Embed Size (px)
Citation preview
Tax on the Couch – May 2016
Tax on the Couch
Notes
May 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016
The information in this publication has been developed in consultation with the Australian Taxation Office.
ATO Disclaimer
This general advice has been prepared by the Australian Taxation Office ABN 52 824 753 556 and does not take account of your objectives or financial, legal or taxation situation or needs. Before acting on this general advice you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice in making an investment strategy and investing the assets of any fund.
This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.
This material or information is not intended as a form of financial advice and should not be treated as such. The Australian Taxation Office does not provide financial, legal or taxation advice.
The above disclaimer also applies to, and in respect of, the NTAA.
Disclaimer
The NTAA and their presenters do not hold an Australian Financial Services Licence to provide financial product advice under the Corporations Act 2001 (Cth). This material covers general taxation information which is only one of the factors to consider when making a decision on a financial product. If you are seeking financial product advice, you should contact a person who is licensed under the Corporations Act 2001 (Cth).
Tax on the Couch is intended to be a guide only. None of the comments contained in the presentation or notes are intended to be advice, whether legal, financial or professional. You should not act solely on the basis of the information contained in these notes because many aspects of the material have been generalised and the tax laws apply differently to different people in different circumstances. Further, as tax and related laws change frequently, there may have been changes to the law since the notes were written. Specific advice should always be obtained from a tax professional.
The NTAA, their directors, employees, consultants, presenters and authors expressly disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person relying on a part or the whole of the contents of this publication.
Copyright
© Copyright 2016 NTAA
All rights reserved. Except as permitted by the Copyright Act 1968, no part of these notes may be reproduced or published in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without prior written permission from the NTAA.
Feedback
Please send any questions or feedback regarding Tax on the Couch to [email protected]
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 1
Table of Contents
Table of Contents ....................................................................................................................................... 1
Legislative Update ...................................................................................................................................... 2
Bills of interest recently introduced to parliament – lapsed at prorogation (15/04/2016) ....................... 2
Bills of interest previously introduced to parliament – lapsed at prorogation (15/04/2016).................... 3
Bills awaiting Royal Assent ..................................................................................................................... 5
Bills that have received Royal Assent ..................................................................................................... 5
Rulings Update ........................................................................................................................................... 7
Rulings ........................................................................................................................................................ 7
Class Rulings .......................................................................................................................................... 7
Class Rulings – Notices .......................................................................................................................... 7
Good and Services Tax Rulings – Notices ............................................................................................. 7
Miscellaneous Tax Rulings – Notices ..................................................................................................... 8
Product Rulings ....................................................................................................................................... 8
Taxation Rulings – Draft .......................................................................................................................... 8
Taxation Rulings – Notices ..................................................................................................................... 8
Determinations ........................................................................................................................................... 9
Goods and Services Tax Determinations – Drafts.................................................................................. 9
Superannuation Contributions Determinations – Notices ....................................................................... 9
Taxation Determinations ......................................................................................................................... 9
Taxation Determinations – Notices ....................................................................................................... 10
Legislative Determinations ....................................................................................................................... 10
Practical Compliance Guidelines .......................................................................................................... 10
Law Companion Guidelines .................................................................................................................. 10
ATO Interpretive Decisions ...................................................................................................................... 11
Withdrawn Interpretive Decisions ......................................................................................................... 11
Cases Update ........................................................................................................................................... 12
Appeals .................................................................................................................................................. 12
Cases .................................................................................................................................................... 12
Decision Impact Statements .................................................................................................................... 13
Practice Statements ................................................................................................................................. 13
Other Developments ................................................................................................................................ 14
Media Releases: Treasury Ministers and ATO ..................................................................................... 14
Speeches: Treasury Ministers and ATO ............................................................................................... 15
Other Developments ................................................................................................................................ 16
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 2
Legislative Update
On 21 March 2016, the Prime Minister requested that the Governor-General prorogue and re-call parliament. Upon receipt of this request, the Governor-General, His Excellency General the Honourable Sir Peter Cosgrove AK MC (Retd), issued a proclamation that Federal Parliament would be prorogued with effect from 15th April 2016, and summoned to sit again on Monday 18 April 2016.
The Federal Budget is also to be delivered a week earlier than expected, on Tuesday 3 May 2016.
Parliament was recalled to consider and vote on bills relating to the governance of trade unions and the reintroduction of the Australian Building and Construction Commission. These bills have previously been rejected by the Senate.
The Prime Minister has indicated that should any of these Bills be rejected by the Senate again, he will advise the Governor-General to dissolve both Houses of Parliament and issue writs for a double dissolution election, which would be held on Saturday, 2 July 2016.
On 18 April 2016 the Senate rejected the Building and Construction (Improving Productivity) Bill 2013 [No.2] and the Building and Construction Industry (Consequential and Transitional Provisions) Bill 2013 [No.2].
Accordingly, the Prime Minister has his “trigger” to request a double dissolution election. The Prime Minister has indicated that this request will not be formally made to the Governor-General until the weekend of 7/8 of May 2016. [At the time of filming and at the time of writing of these notes, no formal request for a double dissolution election has been made – although such a request is clearly anticipated.]
A consequence of parliament being prorogued and re-called in this fashion, is that any bills before parliament as of 5pm, 15 April 2016 lapsed, and will need to be reintroduced to the House of Representatives, assuming they remain part of the Federal Government’s legislative program.
Bills of interest recently introduced to parliament – lapsed at prorogation (15/04/2016)
Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016
This Bill was introduced to the House of Representatives on 17 March 2016. It sought to make the following changes:
To give the Commissioner of Taxation a remedial power (proposed new Division 370 within Schedule 1 of the Taxation Administration Act 1953) which would enable the Commissioner, by way of a disallowable legislative instrument, to make one or more modifications to the existing tax law to ensure that the law can be administered in a way designed to achieve its intended purpose;
To allow primary producers to access income tax averaging 10 income years after choosing to opt out, instead of that choice being permanent; and
To provide relief from luxury car tax to certain public institutions (i.e., public museums, galleries and libraries that are registered for the GST and have been endorsed as deductible gift recipients) where a luxury car is acquired for the sole purpose of public display.
Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016
This Bill was introduced to the House of Representatives on 17 March 2016. It sought to make the following changes:
To create an early stage investor regime that provides tax incentives for qualifying investors through a non-refundable tax offset and capital gains tax exemption on innovation related investments;
To provide non-refundable carry-forward tax offsets for limited partners in early stage venture capital limited partnerships (ESVCLP);
To provide for a capital gains tax exemption for fixed and unit trust beneficiaries of partners in ESVCLPs;
To increase the maximum fund size for ESVCLPs to $200 million;
To remove the requirement that an ESVCLP divest an investment in an entity once the value of the entity’s assets exceeds $250 million;
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 3
To provide that an entity can invest in another entity and remain an eligible venture capital investment;
To enable foreign venture capital funds of funds to hold more than 30 per cent of the committee capital of an ESVCLP and extend their access to capital gains tax and other income tax concessions in relation to eligible venture capital investments; and
To enable a managed investment trust to disregard its investment in, and through, an ESVCLP or venture capital limited partnership when determining if it is a trading trust.
Superannuation Legislation Amendment (Choice of Fund) Bill 2016
This Bill was introduced to the House of Representatives on 17 March 2016. It sought to amend the Superannuation Guarantee (Administration) Act 1992 to provide that employees are able to choose their own superannuation fund for their compulsory employer contributions where they are employed under a workplace determination or enterprise agreement made on or after 1 July 2016.
Bills of interest previously introduced to parliament – lapsed at prorogation (15/04/2016)
Australian Charities and Not-for-profits Commission (Repeal) (No. 1) Bill 2014
This Bill proposed to repeal the Australian Charities and Not-for-profits Commission Act 2012 and provide for transitional arrangements, including the transfer of matters and the reporting obligations of the agency which succeeds the Australian Charities and Not-for-profits Commission (ACNC).
Broadly, the Committee formed the view that the abolition of the ACNC would relieve the regulatory burden from many charities.
Note that on 4 March 2016, the government announced that the ACNC will be retained. The decision follows extensive consultation with the not-for-profit sector. The government said that the ACNC will have a renewed focus on working with charities, and that it will work with the ACNC to remove duplication, increase accountability and transparency and reduce the burden of red tape for charities and not-for-profit organisations. Refer to the joint press release of the Minister for Social Services and the Minister for Small Business and Assistant Treasurer, 4 March 2016.
Fairer Paid Parental Leave Bill 2015
This Bill was introduced to the House of Representatives on 25 June 2015. The Bill aimed to ensure that, from 1 July 2016, parents would no longer be entitled to receive both employer provided primary carer leave payments (or other like payments) and parental leave pay under the Paid Parental Leave scheme. The Bill also proposed to remove (from 1 April 2016) the requirement for employers to act as paymasters with respect to the Paid Parental Leave scheme.
Family Assistance Legislation Amendment (Child Care Measures) Bill (No.2) 2014
This Bill was introduced in the House of Representatives on 25 June 2014. It proposed to amend the A New Tax System (Family Assistance) Act 1999 to maintain the Child Care Benefit income thresholds at the amounts applicable as at 30 June 2014 for three income years, starting from 1 July 2014, with the first indexation of these amounts recommencing on 1 July 2017.
Family Assistance Legislation Amendment (Jobs for Families Child Care Package) Bill 2015
This Bill sought to introduce from 1 July 2017 a new means tested Child Care Subsidy to replace the current Child Care Benefit and the Child Care Rebate.
Family Law Amendment (Financial Agreements and Other Measures) Bill 2015
This Bill sought to amend the Family Law Act 1975 to:
amend the financial agreement regime to remove existing uncertainties around requirements for entering, interpreting and enforcing agreements, make changes to the coverage of spousal maintenance matters in agreements, provide for a statement of principles to outline their binding nature, and to reinforce the binding nature of the agreements;
strengthen protections from violence in certain procedural matters;
strengthen Australia’s response to international parental child abduction;
update the arrest powers of the family court;
assist the operation of the family law courts; and make
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 4
minor and technical amendments.
Freedom of Information Amendment (New Arrangements) Bill 2014
This Bill was introduced in the House of Representatives on 2 October 2014. It proposed to abolish the Office of the Australian Information Commissioner and streamline the arrangements for privacy and freedom of information functions.
Social Services and Other Legislation Amendment (2014 Budget Measures No.5) Bill 2014
The Bill was introduced into the House of Representatives on 2 October 2014. It proposed to, amongst other things, increase the current qualification age for the Age Pension and the non-veteran pension age, from 67 to 70. Specifically, on 1 July 2025, the qualifying age was proposed to increase from 67 years, by six months every two years, until 1 July 2035 when it would reach 70.
This measure was announced in the 2014/15 Budget.
Social Services Legislation (Budget Repair) Bill 2015
This Bill sought to introduce certain measures in relation to the age pension, including reducing the period from 26 weeks to 6 weeks during which the age pension and certain other pensions with unlimited portability will be paid to recipients while they are outside of Australia. The Bill also proposed to abolish the Pensioner Education Supplement and the Education Entry Payment from 1 January 2016, now deferred to the first 1 January or 1 July to occur on or after the Bill receives Royal Assent. These measures were announced in the 2014/15 Budget.
Social Services Legislation Amendment (Youth Employment) Bill 2015
This Bill proposed to amend the Social Security Act 1991 to extend and simplify the ordinary waiting period for all working age payments; extend youth allowance (other) to 22 to 24 year olds in lieu of Newstart allowance and sickness allowance; provide for a four-week waiting period for certain persons aged under 25 years applying for youth allowance (other) or special benefit and require these job seekers to complete certain pre-benefit activities.
Tax and Superannuation Laws Amendment (2015 Measures No.3) Bill 2015
This Bill proposed to abolish the seafarer’s tax offset and to reduce by 1.5%, the rates of the tax offset available under the Research & Development (R&D) tax incentive for the first $100 million of eligible expenditure. Specifically, the higher (refundable) tax offset was proposed to be reduced from 45% to 43.5%, and the lower (non-refundable) tax offset would be reduced from 40% to 38.5%. This measure was announced in the 2014/15 Budget.
Tax and Superannuation Laws Amendment (2016 Measures No.1) Bill 2016
This Bill contained a GST tax integrity measure to extend GST to digital products and other services imported by consumers (the ‘Netflix tax’), as well as other amendments relating to the GST treatment of cross-boarder transactions between businesses. It also incorporated farm management deposit (‘FMD’) reforms including increasing the maximum amount that can be held in FMDs by a primary producer to $800,000.
Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015
This Bill was part of a package of four bills that sought to establish a new tax system for certain managed investment trusts (MITs). In particular, the bill sought to amend the tax laws to:
establish the new class of attribution managed investment trusts (AMIT), and enable the Commissioner to determine an amount of non-arm’s length income in relation to a MIT;
provide that a member of an AMIT will make a capital gain or capital loss when a CGT event happens to their membership interests;
provide that fund payment withholding provisions apply when a withholding MIT makes a fund payment to another entity that has a place of payment or address outside Australia;
repeal the corporate unit trust rules and exclude certain superannuation funds and exempt entities from the application of the 20% tracing rule for public trading trusts; and
to extend the list of entities qualifying as eligible investors for the purpose of the widely held requirements. Also amends thirteen Acts to make consequential amendments.
Treasury Legislation Amendment (Repeal Day 2015) Bill 2015
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 5
Amongst other things, this Bill sought to amend the superannuation guarantee provisions to, from 1 July 2016:
align the earnings base for calculating the superannuation guarantee charge (SG) with the earnings base for calculating SG contributions;
align the nominal interest on unpaid or late SG contributions with the period over which they are actually outstanding; and
align the penalties imposed under the superannuation guarantee charge regime with the administrative penalties imposed by other legislation.
Note that, on 16 March 2016, the House of Representatives passed the Bill after removing the provisions on the superannuation guarantee charge.
Bills awaiting Royal Assent
No Bills are currently awaiting Royal Assent as of 15 April 2016.
Bills that have received Royal Assent
Business Services Wage Assessment Tool Payment Scheme Amendment Bill 2016
This Bill was introduced in the House of Representatives on 11 February 2016 and proposes to increase one-off payments made to eligible employees with an intellectual impairment from 50% to 70% of the difference between the actual wage paid to an eligible person and the amount they would have been paid had the Business Services Wage Assessment Tool (BSWAT) productivity-only component been applied. The Bill will also remove the current compulsory requirement to obtain legal advice before any payments are made and extend all relevant scheme dates by 12 months.
This Bill received Royal Assent on 18 March 2016.
Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2016
This Bill was intended to make many amendments to reduce the compliance costs imposed on the financial services industry by amending Part 7.7A of the Corporations Act 2001 (i.e., the Future of Financial Advice (FOFA) provisions). However, after being held up in the Senate (and the Senate disallowing the accompanying regulations), the Bill was amended to remove a number of the proposed amendments to FOFA and to implement minor and technical changes that relate to:
amending the title of the final Act to the Corporations Amendment (Financial Advice Measures) Act 2015 to reflect that the proposed amendments are now primarily of a minor and technical nature;
extending the time for fee recipients to provide a renewal notice to a retail client from 30 to 60 days after the client’s fee renewal notice day; and
extending the time for fee recipients to provide fee disclosure statements to pre-1 July 2013 retail clients from 30 to 60 days.
In summary, the following originally proposed amendments were removed from the final Bill:
changes to the Statements of Advice requirements;
repeal of the requirement that licensees send fee disclosure statements to pre-1 July 2013 clients;
repeal of the opt-in requirement for continuing an ongoing fee arrangement;
changes to the definition of ‘volume-based shelf-space’;
changes to the best interests duty and scaled advice;
changes to the execution only provision;
changes to allow the payment of mixed benefits; and
the general advice exemption from conflicted remuneration.
This Bill received Royal Assent on 18 March 2016.
Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015
This Bill proposes to amend the Taxation Administration Act 1953 to require certain financial institutions in Australia to report information (based on an OECD-developed Common Reporting Standard) to the ATO about financial accounts held by foreign tax residents. The ATO, in turn, will provide this
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 6
information to the relevant overseas tax authorities and will receive information on Australian tax residents with financial accounts held overseas. The measures apply from 1 July 2017.
This Bill received Royal Assent on 18 March 2016.
Tax Laws Amendment (Norfolk Island CGT Exemption) Bill 2016
This Bill amends the appropriate legislation to exempt assets held by Norfolk Island residents before 24 October 2015 from CGT, to the extent that they could be exempt before Norfolk Island was fully brought into Australia’s income tax system.
This Bill received Royal Assent on 18 March 2016.
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 7
Rulings Update
The following lists the Rulings, Determinations, Practice Statements and Interpretative Decisions (and other related documents) issued by the ATO from 16 March 2015 to 15 April 2016.
Rulings
Class Rulings
CR 2016/14 Income tax: the South32 Cannington Voluntary Early
Retirement Scheme
23 March 2016
CR 2016/15 Income tax: the 'Ausgrid Early Retirement Scheme 2016' 23 March 2016
CR 2016/16 Income tax: Global Resource Masters Fund Limited - return of
capital
23 March 2016
CR 2016/17 Income tax: the 'Endeavour Energy Early Retirement Scheme
2016'
23 March 2016
CR 2016/18 Fringe benefits tax: employer clients of Community CPS
Australia Limited trading as Beyond Bank Australia who are
subject to the provisions of either section 57A or section 65J of
the Fringe Benefits Tax Assessment Act 1986 and make use of
the Salary Packaging Card facility
30 March 2016
CR 2016/19 Income tax: liquidation - Great Southern Plantation and Gunns
Plantations Limited Woodlot Schemes
30 March 2016
CR 2016/20 Income tax: Commonwealth Bank of Australia - CommBank
PERLS VIII Capital Notes
30 March 2016
CR 2016/21 Income tax: 'The Flinders University Academic Staff Early
Retirement Scheme 2016'
13 April 2016
CR 2016/22 Income tax: 'The Flinders University Professional Staff Early
Retirement Scheme 2016'
13 April 2016
Class Rulings – Notices
CR 2014/63A2 -
Addendum
Income tax: Sydney Trains Maintenance Division Early
Retirement Scheme
23 March 2016
CR 2013/14A1 -
Addendum
Goods and services tax: goods and services supplied by
dentists
30 March 2016
Good and Services Tax Rulings – Notices
GSTR 2012/3A2 -
Addendum
Goods and services tax: GST treatment of care services and
accommodation in retirement villages and privately funded
nursing homes and hostels
6 April 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 8
Miscellaneous Tax Rulings – Notices
MT 2021W -
Withdrawal
Fringe benefits tax : response to questions by major rural
organisation
16 March 2016
MT 2040W Fringe benefits tax: living-away-from-home allowance benefits:
reasonable food component for expatriate employees
13 April 2016
MT 2043W Fringe benefits tax: living-away-from-home allowance benefits:
reasonable food component for expatriate employees: update
of MT 2040
13 April 2016
MT 2045W Fringe benefits tax: living-away-from-home allowance benefits:
reasonable food component for expatriate employees: update
of MT 2040
13 April 2016
MT 2047W Fringe benefits tax: living-away-from-home allowance benefits:
reasonable food component for expatriate employees: update
of MT 2045
13 April 2016
MT 2051W Fringe benefits tax: living-away-from-home allowance benefits:
reasonable food component for expatriate employees: update
of MT 2047
13 April 2016
Product Rulings
PR 2016/2 Income tax: tax consequences of investing in ANZ Cobalt 30 March 2016
PR 2016/3 Income tax: TFS Indian Sandalwood Project 2016
Sophisticated Investor Offer
13 April 2016
Taxation Rulings – Draft
TR 2016/D1 Income tax: deductibility of expenditure on a commercial
website
6 April 2016
Taxation Rulings – Notices
TD 94/16A1 -
Addendum
Fringe benefits tax: where an employee is provided with a car
by the employer and the car is kept in safe storage (e.g. in a
commercial garage) while the employee is travelling, under
what circumstances is that car taken to be available for private
use under section 7 of the Fringe Benefits Tax Assessment Act
1986 ?
16 March 2016
TR 2011/3A1 -
Addendum
Fringe benefits tax: meaning of 'cost price' of a car, for the
purpose of calculating the taxable value of car fringe benefits
16 March 2016
TR 2014/7A1 -
Addendum
Income tax: foreign currency hedging transactions - applying
the foreign income tax offset limit under section 770-75 of the
Income Tax Assessment Act 1997 and determining the source
of foreign currency hedging gains
16 March 2016
IT 2659W - Notice
of Withdrawal
Income tax: value of goods taken from stock for private use 13 April 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 9
Determinations
Goods and Services Tax Determinations – Drafts
GSTD 2016/D1 Goods and services tax: can Division 142 of the A New Tax
System (Goods and Services Tax) Act 1999 prevent refunds of
increasing adjustments made under section 19-50 of that Act?
23 March 2016
Superannuation Contributions Determinations – Notices
SCD 2004/5W Superannuation contributions: for the 2004-2005 financial year,
what is the amount represented by A in the first formula
contained within subsection 5(1) of the Superannuation
Contributions Tax Imposition Act 1997 and subsection 5(1) of
the Termination Payments Tax Imposition Act 1997 ?
13 April 2016
Taxation Determinations
TD 2016/1 Fringe benefits tax: for the purposes of section 28 of the Fringe
Benefits Tax Assessment Act 1986 what are the indexation
factors for valuing non remote housing for the fringe benefits
tax year commencing on 1 April 2016?
30 March 2016
TD 2016/2 Fringe benefits tax: for the purposes of section 135C of the
Fringe Benefits Tax Assessment Act 1986, what is the
exemption threshold for the fringe benefits tax year
commencing on 1 April 2016?
30 March 2016
TD 2016/3 Fringe benefits tax: what are 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 2016?
30 March 2016
TD 2016/4 Fringe benefits tax: 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 2016
30 March 2016
TD 2016/5 Fringe benefits tax: what is the benchmark interest rate to be
used for the fringe benefits tax year commencing on 1 April
2016?
30 March 2016
TD 2016/6 Income tax: is an amount that is a cost in relation to a debt
interest covered by paragraph 820-40(1)(a) of the Income Tax
Assessment Act 1997 (ITAA 1997) deductible under section
25-90 of the ITAA 1997 (or, alternatively, under subsection
230-15(3) of the ITAA 1997) where that amount is incurred in
earning income that meets the requirements of both section
23AH of the Income Tax Assessment Act 1936 and section
768-5 of the ITAA 1997?
13 April 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 10
Taxation Determinations – Notices
TD 2012/D6W -
Withdrawal
Income tax: must income tax have been assessed before an
agent or trustee has an obligation under section 254 of the
Income Tax Assessment Act 1936 to retain sufficient money to
pay tax which is or will become due as a result of their agency
or trusteeship?
23 March 2016
TD 2012/D7W -
Withdrawal
Income tax: does a receiver who disposes of a CGT asset as
the agent for a debtor have an obligation under section 254 of
the Income Tax Assessment Act 1936 to retain from sale
proceeds sufficient money to pay tax which is or will become
due as a result of disposing of that asset?
23 March 2016
Legislative Determinations
Practical Compliance Guidelines
PCG 2016/2 Fuel tax credits - practical compliance methods for small
claimants
22 March 2016
PCG 2016/3 Fuel tax credits - fuel tax credit rate for non business claimants 22 March 2016
PCG 2016/4 Fuel tax credits - incidental travel on public roads by certain
vehicles
22 March 2016
PCG 2016/5 Income tax - arm's length terms for Limited Recourse
Borrowing Arrangements established by self managed
superannuation funds
6 April 2016
PCG 2016/6 Determining source of certain hedging gains for the purposes
of section 770-75
15 April 2016
Law Companion Guidelines
LCG 2015/D5A1 Attribution Managed Investment Trusts: choice to treat
separate classes as separate AMITs
23 March 2016
LCG 2016/D2 Small Business Restructure Roll over: consequences of a roll
over
24 March 2016
LCG 2016/D3 Small Business Restructure Roll over: genuine restructure of
an ongoing business
24 March 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 11
ATO Interpretive Decisions
Withdrawn Interpretive Decisions
ATO ID 2001/324
(Withdrawn)
GST and Soy Milk Powder 21 March 2016
ATO ID 2002/926
(Withdrawn)
Fringe Benefits Tax: minor benefits exemption and interest free
loans
21 March 2016
ATO ID 2003/757
(Withdrawn)
Capital Allowances: balancing adjustment event - early
termination of non-novated luxury car lease
21 March 2016
ATO ID 2006/150
(Withdrawn)
Employee Share Scheme: deduction for the issue of shares 21 March 2016
ATO ID 2003/613
(Withdrawn)
Car fringe benefits: car taken to be available for private use
under the statutory formula method
1 April 2016
ATO ID 2007/218
(Withdrawn)
Acquisition of shares from a trustee pursuant to rights acquired
under an employee share scheme
1 April 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 12
Cases Update
Appeals Miley v Commissioner of Taxation [2016] AATA 73
The Commissioner has appealed to the Federal Court against the decision of the Administrative Appeals Tribunal which found in favour of the taxpayer. The AAT held that the ‘market value’ if a parcel of shares sold by the taxpayer in an arm’s length transaction was not based on the proceeds received as part of the sale, but rather a discounted amount taking into account that the taxpayer was a ‘non-controlling’ shareholder. This lesser amount accepted by the AAT allowed the taxpayer to pass the $6million ‘maximum net asset value test’ for the purposes of meeting the basic qualifications to access the CGT small business concessions.
Cases
Rigoli v Commissioner of Taxation [2016] FCAFC 38
The Full Federal Court unanimously dismissed a taxpayer’s appeal in a matter pertaining to default assessments. The taxpayer sought to argue the Commissioner’s default assessments were excessive and this argument was based upon reliance on an expert report prepared for the ATO. However, the taxpayer failed in his argument because the Full Federal Court found that when a taxpayer is seeking to challenge default assessments issued by the Commissioner, the taxpayer’s burden is to establish what their income actually was. The expert’s report only dealt with income from a partnership of which the taxpayer was a partner. It was silent on the taxpayer’s income from other sources. Moreover, the expert’s report lacked probative value given the taxpayer’s failure to keep basic business records.
Fischer v Nemeske Pty Ltd [2016] HCA 11
In a 3:2 majority decision, the High Court has upheld a decision of the NSW Court of Appeal, which found that the trustee of a trust had validly exercised a power to “advance” and “apply” trust capital or income by creating a debt in favour of a beneficiary of the trust. This debt reflected an amount held to the account of an Asset Revaluation Reserve, which was based on the increase above historical cost of shares held by the trust in a private company.
SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2016] NSWSC 362
The NSW Supreme Court has made an order of rectification in relation to a contract for the sale of property, to reflect what was held to be the common intention of the parties to the contract, that the purchase price stated in the contract was to be exclusive of GST. The words of the contract as signed by both parties indicated the purchase price was inclusive of GST. In particular, the Court took into account the evidence of the auctioneer, who at the commencement of the auction stated that all bids and the final knock-down price where GST-exclusive.
Lee Group Charters Pty Ltd v Commissioner of Taxation [2016] FCA 322
The Federal Court found in favour of two taxpayers, finding that they were carrying on a genuine business of chartering super yachts. Accordingly, the exemption found in S.26-47(3)(b) of the Income Tax Assessment 1997 prevented the Commissioner from denying the taxpayer deductions where there was an excess of expenses over the income generated from the boat chartering activities.
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 13
Decision Impact Statements
2014/6023 &
2014/6090
Trustee of the WT & A Norman Superannuation Fund & the
Trustee of Mary A Norman Superannuation Fund and
Commissioner of Taxation
17 March 2016
VID 43-48 of 2015 Orica Ltd v Commissioner of Taxation 17 March 2016
Practice Statements
PS LA 2016/1 Transfer pricing adjustments with potential customs
implications
14 April 2016
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 14
Other Developments
Media Releases: Treasury Ministers and ATO
Treasurer – The Hon Scott Morrison MP
16 March 2016 Fixing competition policy to drive economic growth and jobs
18 March 2016 Critical asset sales to fall within foreign review net
21 March 2016 Supporting Australia’s FinTech future
23 March 2016 Government nominates Rod Sims for reappointment as ACCC Chairman
30 March 2016 Turnbull Government to open competition in share clearance
4 April 2016 2016-17 Budget media lock-up
8 April 2016 Monash upgrade the centrepiece of Turnbull Government’s Victorian infrastructure package
10 April 2016 Additional Commonwealth Support for Infrastructure Projects in Western Australia
12 April 2016 Fact Sheet – ASIC and Royal Commission
13 April 2016 The facts – ASIC and Royal Commission
15 April 2016 Labor’s sham costings and policy stunts exposed
Assistant Treasurer and Minister for Small Business – The Hon Kelly
O’Dwyer MP
16 March 2016 Financial System Resilience Bill
16 March 2016 Fixing competition policy to drive economic growth and jobs
17 March 2016 Improving transparency in the superannuation industry
17 March 2016 Government moves to give more employees choice
18 March 2016 Interim ban imposed on unsafe hoverboards
31 March 2016 Consumer Ministers to establish a free range egg standard
31 March 2016 Have your say on the Australian Consumer Law
31 March 2016 Green light for food labelling reforms a win for consumers
1 April 2016 Government decision on financial assistance relating to the collapse of Trio Capital
1 April 2016 Small businesses in the road transport industry encouraged to have their voices heard
6 April 2016 Australians have $1.2 billion of unclaimed money
9 April 2016 Minister to visit USA
10 April 2016 SME’s front and centre of Australia Week in China
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 15
ATO
18 Mar 2016 New tax stats released
22 Mar 2016 Corporate tax transparency report for 2013 - 14 - Australian-owned resident private companies
22 Mar 2016 Statement by Commissioner of Taxation, Chris Jordan AO on corporate tax transparency March 2016
22 Mar 2016 SuperStream research-employers and APRA funds
29 Mar 2016 100 days to go until SuperStream deadline for small businesses
04 Apr 2016 ATO statement regarding release of taxpayer data
04 Apr 2016 SuperStream deadline rapidly approaching
Speeches: Treasury Ministers and ATO
Treasurer – The Hon Scott Morrison MP
21 March 2016 Address at the launch of the Government’s FinTech statement, Stone & Chalk, Sydney
13 April 2016 Clearing a path for jobs and growth Address to the Business Council of Australia — Annual Forum Dinner, Sydney
Assistant Treasurer and Minister for Small Business – The Hon Kelly
O’Dwyer MP
16 March 2016 Video message, AIST Conference of Major Super Funds
Treasury
21 March 2016 Remarks at the Australia, Japan and International Economic Outlook Seminar
22 March 2016 The importance of culture
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 16
Other Developments
ATO looking at trust distributions to SMSFs
The ATO has announced that it is reviewing self-managed superannuation funds (SMSFs) that have received distributions from trusts. In particular, the ATO is concerned the some SMSFs may have derived non-arm’s length income (NALI) which has not been declared as such in fund returns.
NALI is taxed at 47% rather than the normal 15% rate applicable to a complying superannuation fund for the 2016 income year.
Car expenses, cents per kilometre reimbursements: Special arrangements for the 2016 FBT Year
From 1 July 2015 onwards, for income tax purposes, under the cents per kilometre method for claiming car expenses under Division 28, there is now one single rate of 66 cents per kilometre. Prior to 1 July 2015 there were three different rates.
The ATO has announced that due to some confusion amongst taxpayers as to the correct rate to apply for the 2016 FBT year in relation to certain expense payment benefits relating to an employee’s car expenses on a cents per kilometre basis, the ATO will accept 2016 FBT returns based on the 2014-15 rates (which are 64, 76 or 77 cents depending on the engine capacity of the car).
ATO releases Taxation-statistics 2013-14
The ATO has recently released statistics for the 2013-14 income year relating to the different taxes administered by the ATO.
ATO statement regarding Mossack Fonseca/'Panama Papers'
The ATO has released a statement confirming that it has received data in relation to a Panamanian law firm, Mossack Fonseca, containing names of a significant number of Australian residents. As a result of having received this data the ATO has identified over 800 individual taxpayers that may have Australian tax obligations.
ATO reminds Tax Agents of switch from ELS to SBR-enabled lodgement
The ATO has reminded Tax Agents of the need to be ready for the phase-out of the electronic lodgement service (ELS), which is to be replaced with the SBR-enabled lodgement service. The ATO will maintain ELS as a safety net until 31 March 2017.
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 17
Hot Topic: Meal Entertainment, FBT and changes to salary
packaged benefits from 1 April 2016
1. New $5,000 cap for salary packaged entertainment for employees of FBT-rebatable or
FBT-exempt employers
Certain employers are subject to a limit (or cap) on the amount benefits that can be provided to an employee (per FBT year), which are either eligible for an FBT rebate or exempt from FBT, basically as follows:
(a) FBT-rebatable employers (e.g., a sporting club, a private school, a religious institution, a trade union, an employer association and a charitable institution) are subject to a $31,177 cap for the 2016 FBT year (and the 2017 FBT year) on the amount of fringe benefits (which are eligible for a 49% FBT rebate) they can provide to each of their employees. This is equivalent to a (non-grossed up) taxable value of $14,525 where only Type 1 benefits are provided (i.e., $31,177 ÷ 2.1463).
An FBT-rebatable employer is not entitled to claim the 49% FBT rebate to the extent that the grossed-up taxable value of fringe benefits (other than ‘excluded benefits’ – refer below) provided to an employee during the 2016 FBT year exceeds $31,177.
(b) Certain FBT-exempt employers (i.e., exempt under S.57A) are subject to the following caps on the amount of FBT-exempt benefits they can provide to each of their employees:
Public benevolent institutions (‘PBIs’) and health promotion charities are subject to a $31,177 cap for the 2016 FBT year (and the 2017 FBT year) on the amount of FBT-exempt benefits they can provide to each of their employees. This is equivalent to a (non-grossed up) taxable value of $14,525 where only Type 1 benefits are provided (i.e., $31,177 ÷ 2.1463); and
Public and non-profit hospitals, and ambulance services, are subject to a $17,667 cap for the 2016 FBT year (and the 2017 FBT year) on the amount of FBT-exempt benefits they can provide to each of their employees. This is equivalent to a (non-grossed up) taxable value of $8,231 where only Type 1 benefits are provided (i.e., $17,667 ÷ 2.1463).
An FBT-exempt employer (i.e., exempt under S.57A) is required to lodge an FBT return and pay FBT where the notional grossed-up taxable value of fringe benefits provided to an employee during the 2016 FBT year (other than ‘excluded benefits’ – refer below) exceeds the relevant capping threshold (i.e., $31,177 or $17,667). Prior to 1 April 2015, the above capping thresholds were $30,000 (e.g., for PBIs) and $17,000 (e.g., for hospitals).
1.1 Treatment of salary packaged entertainment when applying the
capping thresholds before 1 April 2016
When applying the above capping thresholds before 1 April 2016 (i.e., the thresholds of $31,177 and $17,667 for the 2016 FBT year), certain benefits (referred to as ‘excluded benefits’) are excluded from the capping thresholds.
More specifically, the following benefits (i.e., excluded benefits) are not taken into account in determining whether the relevant capping threshold is exceeded for a particular employee, in respect of the 2016 FBT year (and earlier FBT years):
(a) Meal entertainment (whether or not provided under a salary sacrifice arrangement) – basically, the provision of entertainment by way of food or drink, or accommodation or travel in connection with or for the purpose of facilitating the provision of entertainment by way of food or drink – refer to S.37AD. Common examples include the following:
A restaurant meal, whether consumed as part of a business lunch, a private dinner or a social function (e.g., a Christmas party).
Food and drink consumed at a social function (e.g., a Christmas party) held at an employer’s business premises or in a corporate box or marquee.
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 18
Food and drink consumed at a private function (e.g., a birthday, engagement or wedding).
(b) Entertainment facility leasing expenses (‘EFLEs’) – basically, the cost of hiring or leasing a corporate box, boat, plane or other facility used to provide entertainment – refer to S.136(1). Common examples of EFLEs include the following:
Hiring an entire houseboat for a family holiday.
Hiring a charter plane for a joy flight, to the exclusion of others (in contrast, a seat on a plane in itself does not qualify as an EFLE).
Holiday accommodation (e.g., the cost of a hotel room or an apartment).
Hiring a cabin on a cruise ship.
Hiring a reception centre or marquee for a private function (e.g., an engagement or a wedding).
(c) Car parking benefits – as defined in S.39A.
(d) Benefits with no taxable value – benefits which have no taxable value (because they are specifically exempt from FBT or fully subject to the ‘otherwise deductible rule’).
FBT TIP – Salary packaging excluded benefits has been attractive
This effectively means that there has traditionally been no cap (or limit) on the amount of excluded benefits (particularly meal entertainment and EFLEs) that can be provided by FBT-exempt and FBT-rebatable employers.
As a result, salary packaging excluded benefits (especially meal entertainment and EFLEs) has traditionally been very attractive for employees working for these employers (e.g., PBIs and hospitals). This is largely because, employees salary packaging these benefits have been able to generate substantial after-tax savings on the basis that these benefits have not been subject to the above caps and, therefore, continued to be either fully rebatable (for an FBT-rebatable employer) or fully FBT-exempt (for an FBT-exempt employer under S.57A).
1.2 The new $5,000 cap for salary packaged entertainment (i.e., meal
entertainment and EFLEs) from 1 April 2016
The federal government recently introduced changes to limit the amount of salary packaged meal entertainment and EFLE benefits per employee, which are eligible for concessional FBT treatment (i.e., eligible for the 49% FBT rebate for an FBT-rebatable employer, and FBT exempt for an FBT-exempt employer under S.57A). Refer to the Tax and Superannuation Laws Amendment (2015 Measures No.5) Act 2015.
These changes effectively involve the following, from 1 April 2016:
1. Salary packaged entertainment benefits (i.e., benefits relating to the provision of meal entertainment and/or EFLEs) will be taken into account when determining whether the relevant capping threshold (e.g., $31,177 or $17,667) has been exceeded (i.e., whether an FBT-rebatable employer has an ‘Aggregate non-rebatable amount’ or whether an FBT-exempt employer under S.57A has an ‘Aggregate non-exempt amount’).
From a technical perspective, this has been achieved by excluding salary packaged meal entertainment and EFLEs from the definition of ‘excluded fringe benefit’ (refer to amended S.5E(3)(a) and S.5E(3)(c)).
2. Where the relevant cap has been exceeded for an employee in an FBT year, the excess amount is reduced by the lesser of:
$5,000; and
an employee’s total grossed-up taxable value of salary packaged entertainment benefits.
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 19
Any remaining excess amount is either effectively non-rebatable (i.e., it forms part of the employer’s ‘aggregate non-rebatable amount’) for a rebatable employer, or is subject to FBT (i.e., it forms part of the employer’s ‘aggregate non-exempt amount’) for an FBT-exempt employer.
The broad effect of the above changes is to impose on each employee, a separate single grossed-up cap of $5,000 each FBT year for salary packaged entertainment benefits, which will remain eligible for concessional FBT treatment (e.g., the 49% FBT rebate).
More specifically, the above changes will have the following effect:
(a) Where an employee has salary packaged entertainment from 1 April 2016, their existing (standard) cap is effectively increased by the lesser of: $5,000 and the total grossed-up taxable value of such benefits, as follows:
Where the grossed-up taxable value of an employee’s salary packaged entertainment exceeds $5,000, the existing cap is increased by $5,000 (i.e., the $31,177 cap becomes $36,177, and the $17,667 cap becomes $22,667, for the 2017 FBT year).
Further, part or all of the excess salary packaged entertainment above $5,000 could end up being applied against any unused portion of the existing caps, before determining whether there is any excess not eligible for concessional FBT treatment.
Where the grossed-up taxable value of an employee’s salary packaged entertainment is less than $5,000, the existing (standard) cap is increased by the grossed-up value.
(b) Where an employee has no salary packaged entertainment from 1 April 2016, the existing (standard) cap is not increased and, therefore, remains the same (i.e., $31,177 or $17,667 for the 2017 FBT year).
Based on the above, the changes from 1 April 2016 only apply to meal entertainment or EFLE benefits that are provided to an employee under a salary packaging arrangement (i.e., meal entertainment and EFLE benefits that are not provided under a salary packaging arrangement will continue to be excluded from the capping thresholds). Refer to new S.5B(1M) and S.65J(2J).
Under the current definition, a ‘salary packaging arrangement’ means an arrangement under which a benefit is provided to an employee (or associate, from 1 April 2016) if:
the benefit was provided in return for the employee agreeing to a reduction in their salary and wages; or
the arrangement is part of the employee’s remuneration package and the benefit is given in circumstances where it is reasonable to conclude that the employee’s salary or wages would have been greater if the benefit was not provided.
2. Government removes 50/50 split method and 12-week
register method for salary packaged entertainment from
1 April 2016
As part of the new $5,000 cap for salary packaged meal entertainment and EFLEs, the government has removed the option for employers to use the concessional valuation rules for salary packaged meal entertainment and EFLEs. In other words, an employer will be unable to use the 50/50 split and 12-week register methods for valuing salary packaged meal entertainment or EFLEs.
This basically means that, from 1 April 2016 (i.e., in respect of the 2017 and subsequent FBT years), employers will be required to apply the actual method for valuing (i.e., determining the taxable value of) salary packaged meal entertainment and EFLE benefits. Refer to new S.37AC (a) and (b), and new S.152B(2).
This applies to all employers from 1 April 2016 where salary packaged meal entertainment and EFLE is provided – including taxable employers.
Tax on the Couch – May 2016
© Tax on the Couch: May 2016 20
3. Reporting salary packaged entertainment from 1 April
2016 on an employee’s payment summary under new
rules
The government has recently amended the definition of ‘excluded fringe benefit’ in S.5E(3) to ensure that the following benefits are reportable benefits from 1 April 2016 (refer to amended S.5E(3)(a) and (c)):
The provision of meal entertainment under a salary packaging arrangement; and
A benefit that is partly or wholly attributable to EFLEs, and is provided under a salary packaging arrangement.
As a result, such salary packaged entertainment will be taken into account in calculating an employee’s Individual Fringe Benefits Amount from the 2017 FBT year and, therefore, whether the employee has exceeded the $2,000 reportable benefits threshold for the relevant FBT year. On this basis, only meal entertainment benefits and EFLE that are not provided under a salary packaging arrangement will continue to be excluded from the FBT payment summary reporting rules from 1 April 2016 (i.e., from the 2017 FBT year).
From 1 April 2016, a ‘salary packaging arrangement’ will be defined as an arrangement under which a benefit is provided to an employee or associate, if:
the benefit is provided in return for the employee agreeing to a reduction in their salary and wages; or
the arrangement is part of the employee’s remuneration package and the benefit is given in circumstances where it is reasonable to conclude that the employee’s salary or wages would have been greater if the benefit was not provided.
FBT WARNING – New reporting requirement applies to all employers
The new reporting requirement in respect of salary packaged entertainment from 1 April 2016 will apply to all employers, not just to FBT-exempt and FBT-rebatable employers.
