GST performance report for 2019-20 published
Deputy Commissioner, Small Business, Deborah Jenkins has released the 2019-20 performance report for GST. Highlights include the difference between net GST accruals and cash collections of approximately $6.4 billion, compared with $1.6 billion in 2018-19. The ATO says the most significant component of this is an increase in unpaid debt, in part due to payment deferrals granted to businesses experiencing financial hardship.
Tax avoidance program for high wealth groups has response window widened
The Next 5,000 tax performance program (previously known as the high wealth private groups tax performance program) is a key element of the ATO’s tax avoidance taskforce. The Next 5,000 program runs for four years from 2019-20. For the streamlined assurance review, the ATO says during 2020-21 targeted taxpayers may be offered an alternative to the three-month notification period to help them in managing the effect of COVID-19 on their business.
ASIC launches immunity policy for market misconduct offences
ASIC has released an immunity policy for certain serious offences such as market manipulation, insider trading and dishonest conduct, where immunity will be available to the first individual who satisfies the immunity criteria and reports the misconduct to ASIC prior to commencement of an investigation.
Foreign investment reforms to be reviewed
Treasury is conducting an evaluation of the foreign investment reforms that commenced on 1 January 2021. The evaluation is considering the impact that the reforms and their implementation have had on foreign investment in Australia and the broader Australian economy, and also will consider the unusual economic and policy circumstances in which the reforms have commenced, particularly in relation to the COVID-19 pandemic. Terms of reference have been published, and the review is required to be completed by 10 December 2021.
Deadline for FACTA reporting obligations extended
Financial institutions that report under the Foreign Account Tax Compliance Act (FATCA) have been given an extension on their reporting obligation. The ATO says that to allow reporters more time to obtain missing TINs from account holders, and also to modify systems to enable reporting of codes, it has extended the deadline for submitting 2020 reporting year FATCA reports to 31 August 2021.
Extending superannuation choice
New workplace determinations and enterprise agreements made on or after 1 January 2021 must offer employees the right to choose the super fund for SG payments. Once a new agreement is in place, employers must offer choice of fund to both existing employees who request to choose their super fund and all new employees. Nomination can be by completing the standard choice form through ATO online services linked to their myGov account, or an employer can provide a Superannuation (super) standard choice form. If an employee doesn’t nominate a fund, employers can continue to pay their super to the same fund they previously contributed to, or into their default fund.
In other news
Buy-now-pay-later providers code
The Australian Finance Industry Association (AFIA) is to release a self-regulatory code of conduct for buy-now-pay-later service providers. With an aim to come into effect from 1 March, the code is to cover providers that come under the guidance of AFIA, including Afterpay, Brighte, Humm Group, Klarna, Latitude, Openpay, Payright and Zip Co. The association says these represent 95% of the buy-now-pay-later market.
APRA releases latest quarterly private health insurance statistics
APRA publishes statistics on the private health insurance industry (PHI) on a quarterly basis (see the latest here, to end of December 2020). The statistics provides industry aggregate summaries of key financial and membership statistics. Specific sets of statistics are also provided in the areas of membership, coverage, benefits paid, medical gap, prostheses, and medical services.
Study shows COVID-19 support greatly eased financial distress
Measures to counter the economic outcomes of the pandemic, such as JobKeeper, the boost to JobSeeker, debt and rent amnesties and more, saw a pronounced decline in the number of Australians experiencing financial distress. The study by Anglicare also found that utilities were the leading pain point.
Reminder for business clients about unrecoverable income (bad debts)
Your business owner clients should be reminded that they may be able to claim a deduction for income that cannot be recovered from a customer or debtor — unrecoverable income is also known as a “bad debt”. The ATO has refreshed its guidance on the treatment of unrecoverable income. There are also special bad debt deduction rules for tax consolidated groups, multiple entry consolidated groups, and trusts (subject to certain exclusions).
Director resignations: new laws apply from 18 February 2021
ASIC has announced that the Federal Government has introduced new laws to help combat illegal phoenix activity. From 18 February 2021, a company director will not be able to backdate their resignation more than 28 days or resign if it means the company would be left without a director. Backdating resignations was a common tactic used by directors to engage in illegal phoenix activity.
Social Security changes include extending COVID-19 eligibility criteria
The Federal Government has spelled out a range of changes to Social Security measures. They include a $50 per fortnight boost to JobSeeker payments and increasing the income-free earnings to $150 a fortnight, both from 1 April. There are also changes to some mutual obligation requirements.
First criminal conviction for JobKeeper fraud
A Melbourne taxpayer has the dubious distinction of being the first to be convicted of JobKeeper fraud. He applied for and lodged two months of JobKeeper claims online, declaring he had experienced a downturn of at least 30%. He was a sole trader and his business met all the eligibility requirements, which he confirmed prior to submitting the applications and claims to the ATO that it was all true and correct. The true state of his affairs was that he was not operating a genuine business and he had already agreed to be nominated by his full-time employer for the allowance.
Addendum issued on FBT ruling for government employees posted overseas
TD 2020/8 was issued last year, and deals with income and fringe benefits taxes for treatment of allowances and benefits provided to Australian Government employees posted overseas. An addendum has been issued to correct a statement made in the summary table which sets out the taxation treatment for one for one of the allowances described within
Determination on renting investment property and CGT small business concessions
TD 2021/2 clarifies that a company that carries on a business in a general sense as described in TR 2019/1, but whose only activity is renting out an investment property, cannot claim the CGT small business concessions in Division 152 of the ITAA97 in relation to that investment property.
New Director Identification Number regime could be just around the corner
The DIN regime may have dropped off your clients’ radar, as it has been on the horizon for some time, but it is worth keeping in mind what the ramifications will be, as clients could be clamouring for details sooner than many realise.
SAP or part-year temporary full expensing claims, opt-outs
The ATO has issued guidance to be used by entities that are claiming a deduction or opting out of temporary full expensing or backing business investment and either have an approved substituted accounting period (SAP) with a year ending before 30 June 2021, or need to lodge a tax return for part of the year (for example, this could be because their business is entering into liquidation or they stop being an Australian resident for tax purposes during the 2021 income year before 30 June 2021).
COVID-19 snap lockdown leads to increase in Victoria’s travel voucher scheme
Two travel voucher schemes (one new and an existing plan expanded) aim to re-encourage Victorians to travel across their state in the wake of the recent “circuit breaker” lockdown. These are aimed at helping struggling travel and accommodation businesses that had sudden cancellations. The schemes include a new Melbourne Travel Voucher Scheme with 40,000 vouchers to support travel in greater Melbourne (to launch soon), and an expanded Regional Travel Voucher Scheme with an additional 10,000 vouchers to support travel in regional Victoria.
SMSF annual returns: Top 5 mistakes for last-minute newbies
The due date for first year SMSF trustees to lodge their fund’s first annual return is generally 28 February. Just in case any of these first-timers decide to burn the midnight oil over this coming weekend to make that deadline (28 February is Sunday, so the due date is 1 March), the ATO has published the top five mistakes it sees coming through on SMSF annual returns. Of course the smarter trustees don’t have to worry as they will be using the services of a registered practitioner.
Warn clients scammers on the prowl with false TFN cancellation scare
The ATO has pointed out a spike in automated scam calls about the cancelling of tax file numbers. The calls attempt to mimic an official ATO notification that a TFN has been suspended following suspected fraudulent activity. Since 1 January, the ATO has received 638 reports of this scam, with seven victims paying out nearly $118,000. It says younger people (18 to 24 years) have paid the most under this new tactic, with one losing $36,000.
Lodge 2018-19 returns, or lose child care benefit
The ATO is reminding Child Care Subsidy recipients and their partners that they must lodge their outstanding 2018-19 individual tax returns by 31 March 2021 or they may lose their benefits. If your client is not required to lodge a tax return for 2018-19 but has not yet informed the ATO, this must be done by 31 March 2021. The ATO also suggests your client notifies Services Australia.
Australian Financial Complaints Authority under review
The Australian Financial Complaints Authority (AFCA) is being reviewed in terms of its performance and functions. Treasury has released the terms of reference for the review, and says that legislation requires it to consider whether AFCA has been effective in resolving complaints in a way that is fair, efficient, timely and independent. In doing so, the review will take account of feedback provided by consumers and small businesses and by financial firms. Submissions and comments close 26 March.
AAT affirms decision to not release taxpayer from tax liabilities in face of “hardship”
In ZCSB and Commissioner of Taxation (Taxation)  AATA 138, the applicant had a tax debt of $1,191,003.90, which the ATO was not in favour of letting go due to his claim of facing financial hardship. The surgical assistant who started his own consulting business said he was aware he had to pay taxes, but he was not aware of “the process for going and doing that as a sole trader”. He told the AAT that his tax agents asked him for information in relation to how the business was developing, including projected income, and this “made it a lot more complicated” than he expected it would be. The decision to hold him to his liabilities was affirmed.
Whacky Tax Fact
Great Britain in the 1690s and France in the 1790s introduced a tax based on the number of windows in a house. Consequently, houses began to be built with very few windows, or people would close up existing windows. In England, after 155 years, medical authorities began to think that health problems in the citizenry was caused by a lack of fresh air. There the tax was finally repealed in 1851, with France waiting until 1926 to do the same.
Federal Court determines payments in place of employee incentives not deductible
An interesting decision issued from the Federal Court last week where it was decided that amounts paid in consideration for the cancellation of entitlements under an employee option plan and incentive scheme were not deductible under section 8-1. The Federal Court came to this conclusion not because the outgoings were capital in nature, but because they failed the positive limbs.
Victoria’s COVID-19 “circuit breaker” lockdown support offer
Inevitable costs were incurred by many businesses in Victoria after the recent snap lockdown, such as through loss of perishable food or produce and cancelled bookings. Support has finally been announced by the Victorian Government. Under the Business Costs Assistance Program, eligible businesses with an annual payroll of up to $3 million can receive a one-off grant of $2000, whether they have employees or not. Also hospitality businesses can get a one-off payment of $3000 to help with costs incurred through the new Licensed Hospitality Venue Fund. Also the Regional Tourism Accommodation Support Program is to be expanded to include premises in greater Melbourne whose bookings were cancelled due to the circuit breaker action (opening soon, but register now).
Indexation of TBC webinar
Although touted as being for larger APRA-regulated super funds, the ATO’s upcoming webinar on the indexation of the transfer balance cap on 2 March will cover the general reporting and compliance requirements once the TBC increases. These webinars usually run for 45 to 60 minutes. You can submit questions during the webinar and the questions and answers from each session will be published online afterwards.
No short cut to concessions for family trusts
Concessional treatment applies to some transactions where trusts have validly elected to become family trusts (it is not sufficient for your client to simply include the words “family trust” in their trust’s name). The ATO has provided guidance. A family trust election (FTE) is the mechanism that can make the transformation happen, but this means your client must have satisfied the relevant tests, and made an election in writing in the approved form.
Claiming the loss carry back for substituted accounting periods
The ATO has issued a form for claiming loss carry back tax offset by eligible entities with an early balancer substituted accounting period or lodging a part year company tax return for 2020–21. There is also instructional material for the above.
Change to FBT balancing payment due date
The Tax Practitioner Stewardship Group advises that the 28 May due date for the FBT balancing payment has been changed to align with the lodgment date for employers that utilise practitioners who lodge FBT returns electronically — the revised due date is 25 June. This change will take effect from the 2021 FBT year. The ATO’s systems will be updated by the end of May 2021, and it advises that there is no need to request a deferral. Note that if lodging the FBT return by paper, the payment due date is 21 May.
COVID-19 related medical or hygiene products to get a customs break
A bill has been passed by the House of Representatives that will incorporate the “free” rate of customs duty for medical or hygiene products used to combat COVID-19 and to make other amendments to the Customs Tariff Act 1995. The Customs Tariff Amendment (Incorporation of Proposals and Measures) Bill 2020 will also smooth out anomalies that have developed over the course of time with several free trade agreements.
Data matching update announced that widens Services Australia access
An announcement has been made that signals further meshing of STP data sourced through ATO systems and individuals relying on Services Australia. The payroll information is to be matched against the latter’s records, with guidance issued by Services Australia outlining this process.
SAN misuse still a pebble in ATO’s shoe
ATO has re-stated its continuing concerns about the misuse of SMSF auditor numbers (SAN). Self-lodgers and first time lodgers of SMSF annual returns have a due date looming (28 February, or rather 1 March since that’s a Sunday). A SAN is included in each SMSF annual return to identify who audited the fund prior to lodgment. The ATO says there have been instances where a SAN is included in a return but an audit has not been completed by the auditor with that SAN, or the return was lodged prior to the completion of an audit.
The COVID-induced pause in SMSF compliance has left 2019 return lodgments well short
Commissioner Chris Jordan spoke at the SMSF Association annual conference on 18 February, in which he revealed that around 14% of 2019 SMSF annual returns are yet to be lodged — so going on the latest figures from APRA, this equates to about 83,000 funds. A fair amount of that could be due to effects of the pandemic, he said. For 2020, Jordan said the ATO’s “rigorous checks” also prevented $126 million from illegally leaving the superannuation system.