July 2017.

Draft leg: No franking credits from particular capital raising activities
The Government has released exposure draft legislation to prevent the distribution of franking credits where a distribution to shareholders is funded by particular capital raising activities. The measures will prevent companies from attaching franking credits to distributions to shareholders made outside or additional to the company’s normal dividend cycle to the extent the distributions are funded directly or indirectly by capital raising activities that result in the issue of new equity interests. The Government is seeking stakeholders’ views on the exposure draft legislation and accompanying explanatory material implementing this measure by 5 October 2022.Draft GST margin scheme valuation determination issued
The ATO has registered draft legislative instrument A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination 2022.  It specifies the requirements for making valuations for the purposes of applying the margin scheme in Div 75 of the GST Act. Among other things, it provides that a valuation of an interest, unit or lease made in accordance with one of the methods in this instrument is an approved valuation of that interest, unit or lease. It also provides that if the real property supplied by selling a freehold interest in land or selling a stratum unit or granting or selling a long-term lease is the same interest, unit or lease that existed at the valuation date, the valuation must be of that interest, unit or lease. This Draft Determination will repeal A New Tax System (Goods and Services Tax) Margin Scheme Valuation Requirements Determination MSV 2020. However, the requirements contained in that Determination will continue to apply to supplies of real property made up to 3 months after the commencement of this instrument, where the taxpayer has a valuation which complies with the requirements in that Determination on the day that this new instrument commences.

ATO: Transfer balance cap – defined benefit income streams
The ATO has released information on the “Transfer balance cap – defined benefit income streams.” It applies to individuals who are: retired and receiving one or more capped defined benefit income streams; retired and receiving both account-based and capped defined benefit income streams expecting to receive a capped defined benefit income stream; receiving a capped defined benefit income stream and start receiving (or expect to), a reversionary defined benefit income stream; receiving, or may start receiving, a capped defined benefit income stream and are due to turn 60 years old soon.