5 minute tax updates: October 28 – 31

Working holiday maker regime in potential turmoil
‘No benefit’: Calls for micros to be excluded from STP continue
One system to rule them all
Cash crack-down bill passes House, with new Israel DTA
AAT says “recklessness” a factor in Div 7A decision
New 75% stamp duty rebate in WA for apartment buyers
OECD releases “unified approach” to digitalised international tax

Working holiday maker regime in potential turmoil
The Federal Court has handed down a decision in Addy v Commissioner of Taxation [2019] FCA 1768 that could have severe impact on the working holiday maker scheme.  The case follows the activities of a British citizen working here on a 417 visa who appealed an ATO income tax assessment. Catherine Addy, a 27-year-old UK drama student from London, initially came to Australia in August 2015 on a work visa. She left Australia in May 2017. She was considered to be a resident of Australia for tax purposes. Four years after arriving, Addy won the Federal Court case, the decision concluding the backpacker taxing regime discriminated against UK nationals. The FC’s Justice Logan found an article of the Double Taxation Agreement with the UK should not tax UK nationals in a more burdensome way than their own nationals in the same circumstances. “That is a disguised form of discrimination based on nationality,” he said in his judgement.

‘No benefit’: Calls for micros to be excluded from STP continue
Accountants Daily reports that Tax & Super Australia (TSA) believes the ATO should strongly consider exempting micro employers from the STP regime, citing research that showed that such entities were struggling to implement the new system. A survey of members found that close to two-thirds believed STP would not improve the way employers report tax and super information to the ATO or were undecided on it, while 92% of them indicated that their clients needed help implementing STP.

One system to rule them all
The coming silly season looks set to be a busy period for the ATO, as revenue collection agency looks to implement its “Activity Statement Financial Processing” project (ASFP), the name it has given to a system enhancement that aims to move all activity statement and franking deficit tax financial data onto one new system.

ASFP will change the way activity statement and other account information is displayed in Online Services for Agents. See more and other details here.

The change is planned for between 24 December and 1 January, during the ATO’s annual closure, which will close all ATO online systems for that period. STP will still enable reporting, although records will not be processed and displayed until the main online system is back up.

Cash crack-down bill passes House, with new Israel DTA
A couple of new bills have just passed along the legislative process and now move to the Senate. The Currency (Restrictions on the Use of Cash) Bill 2019 makes it a criminal offence to make or accept payments in cash for more than $10,000. Individual-to-individual transactions are not covered in the original proposal.

Draft rules on how the currency restrictions legislation will work on a practical level have been released recently by Treasury (see here).

Also passed in a new double taxation agreement to be struck with Israel. It was agreed to last March, and gives effect to BEPS recommendations and ensures taxing rights to Australia over certain income.

AAT says “recklessness” a factor in Div 7A decision
No discretion was exercised by the ATO to not deem as dividends loans made by a company to its shareholders and the transfer of property to an associate. It seemed the taxpayers concerned (registered tax agents and accountants) had thought the ATO would overlook the operation of Div 7A — which it did not, and to which the taxpayers appealed. This discretion is governed by s 109RB, on the grounds of honest mistake or inadvertent omission, which both the ATO and AAT found (on the basis that the appellants were tax agents) they found to be “impossible to accept”.

New 75% stamp duty rebate in WA for apartment buyers
West Australian apartment buyers who sign pre-construction contracts on new residential units and apartments may be eligible for a 75% transfer duty rebate of up to $50,000. Known as the Off-the-plan Duty Rebate scheme, it is available for two years (from 23 October 2019), with multiple rebates available to the same purchaser.

OECD releases “unified approach” to digitalised international tax
The OECD has made public a consultation document on the secretariat’s proposal for a “unified approach” under its “Action 1 (Tax challenges arising from digitalisation)” project to address international taxation in the digitalised economy. The project focuses on revising the allocation of taxing rights among countries, potentially including new approaches to nexus (permanent establishment) issues and the arm’s length principle. There are seven questions open for public comment, which closes 12 November (noon, Paris time).

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