New RDTI user portal coming soon, but open for early familiarisation
The Department of Industry, Science, Energy and Resources has launched a new portal to make it easier for companies to manage their applications for the Research and Development (R&D) tax incentive. Using the new customer portal, applications can be submitted from 5 July 2021, but users can log in now to become familiar with the new portal and start drafting applications.
SMSF deadline on SuperStream fast approaching, so secure an electronic service address
SMSFs that accept contributions from employers (other than related-party employers), it needs to be able to receive the contributions and associated SuperStream data electronically. And from 1 October, the fund will need to use SuperStream to rollover any super to or from the SMSF. To do so, the fund will need an electronic service address (ESA), which is a special internet address, different to an email address.
Deferral options, supported lodgment, re-iterated by ATO
Deputy Commissioner Hoa Wood has posted a reminder to practitioners that the ATO is aware that the approaching tax time adds to the toll the past 18 months has taken on many tax professionals, and that it is committed to providing help when you need it. She says the ATO has a range of deferral options available for tax professionals, and that If you need more help to keep on top of lodgments across your practice, its supported lodgment program could be suitable.
New labels in returns coming for COVID depreciation and write-off measures
The ATO has informed the Tax Practitioners Stewardship Group (with an announcement to be made soon) that in the next couple of months new labels will be introduced for both Backing Business Investment and the instant asset write-off in the 2020-21 company, trust, partnership and business and professional items section of individual income tax returns. The ATO says this will make it easier for businesses to claim the measures and will include labels for reporting aggregated turnover and information about assets. The relevant income tax return instructions will explain how to complete each relevant label, and the ATO will update its website accordingly.
ATO’s March 2021 quarterly statistical report on SMSFs
There are highlights contained in the March 2021 report on the most recent statistics on SMSFs, published by the Federal Government’s data.gov.au, that make compelling reading. For example, there are now just shy of 600,000 funds, with. Total membership of 1,120,936 Australians. Total assets now top $787 billion, with 26% of that invested in the sharemarket and 19% in cash and term deposits.
Arm’s length and transfer pricing Glencore decision set in concrete by High Court
The Commissioner has lost his appeal in the High Court seeking to appeal against the Full Federal Court decision on the Glencore case. In this case, the court found in favour of the taxpayer in a marketing hub transfer pricing case involving sales by an Australian entity to a related marketing entity based in Switzerland. It accepted the taxpayer’s basis of determining the arm’s length rate based on comparable agreements and opposed the ATO’s, which were based on hypothetical (reconstructed) arrangements.
Business industry codes can be important for your client’s tax outcome
Many businesses change purpose over time, and the ATO occasionally urges practitioners to take the opportunity to check that their clients’ business industry codes are correct.
Permanent establishment COVID-era treatment given an end date
The ATO has advised before about its compliance approach to the existence of permanent establishments (and that it will not take compliance action while travel restrictions have an impact of business affairs. But its latest advice is that this approach is set to end on 31 December 2021.
extends COVID-19 practitioner support measures
The Tax Practitioners Board’s support concessions delivered earlier in the pandemic have been further extended. CPD obligations have been relaxed, with the temporary removal of the 25% cap for relevant technical/professional reading activity until 31 December 2021, and also extending to the same date its acceptance of a small amount of educative health and wellbeing activities undertaken. Annual declaration due by the same date can also be put off until 2022 or, if renewals are due in 2022, until 2023.
Screen production incentives consultation initiated
The Federal Government’s media reforms package, which was announced in the 2020-21 Budget, included screen sector support. These measures are intended to drive the production and distribution of quality Australian screen content in a digital environment. Treasury has now released an exposure draft bill and explanatory memorandum for public consultation, with comments and submissions due by 31 May.
The unit trusts that must be dealt with as a corporate entity
The ATO is reminding practitioners and trustees that certain unit trusts are treated and taxed as corporate tax entities. Under Division 6C of Part III of ITAA36, a public trading trust (PTT) must be both a trading trust (broadly, a trust that carries on activities other than holding solely passive investments such as shares, land and fixed interest assets), and a public unit trust. PTTs lodge a company tax return using a company TFN, although practitioners need to be aware of recent amendments to Division 6C.
Some auditors are committing a basic error in reporting protocol
The ATO reports that it has been finding that some auditors are reporting information in Section G of the auditor/actuary contravention report (ACR) when it should be reported in Section E. It reiterates that Section E (contraventions) is where you must report all contraventions of the sections and regulations listed in tables 1A and 1B of the ACR instructions that meet the reporting criteria. If there are contraventions that are not listed in the tables, you can report them in Section G.
Instruments registered regarding waiver of document requirements for GST purposes
The Federal Government has registered legislative instruments WAN 2021/1 and WTI 2021/1. The first deals with the waiver of an adjustment note requirement and applies to a decreasing adjustment arising from an adjustment event in respect of an acquisition of eftpos interchange services. The latter deals with a waiver of an income tax invoice applying to an input tax credit on a creditable acquisition under the same circumstances.
ATO must confirm stance on travel
claims when home is the place of work
With some businesses continuing to allow employees to work solely from home following the COVID-19 lockdowns, and others adopting more of a “hybrid” model, Tax & Super Australia says the ATO needs to confirm what are legitimate travel expenses for those people who now have their home as their place of work.
Whacky Tax Fact
“Bottom of the harbour” tax schemes were a form of tax avoidance used in Australia in the 1970s. The harbour referred to was Sydney Harbour, which was near the financial district. The operation at the heart of bottom of the harbour schemes involved a company that would be stripped of assets and accumulated profits before its tax fell due, leaving it then unable to pay. Once assets were stripped, the company would be sent, metaphorically, to the “bottom of the harbour” by being transferred to someone of limited means and with little interest in its past activities. The company’s records were often lost too (quelle surprise). The ATO, being in the same position as other unsecured creditors in the case of an insolvent company, ended up with nothing. Participation in the schemes was made a criminal offence in 1980.
Students invited to get creative with all things tax and super
Calling all high school students: The ATO’s “Tax, Super + You” competition is back for 2021, opening for entries this week until 13 August. Shortlisted entries the last time the competition was held (in 2019) included raps, songs, animations, video skits and even a boardgame. Assistant Commissioner Sally Bektas explains how to get involved on ATOtv.
Commissioner has just flexed his rarely used remedial power
The Commissioner of Taxation has limited powers to modify the operation of tax law in circumstances where entities will benefit, or at least be no worse off, as a result of the modification. This power is known as the Commissioner’s remedial power (CRP). An instrument under the CRP regime has been issued just this month. The remediation affects the Temporary Work (International Relations) Visa (subclass 403), and is to be repealed 1 April 2024.
Early engagement consultation
The Federal Budget contained an announcement (page 10 of this Budget brochure) of a new “early engagement” service for the ATO. The service aims to encourage and support new business investments into Australia. The ATO is currently developing web guidance that will provide details about the new program, including its scope and eligibility requirements. Comments can be made to this ATO contact.
Taking care of (small) business
Tax time needn’t be all that stressful for you small business clients, especially if they have a thorough and prepared tax agent at their backs. The ATO notes that the most common errors SMEs make when completing their tax returns are failing to declare all income, failing to account for private use of business funds or assets, and not keeping all required records or not having adequate record keeping systems. It has other tips to help keep your small business clients compliant.
NT Revenue can now make special arrangements on some areas of tax
The Northern Territory legislation amendment mentioned in the Daily Update of 11 May, which gives the Commissioner of Territory Revenue expanded powers to grant special arrangements dealing with matters other than tax returns (such as tax exemptions, settlement of tax liabilities, etc), is now law. The new rules commence from 21 May.
Interaction of tax depreciation
incentives (with links)
Readers have pointed out that an item from yesterday’s Daily Update had incomplete links, which have now been updated for this post, to ATO guidance on the interactions of various tax depreciation incentives. These include temporary full expensing, instant asset write-off (to 11 March 2020, and from 12 March 2020), and backing business investment. There was also an infographic that summarises the information and the interaction between the measures.
Is your client eligible for the small business income tax offset?
The small business income tax offset (also known as the unincorporated small business tax discount) can reduce the tax a business pays by up to $1,000 each year. The offset is worked out on the proportion of tax payable on business income.
Interaction of tax depreciation incentives
The ATO has issued a guide to the various tax depreciation incentives and when businesses could consider using them. The depreciation incentives include temporary full expensing, instant asset write-off (to 11 March 2020, and from 12 March 2020), and backing business investment. It has also supplied an infographic that summarises the information and the interaction between the measures.
Primary producers spending big on capital assets
NAB data shows that farmers are purchasing new equipment and vehicles in record numbers as operators embrace the strongest market conditions seen in years, as well as current favourable depreciation measures. Spending on tractors is up 146% year on year, irrigation equipment up 217%, earthmoving/construction equipment up 133%, and forklifts up 216%. Farm management deposits (FMDs) which the ATO administers from a tax point of view, are also in the spotlight (the scheme is used to manage uneven cash flow due to sometimes fickle income-producing conditions). FMD account holders have been tapping these savings for equipment upgrades. There has also been lobbying pressure to scrap the FMD scheme’s $800,000 cap.
Exposure draft changes to exempt current pension rules
The Federal Government has released exposure draft legislation to change certain administration processes for superannuation funds with regard to requirements for the calculation of exempt current pension income (ECPI). The draft legislation provides choice for fund trustees to use their preferred method of calculating ECPI where the fund is fully in the retirement phase for part of the income year but not for the entire income year. The draft legislation will also remove a redundant requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI, where the fund is fully in the retirement phase for all of the income year. Comments are invited until 18 June.
More data matching gazetted for ATO
Notice has been given that the ATO will acquire property management data from property management software providers for the 2018-19 through to 2022-23 financial years. The information will be matched against ATO records to inform rental property owners of their taxation obligations as well as to undertake compliance activity. Also posted to the Commonwealth Gazette is notice that the ATO will acquire rental bond data from state and territory rental bond regulators bi-annually through to 30 June 2023. The information will identify taxpayers owning income producing property and if taxpayers are disposing of a property which may trigger a CGT event.
Checklist for employment-related tax deductions
This checklist contains a general list of general and specific employment-related deductions and should be used as a guide only. Also, how much of the expense is allowable as a tax deduction will depend on the extent the expenses are incurred in earning the person’s assessable income.
Rollover from SMSF? First step is a “tick” of approval
The SMSF Member Verify service (also known as SMSFmemberTICK), administered by Standard Business Reporting, allows SMSFs and their nominated intermediaries to match member details to information held by the ATO using the members’ TFN and other key identity information to assist SuperStream rollovers. Before any rollover can be made, trustees must have a member verified and receive a “valid” notice from the ATO.
SMSFs still holding out on lodging annual return to get final warning
The ATO says it has already contacted SMSFs with outstanding annual returns, but now reiterates that SMSFs who have had no engagement with the ATO regarding their non-lodgment can expect to be issued with a final warning.