Phase 2 of Single Touch Payroll
The ATO states that the mandatory start date for STP Phase 2 reporting will be 1 January 2022. It has listed the key changes in the following categories: Employment conditions, Income type and country code, Disaggregation of gross, Salary sacrifice, Lump sums, Reporting previous business management software IDs and payroll IDs, and Child support garnishees and Deductions.
SuperStream rollover v3 to include SMSFs
From 31 March 2021, the SuperStream Rollover message will be extended to include self-managed superannuation funds (SMSFs) and digital release authorities. The transition period for implementation and onboarding to SuperStream Rollover v3 is from 31 March 2021 to 30 September 2021.
Foreign exchange rates update
The ATO has provided a list of daily, monthly and annual foreign exchange rates. These have been updated to include monthly rates from the Reserve Bank of Australia for February 2021. All foreign income, deductions and foreign tax paid must be translated (converted) to Australian dollars before including it in a client’s return.
Legislative instrument issued on lodgment requirement
LODGE 2021/D1 is a draft notice of requirement to lodge a return for the income year ending 30 June 2021. The acts it pertains to includes the Income Tax Assessment Act 1936, Income Tax Assessment Act 1997, Income Tax (Transitional Provisions) Act 1997, Taxation Administration Act 1953, Superannuation Industry (Supervision) Act 1993, Higher Education Support Act 2003, Trade Support Loans Act 2014, and VET Student Loans Act 2016 (VETSLA). Comments are due by 30 March.
Instrument issued to make adjustments to ITAA97
This instrument repeals the Income Tax Assessment Regulations 1997 at the same time as the Income Tax Assessment (1997 Act) Regulations 2021 come into operation and makes minor consequential amendments. It also makes minor amendments to the retirement savings accounts regulations and SIS regs.
COVID-19 tax lessons: A weekend read
National law firm McCullough Robertson has published an article many readers may find interesting enough to warrant reserving a space on the couch. Titled Tax administration lessons learnt from COVID-19 (and promptly forgotten), the author of the article contends that although most of us will remember 2020 as a year of enormous disruption and difficulties, it likely represents the zenith of tax administration in Australia.
Jobs and benefits: the COVID-19 challenge
This report from the Institute for Government looks at what can be learned from the experience of the coronavirus pandemic about the opportunities for reforms to government financial support for working age people and the key features of a social security system that has flexibility to respond rapidly to new labour market conditions. It draws on discussions among former senior civil servants, academics and other experts.
ATO about to issue Section 20C notices
Section 20C notices (former temporary resident with an APRA-regulated super fund) for the period 1 July to 31 December 2020 with a due date of 30 April 2021, are about to be issued by the ATO. It advises that if your client receives a Section 20C notice for an individual they think has been incorrectly identified, they should lodge a revocation request as soon as possible.
Invalidity benefit payments to get the data matching treatment
The Commonwealth Gazette brings news that the ATO is to acquire invalidity benefit payments data from Commonwealth Superannuation Corporation for 2010-11 through to 2021-22. It says approximately 16,000 individuals will be obtained each financial year, scrapping identification details (name, date of birth, date of death, tax file number, email address, phone number, bank BSB and account number) and transaction details.
NSW payroll tax and JobKeeper payment guidance
Revenue NSW has released guidance to employers explaining when, and by how much, a payroll tax exemption applies to JobKeeper payments. The practice note states that where an employer receives the JobKeeper subsidy in relation to an eligible employee, the amount of the “top-up” payment (if any) that they pay to an eligible employee is exempt from payroll tax.
Identity theft and fraud experience consultation
The ATO is consulting on Australians’ experiences of fraud and identity theft. It says identity crime is increasing exponentially, and is a critical threat to the Australian community. This crime type generates significant profits for offenders and causes considerable financial losses to governments, private industry and individuals. Consultation is open now.
Fringe benefits reasonable amounts
TD 2021/3 gives the reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit for the fringe benefits tax year commencing on 1 April 2021.
Fringe benefits cents per kilometre
TD 2021/4 gives the rates to be applied on a cents per kilometre basis for calculating the taxable value of a fringe benefit arising from the private use of a motor vehicle other than a car for the fringe benefits tax year commencing on 1 April 2021.
When refinancing, loan interest can be deductible to a partnership
As a partnership business becomes established, or better yet proves to be viable and becomes a successful operation, there is likely to come a time when its working capital — which had been financed from each partners’ pocket — can be refinanced through the partnership business borrowing funds. This is where TR 95/25 can be your client’s best friend.
Interim solution for PAYG and GST quarterly instalment notices
We mentioned it in yesterday’s Daily Update but now the ATO has published confirmation. The interim solution for paper PAYG and GST quarterly instalment notices has been brought forward from June and will now start with the March 2021 quarterly notices.
Share capital tainting rules
The share capital account tainting rules are integrity measures that prevent a company from transferring profits into a share capital account, and distributing those amounts to shareholders disguised as a non-assessable capital distribution. The ATO has supplied more information about the share capital account tainting rules in Division 197 of ITAA97.
Loss carry back choice: Consultation completed
The loss carry back measure announced in last year’s Federal Budget has been subject to administration refinement since its introduction, including just last week the issuing of approved forms for early balancers and substituted accounting period lodgers. It has also been the subject of consultation by the ATO regarding the development of guidance on whether a taxpayer can revoke, replace, amend or make additional choices after making an initial loss carry back choice. The ATO says its consultation has wound up, and is being considered prior to the finalisation of a draft taxation determination (so watch this space).
Fuel tax credits, heavy vehicles basic method
The ATO says your heavy vehicle using clients can use the basic method to calculate fuel tax credits for diesel used in heavy vehicles if they claim less than $10,000 each year. The method makes it easier to work out on and off public road use, but as the rate for travel off public roads is higher than on public roads, they will get more fuel tax credits if calculating off public road use correctly. This ATO web page goes through the method in three steps, and includes a worked example.
Compliance 2020: A TPB retrospective
Need free CPE/CPD? The TPB has made available a webinar recording (CPD value) where it looks back at the major compliance matters in 2020. The TPB goes over the types of cases it investigated, the outcomes, and what practitioners can expect from an investigation. It also dissects some of the high-profile cases the TPB has handled. Find a copy of the slides and hyperlinks document here.
PAYG instalment check
The ATO is suggesting to taxpayers that now may be a good time to check if their pay-as-you-go instalments are being made at a reasonably correct level and still reflect their expected end-of-year tax liability. It may pay to remind clients that instalments can be varied over a financial year multiple times if need be. Also, if they continue to be affected by COVID-19, the ATO states that it will not apply penalties or charge interest to varied instalments relating to the 2020-21 income year where taxpayers have made their best attempt to estimate liabilities.
Calling all (tax help) volunteers
Tax Help is a service that assists low-income earners to lodge their tax returns and manage and meet their tax obligations. It is an assistance service set up by the ATO, but relies on volunteers to keep operating — and the ATO is looking for more volunteers. If you or someone you know can help, find out more here.
Whacky Tax Fact
During the 1st century CE, the Roman emperor Vaspasian imposed a urine tax (Latin: vectigal urinae) on the distribution of urine from public urinals connected to Rome’s cloaca maxima, which means “great sewer” (so this clears up another bit of trivia). The urine collected from public urinals was sold as an ingredient for several chemical processes, as well as in the tanning process. It also whitened togas, as it contained high levels of ammonia. When Vespasian’s son complained about the disgusting nature of the tax, his father held up a gold coin and asked whether he felt offended by its smell. The phase pecunia non olet (money has no odour) is still used today to indicate that the value of money is not tainted by its origins.
Paper PAYG and GST instalment notices now brought forward to March
As regular readers will know, the ATO’s push to go entirely digital with activity statements and instalment notices received some push-back from practitioners, and in mid-February it subsequently advised that an “interim solution” will see paper PAYG and GST quarterly instalment notices recommence, starting with the June 2021 quarterly notices. It has since announced through its Tax Practitioner Stewardship Group that it will bring this solution forward, and the interim measure will begin (scroll down) with the March 2021 quarterly instalment notices.
Professional firms – allocation of profit compliance guidelines
The “Assessing the Risk: Allocation of profits within professional firms guidelines” and Everett Assignment web material is published already, which shows how the ATO assesses the risk of Part IVA applying to the allocation of profits from a professional firm where the income is not personal services income. However in reviewing the guidelines the ATO became aware they were being misinterpreted in relation to arrangements that go beyond the scope of the guidelines. The just-released draft Practical Compliance Guideline PCG 2021/D2 follows consultation with peak professional bodies and concerns arrangements involving taxpayers who redirect their income to an associated entity from a business or activity which includes their professional services, and has the effect of altering their tax liability.
A simple review of elections can help your client avoid family trust distribution tax
The ATO says its client engagement activities have highlighted instances where family trust distribution tax liabilities could have been avoided if family trust election and interposed entity election details had been regularly reviewed. It advises practitioners with relevant clients to remind them of this fact.
JobKeeper scheme is winding up — but not yet
The ATO is reminding employer participants in JobKeeper that there are still fortnight periods left to run in the life of the scheme. If still signed up, they must pay their eligible employees at least the JobKeeper amount (gross salary inclusive of PAYG withholding) each JobKeeper fortnight — even if they earn less. JobKeeper winds up 28 March.
Ausindustry and ATO’s joint podcast on R&D Tax Incentive scheme
Representatives of both bodies outline key information in this podcast (CPD value) for companies who are about to apply to register for the R&D Tax Incentive program. They talk about the eligibility requirements, the registration process, keeping records, and common mistakes to avoid when registering.
Activity statements: System not quite there yet to go digital
I have encountered too many instances where the activity statement has swapped from paper to electronic, and when I enquire on the ATO Portal where the email notification is, the activity statement is already sent – there is no email address. So many times I contact the client regarding late activity statements as they never receive notification one is ready. The ATO system needs an error default when there is no email address and the method is electronic, so an email address can be added for notifications.
Jon, Croydon Victoria
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Client reminder: FBT returns, if required, are due soon
The ATO is prompting taxpayers and their practitioners to clarify that they may or may not be due to lodge an FBT return for 2021. For employers, it says that as a result of COVID-19 they may have found themselves providing different benefits to those they usually provide – and these may be exempt from FBT. These can include items provided to employees to enable them to work from home (laptop or portable device), emergency accommodation, food and transport, and perhaps emergency health care. The FBT balancing payment due date is 25 June.
Legislation protecting against super fees for no service passes
The Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020 implementing a further four recommendations of the Financial Services Royal Commission to improve consumer protections (and detailed here recently), has passed Parliament. Minister for Superannuation, Financial Services Jane Hume said: “Under the legislation passed today, clients of financial advisers will receive an annual, forward-looking summary of fees and corresponding services, in addition to existing disclosures. Advisers will need to obtain written consent prior to deducting fees.”
ATO’s taxable payments reporting lodgment still short for 2019-20
The ATO has today confirmed more than 60,000 businesses haven’t yet complied with lodgment requirements under the Taxable payments reporting system (TPRS) for 2019-20. The TPRS is a black economy measure designed to assist the ATO identify contractors who don’t report or under-report their income. The ATO estimates that around 280,000 businesses need to lodge a Taxable payments annual report (TPAR) for 2019-20.
Impact statement issued on unfavourable to Commissioner decision
In an AAT case, MWWD and Commissioner of Taxation, the taxpayer provided repair and maintenance services, at times provided to their clients through service technicians. The case concerned a person who was engaged by the taxpayer as a service technician and was treated as an independent contractor for some quarterly periods.The taxpayer did not pay any SG during the period on the basis that he was not an employee. The Commissioner assessed the taxpayer as being liable to pay superannuation guarantee charge on the basis that the person was an employee under subsections 12(1) and 12(3) of the SGAA during the period. But the AAT found otherwise.
Remittance to third party did not reduce net capital gain, says AAT
In another AAT case, ZBFF and Commissioner of Taxation, a taxpayer with significant assets had a marriage fall apart, and came to an arrangement with a friend to save the family house by having it bought by a trust set up to do so. The facts of the case are entertainingly sketched out by the AAT Deputy President Bernard McCabe, who starts out: “It may have been Oscar Wilde who observed ‘No good deed goes unpunished’. This case considers whether a good deed will go untaxed.” He goes on to put forth the reasons he denied the taxpayers claim.
In a post-COVID recovery, deductibility for re-training could be a much needed kickalong
Treasury released a discussion paper around the announcement in the 2020-21 Federal Budget to allow individuals to claim deductions for education and training expenses they incur where the expenditure is not related to their current employment.