Banking sector reform bill looks to end ‘fee for no service’ drag on SMSFs
Legislation to address four recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (FSRC) relating to financial advice, the Financial Sector Reform (Hayne Royal Commission Response No. 2) Bill 2020, has passed the lower house and is headed to the Senate. Schedule 3 to the bill amends the SIS Act to provide greater protection for super members against paying fees for no service. The EM states: “The amendments increase the visibility of advice fees for all superannuation products and prohibit the charging of ongoing advice fees from MySuper products.” Schedule 1 of the bill amends the Corporations Act to require financial services providers under an ongoing fee arrangement to provide clients with a fee statement each year.
FASEA to be wound up and some functions moved to Treasury
In a media release, the Federal Government has announced that the Financial Adviser Standards and Ethics Authority (FASEA) is to be dissolved, with some elements of its functions to be taken over by the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investment Commission (ASIC). Its standard-making functions to the Treasury, with standards to be set by legislative instrument.
ATO provides helpful map to the maze of turnover thresholds and business concessions
Clients can be understandably confused when it comes to the many concessions made available in regard to deductions, the calculation of income tax, record keeping and the available concessions on different taxes such as GST, CGT, FBT and more, — not confused about the concessions per se, but the many and varied thresholds that apply to determine eligibility (and I’m sure many readers would admit to similar head-scratching at times). Clarification has now been issued by the ATO in the form of tables that spell out what concession is available under which levels of turnover threshold, all in one place. Tip: Bookmark it.
Practical compliance guideline on cross-border related party financing
PCG 2017/4, which has just been uipdated, deals with the ATO compliance approach to taxation issues associated with cross-border related party financing arrangements and related transactions. The guideline states that where such an arrangement is rated as low risk, the Commissioner will generally not apply compliance resources to review the taxation outcomes other than to fact check the appropriate risk rating. If it falls outside the low risk category, the Commissioner will monitor, test and/or verify the taxation outcomes. The higher the risk rating, the more likely arrangements will be reviewed as a matter of priority.
ASIC releases technical updates to conflicted remuneration regulations
ASIC has released technical updates to Regulatory Guide 246 Conflicted and other banned remuneration to reflect recent changes to the law. The updates reflect the end of the grandfathering of conflicted remuneration for financial product advice from 1 January 2021, as well as the extension of the ban on conflicted remuneration to stamping fees paid in relation to listed investment companies and listed investment trusts (excluding real estate investment trusts) that took effect on 1 July 2020.
FBT guide for employers updated to reflect small business threshold increase
Chapter 20 of the ATO’s Fringe benefits tax — a guide for employers has been updated in light of the increase in the threshold to define a small business entity from $10 million to $50 million from 1 April 2021. This is relevant for exemptions for certain work-related items and small business car parking (which is also under review).
The Commissioner flexes his discretionary remedial muscle
The Commissioner of Taxation’s “remedial power” is a discretionary option that can be used in limited circumstances to resolve smaller unintended outcomes in the taxation and superannuation law. This ATO page provides an index of the Commissioner’s use of this power (with one example as recent as this month), and provides links to the relevant legislative instruments and explanatory material.
Banks, building societies and credit unions targeted by APRA over repurchased (repayment deferred) residential mortgage loans
The Australian Prudential Regulation Authority (APRA) recently identified repurchased residential mortgage loans at some authorised deposit-taking institutions (ADIs) that were subject to repayment deferral from their securitisations. In APRA’s view, this represents implicit support, which is inconsistent with a prudential standard that requires that mortgages are not repurchased by ADIs if the borrower is in hardship or the loan is of lower quality, as this would undermine the principle of a clear transfer of credit risk that is at the heart of the regulatory treatment of securitisation.
National audit office flags potential in-depth review of JobKeeper
The Australian National Audit Office (ANAO) has stated the case for a potential audit of the JobKeeper scheme sometime in 2020-21. The ANAO says its audit would assess the effectiveness of the ATO’s administration of the JobKeeper scheme, and would follow on from the Auditor-General performance audit of the ATO’s management of risks related to the rapid implementation of COVID-19 economic response measures. The audit would include examination of the implementation of integrity measures designed to protect the scheme against fraud and other abuse. Separately the ABC reports that the ATO has 19 active criminal investigations into fraud against the $101 billion JobKeeper scheme. It has also issued fines to another 19 applicants to the wage subsidy program who have made false or misleading statements, and is considering penalties for another 24.
JobMaker reporting obligations spelled out
A legislative instrument has been registered that spells out the reporting obligations for participating in the JobMaker Hiring Credit scheme. The ATO says it is necessary to obtain certain information from eligible employers to ensure that they can participate in the scheme, and to enable the ATO to determine the value of the payments participating employers are entitled to. The instrument also explains how reporting must be undertaken, and when reports are due. This instrument commences from 4 December 2020 and applies for all JobMaker periods commencing on or after 7 October 2020.
Note that an extensive webinar on JobMaker is being held this coming Friday (details here, special price for members), which will explain all the necessary details, including registration and reporting requirements.
BAS and tax agent fast key code for telephone support from ATO
The ATO has provided a fast key code guide to the BAS agent phone services that it offers, so that agents can find the right phone number for the topic they need. Before phoning, it may pay to check the BAS agent online services guide to get the most out of the ATO’s online services. There is a similar fast key code guide for tax agents, and corresponding online services guide.
ATO’s interest rates updated for GIC and SIC, January – March 2021
There are new general interest charge (GIC) rates and shortfall interest charge (SIC) rates published on the ATO website, applying for the period from 1 January 2021 to 31 March 2021. They are 7.02% GIC, compounding at 0.01923288% a day, and 3.02% SIC, compounding at 0.00827397% a day.
SAR lodgment must be preceded by appointing an approved auditor
In view of the upcoming silly season, and so that important lodgment requirements don’t slip through the cracks, the ATO is reminding SMSF trustees that the first step in completing an SMSF annual return (SAR) is to appoint an approved auditor at least 45 days before lodging deadline. If a client’s due date is, for example, 28 February 2021, the latest they can appoint an auditor is 13 January 2021. Given that this is usually a very quiet time of the year, it may pay to remind clients of this fact if they want to ensure seamless compliance for their fund. Failing to lodge the SAR by the due date can have unwanted consequences, such as the regulation details of the SMSF being removed from Super Fund Lookup (SFLU), and the potential loss of tax concessions.
Update to landholding valuation ruling for Victoria
SRO Victoria has issued revenue ruling DA-060v2, issued 7 December 2020 but with effect 19 June 2019, which outlines the type of valuation evidence, and the circumstances where this may be needed, when determining whether a company or unit trust scheme is a landholder and the amount of duty payable. From June last year, a land holding is also deemed to include an economic entitlement, as well as an interest in fixtures, that may be separate to the land.
JobMaker rules released, with added integrity teeth
The draft JobMaker rules have been sketched out by Tax & Super recently, but just last Friday the final rules for the measure were released via a legislative instrument, which differs from the draft rules we’d previously had access to in a number of ways. One of the stand-out differences is the integrity measures in place in the final rules that are to act to prevent employers gaining access to JobMaker payments by dubious means (such as sacking older workers to then employ younger eligible workers). The integrity rules are set out in section 29 of the instrument. Note that an extensive webinar on JobMaker and the new rules is being held this coming Friday (details here, special price for members), which will explain what the legislation means for you and your clients, including what you need to know and do in the immediate term.
Ask you clients to check now if RAM authorisations are about to expire
The ATO advises that if your client is a “primary person” they can only be linked to an organisation in Relationship Authorisation Manager (RAM) for up to 12 months. Especially in the lead up to the coming summer break, the ATO says it could pay for your clients to check if they need to renew their links or authorisations in RAM before these expire.
Payment plan process changes
From early December, practitioners may have noticed a change in the ATO’s payment plan service. It says that payment plans have been updated “to provide a more tailored plan to better suit your client’s circumstances”. Online services for agents is now set up so that payment plans for your clients can be initiated and commenced without the need to contact the ATO. You can set up a payment plan if your client has an existing debit amount under $100,000 (total balance or overdue amounts), and hasn’t defaulted on a payment plan for the relevant account more than twice in the past two years.
Taxation 2020 in review (OECD data)
The Organisation for Economic Co-operation and Development has released some statistics regarding taxation revenue for 2020 as well as statistics on consumption tax trends for the year. The revenue statistics covers data on government tax revenues from OECD countries for the period 1985 to 2019. Consumption tax data covers VAT/GST and excise rates, trends and policy issues. The OECD made the observation (that we would naturally assume) that COVID-19 will have been likely to significantly affect tax revenues in 2020, although from the data it seems that the main source of the reduced revenues has come from consumption taxes such as Australia’s GST.
$10,000 cash payment ban plan quashed in Senate
Legislation introduced more than a year ago, the Currency (Restrictions on the Use of Cash) Bill 2019, has been unanimously voted down in the Senate, described by one Senator as “officially dead”. The bill had previously had support in the upper house, which would have made it a criminal offense for entities to make or accept cash payments of $10,000 or more. The change in sentiment, with other factors in play of course, has been attributed to the intervening COVID-19 induced economic turmoil.
Taxpayer alert on imputation benefits on derivative instrument
The ATO has issued a taxpayer alert regarding structured arrangements to give access to imputation benefits on listed equities acquired where risk is offset through the use of derivative instruments. TA 2020/5 states that the ATO is reviewing arrangements that are intended to provide imputation benefits to Australian taxpayers in respect of a parcel of shareswhere, as a result of the arrangement making use of derivative instruments, the taxpayer retains no or nominal economic exposure to the dividend and capital performance associated with that parcel of shares.
The end is nigh for paper activity statements
The ATO has issued guidance that indicates that the days of having activity statements issued on paper are fast approaching dinosaur status. It says that when an activity statement is lodged electronically through one of four channels — online services for agents, the practitioner lodgment service (PLS), Standard Business Reporting (SBR) enabled software, or when a client links their myGov account to the ATO — paper statements from then on will not be issued. One last paper statement may be sent out if the first electronic lodgment is after the activity statement generate date, but the ATO says electronic filing should be maintained thereafter.
ATO inviting “neighbourhood watch” type evasion tip offs
The ATO says it is interested in COVID-19, JobKeeper, phoenix, tax evasion and black economy tip-offs you may have about members of the community who gain an unfair advantage by intentionally doing the wrong thing. As a tax professional, the ATO posits that you may see others representing themselves as tax professionals when they are not, or be concerned about the inappropriate conduct of a client’s previous tax professional, (consider voluntary disclosure so your client avoids possible penalties and interest charges), or hear about clients who have been offered, or are involved in potential tax avoidance schemes.