5 minute tax updates: 29 June – 3 July

COVID-induced deficit in franking account to get full tax offset on liability
Tax time toolkits for your clients
FASEA extends CPD deadline for COVID-19

Residency for tax purposes: Guide for clients
Instalment indexation ceased, but clients still need to adjust
Withholding payer number holders STP exemption
GST third-party adjustment note draft instrument
Revised guidance statement on SMSF auditing responsibilities
Effective life of depreciating assets (applicable from 1 July 2020)
SMSFs to stick to maximum of four members, for now
Div 7A reforms also deferred
Tax Time top 10 reminders for practitioners
Salary sacrifice and super guarantee
Reasonable travel and overtime meal allowance expense amounts

COVID-induced deficit in franking account to get full tax offset on liability
Under the law, the ATO is constrained in being able to waive or remit a franking deficit tax liability. However the ATO is also aware that some entities may find they end up, through a variation to PAYG instalments to take account of COVID-19 conditions, with a franking account balance in deficit due to a refund. This usually results in a deficit tax liability, which falls due by the last day of the month following EOFY (a deferral can be considered up to 30 September). Claiming this as an offset can see a reduction to that offset by 30% if no discretion is exercised by the Commissioner. In advice to taxpayers (scroll down to fifth question), the ATO has said it will act as though this discretion to not reduce the offset has already been granted.

Tax time toolkits for your clients
To help practitioners deal with queries from clients this tax time, especially given the further complications resulting from changes due to COVID-19, the ATO has released a package of toolkits and fact sheets, which are also available in PDF format. Covering issues relating to individuals, small businesses and rental property owners, these resources can be accessed by visiting ato.gov.au/taxtimetoolkit or download them from the ATO’s Publication Ordering Service (select the Tax Time Toolkit option in the top menu).

FASEA extends CPD deadline for COVID-19
The Financial Adviser Standards and Ethics Authority (FASEA) has extended the deadline for advisers to meet its 40-hour CPD requirement by three months. It says in the announcement that it is a one-off deal, and that there’s to be no double counting of the resulting overlap of periods between one income year and another. The legislative instrument and explanatory statement can be viewed here.

Residency for tax purposes: Guide for clients
Residency for tax purposes can be a complicated topic for some clients, especially this year with COVID-19. The key element your clients need to understand is their immigration status does not determine their residency status for tax purposes. To help you and your clients determine residency for tax purposes, the ATO has issued a guide that contains a snapshot of the information you need to consider when understanding your client’s tax situation.

Instalment indexation ceased, but clients still need to adjust
Yes, PAYG and GST instalment indexation has ceased for now, as mentioned on this website recently, however the ATO is reminding practitioners that their clients still need to make a variation to instalments for the new income year (the instalment rate or amount does not automatically carry over from one income year to the next).

Withholding payer number holders STP exemption
The legislative instrument has been made to exempt non-ABN holders who instead hold a withholding payer number (WPN) to be exempt from using single touch payroll for the 2020-21 income year, commencing 1 July 2020.

GST third-party adjustment note draft instrument
A draft legislative instrument, TPANI 2020/D1, has been made that describes the information that must be included in a third-party adjustment note under s 134-20(1)(d) of the GST act. The draft instrument applies to the entity that makes the payment and will commence on 1 October 2020. Comments on the draft and its EM are open until 27 July.

Revised guidance statement on SMSF auditing responsibilities
The Auditing and Assurance Standards Board (AUASB) has issued a revised guidance statement GS 009: Auditing Self-Managed Superannuation Funds. The revised statement identifies, clarifies and summarises the existing responsibilities which approved SMSF auditors have with respect to conducting audit engagements. It also provides guidance on matters to consider when planning, conducting and reporting on the financial and compliance engagement of an audit. The appendices to GS 009 include an example engagement and representation letter, illustrative trust deed checklists and financial audit procedures.

Effective life of depreciating assets (applicable from 1 July 2020)
Ruling TR 2020/3 has been issued, which explains the methodology used by the Commissioner of Taxation to make a determination of the effective life of depreciating assets under section 40-100 of the Income Tax Assessment Act 1997.

SMSFs to stick to maximum of four members, for now
In case SMSF trustees were wondering what happened to the plan to expand the number of members/trustees from four to six, the planned change is still in the pipeline but instead of having affect from 1 July 2020 will now start from whenever the enabling legislation is made law.  The announcement was made via a media release from Assistant Treasurer Michael Sukkar.

Div 7A reforms also deferred
Another anticipated change to tax technical treatment is the proposed amendments to Division 7A, which had been slated to appear on the tax landscape from this week. Now it has been announced that any Div 7A amendment commencement has been revised to income years commencing on or after the date of royal assent of the enabling legislation (4th measure down in the table in this media release).

Tax Time top 10 reminders for practitioners
The ATO has produced a list of 10 essentials this Tax Time for practitioners to remember in their approach to clients’ tax affairs. The ATO’s list has been prepared with the difficulties of the COVID-19 period in mind, and gives handy pointers so that no crucial detail is left out when dealing with clients. See the ATO’s “10 things to know” here.

Salary sacrifice and super guarantee
Super guidance note GN 2020/1, Expansion of estimates regime to GST, LCT and WET, addresses law changes introduced by the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Act 2019 which changed the way salary amounts sacrificed to superannuation are treated when calculating and paying superannuation guarantee from 1 January 2020.

Reasonable travel and overtime meal allowance expense amounts
Tax determination TD 2020/5 has been issued, which spells out the reasonable expense amounts for travel and overtime meals for the new 2020-21 income year. As with other such determinations, the reasonable amounts only provide the maximum amount your client can claim without being required to substantiate expenditure (refer to paragraph 33 of TR 2004/6).

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