Ideas Tax Knowledge Blog (3)

Strengthening Incentives for Work: The 2023 Legislation Revolution

In a move aimed at bolstering support for older Australians and income support recipients, the Australian government has introduced the Social Security and Other Legislation Amendment (Supporting the Transition to Work) Bill 2023. This groundbreaking legislation promises to enhance the lives of retirees and those seeking employment by providing them with increased choice and flexibility. The key features of this legislation include an improved pension Work Bonus scheme, extended concession card retention, and changes in the Work Bonus income balance.

In: Work Benefits

The Impact of NSW's Revenue, Mining and Energy Legislation Amendment Bill 2023 on Duties in Employer/Employee Organisation Amalgamations

In: Business Structures

The Future of Superannuation: Examining the Proposed Payday Super System

In a groundbreaking move aimed at strengthening retirement savings for Australians, the government has initiated consultations on a significant budget measure that has the potential to reshape how employers handle superannuation payments. Termed "payday super," this proposed change would require employers to make superannuation guarantee (SG) contributions on the same day they pay employee salaries and wages. With consultations now underway and a proposed implementation date of July 1, 2026, it's crucial to delve into this transformational development in Australia's superannuation landscape.

In: Superannuation

APRA's Latest Updates to Superannuation Data Transformation FAQs

In a bid to enhance transparency and streamline reporting, APRA (Australian Prudential Regulation Authority) has introduced fresh updates and insights into the Superannuation Data Transformation project. These changes aim to provide a clearer understanding of the reporting requirements and help superannuation entities navigate the evolving landscape.

In: Superannuation

Understanding the ATO's Guidance on Vacant Land Expenses: TR 2023/3

In the ever-evolving world of taxation, staying informed about the latest updates and rulings is crucial for individuals and businesses alike. The Australian Taxation Office (ATO) has recently provided clarity on the application of vacant land provisions in section 26-102 of the Income Tax Assessment Act 1997 (ITAA 1997). This development comes in the form of Taxation Ruling TR 2023/3, shedding light on various aspects of this provision and its implications.

Recent ATO Decision Impact Statement on GST and the Sale of Residential Property

In a significant update with implications for the real estate and property development industry, the Australian Taxation Office (ATO) has released a Decision Impact Statement (DIS) in response to the recent Administrative Appeals Tribunal (AAT) decision in the case of Domestic Property Developments Pty Ltd a/t for Dals Property Trust v FC of T 2022 ATC ¶10-661; [2022] AATA 4436. This decision has far-reaching consequences, particularly for property developers involved in the sale of residential units.

The Background

The case centered on a property developer who had completed a development comprising seven residential home units. Of these, two units (Units 1 and 3) were rented to tenants for approximately five years before being sold. Initially, the developer paid Goods and Services Tax (GST) calculated under the margin scheme for these sales. However, upon reconsideration, the developer lodged an objection against the assessments, arguing that the sales of Units 1 and 3 should be treated as input taxed supplies, and requested a refund of the GST paid. When the Commissioner denied the objection, the matter was escalated to the AAT.

The pivotal issue revolved around whether these unit sales could be classified as input taxed supplies. According to section 40-75(2)(a) of the GST Act, a sale would fall into this category if the units were exclusively used for making input taxed rental supplies for at least five years. It was undisputed that the sale of Unit 3 met this criterion.

The AAT upheld the Commissioner's objection decision. It ruled that actively marketing the premises for sale within the scope of a developer's enterprise constituted "use" for the purposes of section 40-75(2)(a). Additionally, the AAT found that GST had been incorporated into the sale prices of the units. The developer had sold the units at prices that ensured they exceeded their costs, including substantial amounts erroneously considered as GST.

The ATO's Perspective on the Decision

The ATO has welcomed the AAT's decision, as it aligns with their interpretation that marketing a property for sale indeed constitutes "use" of the property within the context of section 40-75(2)(a). This interpretation aligns with the stance taken in GST Ruling GSTR 2009/4, which outlines adjustments for changes in the extent of creditable purpose related to acquisitions made during the construction of new residential premises.

Furthermore, the ATO maintains that the term "used" should be interpreted in its ordinary sense in the context of the GST Act. While there is some overlap between the ordinary meaning of "used" and the defined term "apply," the ATO is committed to providing further clarity on this matter in GSTR 2009/4.

Regarding the requirement of a continuous five-year period as per section 40-75(2)(a), the ATO concurs with the AAT's position. However, since the AAT did not elaborate on the commencement date for this five-year period, the ATO plans to maintain its position, as outlined in GSTR 2003/3 and GSTR 2009/4, and aims to address this issue promptly before the AAT or Federal Court.

Lastly, the AAT's findings lend support to the ATO's view on the meaning of "passed on" and "reimburse" as defined in GSTR Ruling GSTR 2015/1 for the purposes of Division 142 of the GST Act.

Impact on Guidance

In response to this decision, the ATO will review and update GSTR 2003/3 and GSTR 2009/4 to provide greater clarity on the issues discussed in the case.

Seeking Input

The ATO is inviting comments on this Decision Impact Statement until October 27, 2023. This provides an opportunity for stakeholders to provide input and contribute to the ongoing development of tax guidance and policy.

This decision and its associated impact statement underscore the importance of staying informed about changes in tax law and regulations, particularly in the dynamic real estate and property development field. Tax professionals, property developers, and investors should monitor developments closely and seek expert advice to ensure compliance and optimize their financial strategies.

Source: Decision Impact Statement 2021/3014, ATO website, September 27, 2023, accessed on September 27, 2023.

Got questions? Reach out to Tax Ideas Accountants & Advisersat +61 2 83181545 or book an appointment on our live calendar.

In: CGT and GST for property buyers

Navigating the Latest Changes in s 100A Trust Reimbursement Agreements

In the dynamic realm of tax law, keeping pace with updates and revisions is essential. The Australian Taxation Office (ATO) has recently introduced significant amendments to Taxation Ruling TR 2022/4, specifically addressing s 100A reimbursement agreements. These alterations come as a response to recent rulings by the Full Federal Court and aim to provide clarity and guidance regarding the application of s 100A.

Understanding s 100A

To comprehend the significance of these updates, it's important to first grasp the essence of s 100A. Section 100A of the Income Tax Assessment Act 1936 empowers the Commissioner of Taxation to either disregard or reallocate specific amounts for income tax purposes. Typically, these amounts are related to trust income and are implemented to prevent tax avoidance.

Recent Full Federal Court Rulings

The ATO has issued an addendum to TR 2022/4 to reflect the outcomes of two pivotal Full Federal Court decisions: Guardian (2023 ATC ¶20-850; [2023] FCAFC 3) and Bblood (2023 ATC ¶20-865; [2023] FCAFC 89). These decisions have necessitated adjustments to the ruling to ensure it remains aligned with the latest interpretations handed down by the judiciary.

Key Revisions

The updated ruling introduces several key revisions:

Involvement of Advisers: Notably, the clarification that advisers may be parties to a reimbursement agreement is a significant development. This recognition acknowledges the practical complexities of managing trust structures.
Beneficiary Participation: The update also delineates the circumstances under which a beneficiary may need to be a party to a reimbursement agreement. This provides greater clarity regarding beneficiary involvement.
Preservation of Commissioner's Perspective: Crucially, these changes do not significantly alter the Commissioner's perspective on the functioning of s 100A. The fundamental principles and objectives of this section remain intact.

Minor Adjustments to PCG 2022/2

In conjunction with the amendments to TR 2022/4, minor adjustments have been incorporated into Practical Compliance Guideline PCG 2022/2. This guideline outlines the ATO's compliance approach concerning s 100A reimbursement agreements. The amendments are primarily aimed at providing clarity regarding specific arrangements that fall outside the low-risk "green zone."

Remaining Informed and Compliant

The updates to TR 2022/4 and PCG 2022/2 underscore the ATO's commitment to maintaining transparency and fairness within the tax system. As tax legislation evolves and judicial interpretations evolve, it is imperative for tax professionals, advisers, and beneficiaries to stay informed and uphold compliance with the latest regulatory modifications.

Understanding the nuances of s 100A and reimbursement agreements is paramount, especially when structuring trusts and managing tax liabilities. These recent amendments strive to strike a balance between preventing tax avoidance and facilitating legitimate financial and business activities.

To access more comprehensive information and insights into these updates, it is advisable to refer to the official sources available on the ATO website. Staying updated with such alterations can contribute significantly to enhanced tax planning and compliance, offering benefits to both individuals and businesses in an ever-evolving tax landscape.

Source: Addendum to Taxation Ruling TR 2022/4 and Practical Compliance Guideline PCG 2022/2, ATO website, September 27, 2023, accessed on September 27, 2023.

Got questions? Reach out to Tax Ideas Accountants & Advisersat +61 2 83181545 or book an appointment on our live calendar.

In: Trust

Bills to Establish fiscal Responsibility Regime Now Law A Game Changer for Banking, Insurance, and Superannuation diligence"

In a significant move aimed at enhancing fiscal responsibility within the banking, insurance, and superannuation sectors, the Fiscal Responsibility Regime( FAR) has officially come law. On the 14th of September 2023, the Fiscal Responsibility Regime Bill 2023 and the Fiscal Responsibility Regime( Consequential emendations) Bill 2023 entered assent, marking a vital moment in fiscal assiduity regulation and oversight. These two bills, Act No 67 of 2023 and Act No 68 of 2023, independently, bring with them sweeping changes that will impact how these diligences operate.

In: Superannuation

Modernising Business Communications Bill Now Law: A Step Towards a Digital Future

In: Business Structures

A New Era for Financial Services: Bills to Establish Financial Accountability Regime Now Law

In today's ever-evolving financial landscape, accountability and transparency are crucial elements for ensuring the stability and integrity of the banking, insurance, and superannuation industries. The Australian government recognizes this and has taken a significant step forward by enacting two crucial pieces of legislation: the Financial Accountability Regime Bill 2023 and the Financial Accountability Regime (Consequential Amendments) Bill 2023. These landmark bills received assent on September 14, 2023, becoming Act No 67 of 2023 and Act No 68 of 2023, respectively. Together, they establish the Financial Accountability Regime (FAR), poised to usher in a new era of financial accountability and responsibility.

In: Financial Services

Ensuring Compliance: Creating an Appropriate Discount Policy for SMSF Services

Contributed by William Fettes, Senior Associate, and Daniel Butler, Director, DBA Lawyers

In the world of financial regulations, staying compliant is paramount. This holds especially true for firms offering discounted services for Self-Managed Superannuation Funds (SMSFs). Failing to establish a proper discount policy aligned with the Australian Taxation Office's (ATO) guidelines could lead to Non-Arm's Length Expenses (NALE) and potential tax liabilities under the Non-Arm's Length Income (NALI) provisions.

Background

Under current legislation, SMSFs that incur general fund expenses deemed as NALE or those that should have been incurred at arm's length but weren't can face a substantial 45% tax liability. This tax rate applies to various aspects of the fund's income, even when the SMSF is in the pension or retirement phase. The ATO's view is that reduced or nil general fund expenses significantly impact the fund's income.

Previously, the ATO offered some relief through the Practical Compliance Guideline PCG 2020/5, but this transitional approach ended on July 1, 2023. Consequently, firms must revisit their discount arrangements to effectively manage NALI/E risks.

Creating an Appropriate Discount Policy

Developing an appropriate staff discount policy benefits both firms and their staff members. It is essential for:

Policy Framework: Establishing a formal policy document outlining the terms of the discount.
Consistency: Ensuring that the discount aligns with normal commercial practices and is supported by benchmark evidence.
Uniformity: Making sure the same discount is available to all eligible individuals.

Proposed NALE Legislation

Treasury's Exposure Draft for the "Treasury Laws Amendment (Measures for Consultation) Bill 2023: Non-Arm's Length Expense Rules for Superannuation Funds" (NALE Bill) introduces a cap on NALI arising from non-arm's length schemes involving lower or nil general fund expenses. However, this cap doesn't apply to capital expenses. The NALE Bill also includes other important measures, like excluding assessable contributions from NALI. Although these changes aim to mitigate the impact of NALE, they are still awaiting finalization and legal passage.

Given this uncertainty, firms are urged to act swiftly to formalize their staff discount arrangements.

LCR 2021/2

In Law Companion Ruling LCR 2021/2, the ATO clarifies that discount arrangements under an appropriate policy will not trigger NALI. For these arrangements to meet the arm's length criteria, they should be consistent with normal commercial practices and accessible to all eligible individuals, including employees, partners, shareholders, or office holders.

Discounts for Non-SMSF Work

LCR 2021/2 predominantly addresses staff discounts related to SMSF services. If discounts extend to unit trusts or companies associated with a staff member's SMSF, they must be supported by objective benchmark evidence. Services provided to other entities should be invoiced separately to maintain a clear separation from SMSF invoicing.

Conclusions

Firms providing discounted services to staff members' SMSFs must act promptly to minimize NALI/E risks. This entails the creation, documentation, and implementation of an appropriate staff discount policy. Additionally, staff members should receive training and guidance on managing NALI/E risks.

By ensuring compliance, firms not only safeguard themselves and their staff but also contribute to transparency and trust within the SMSF sector.

This article was originally published on the DBA Lawyers website and has been reproduced with permission.

Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment on our live calendar .

In: SMSF

New Bill Proposes Exciting Changes for Small Businesses and Charities

The Australian Parliament has introduced the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 to boost the economy and assist small businesses and charities. This comprehensive bill includes several income tax measures to benefit these sectors:

Small Business Instant Asset Write-Off: The bill increases the instant asset write-off threshold from $1,000 to $20,000 for eligible assets, benefiting small businesses with an annual turnover of less than $10 million. This change is effective from July 1, 2023, to June 30, 2024.
Small Business Energy Incentive: An enticing incentive offers a 20% bonus deduction for eligible energy-efficient expenditure, with a maximum of $20,000 on eligible costs up to $100,000. Businesses with a turnover under $50 million can benefit from this between July 1, 2023, and June 30, 2024.
Super Fund Non-Arm's Length Expense Rules: Amendments to non-arm's length income rules for superannuation funds aim to exempt larger funds and limit taxable income from non-arm's length expenses. These changes apply from the 2018–19 income year onward.
Expanding AFCA Powers: The bill proposes to allow the Australian Financial Complaints Authority (AFCA) to consider complaints related to superannuation, even if they don't strictly meet the legal definition of a "superannuation complaint."
Accounting Standards and General Insurance Contracts: To ease the tax compliance burden on the general insurance industry, the bill aligns with the new accounting standard AASB 17. General insurers can use audited financial reporting information for tax returns starting from January 1, 2023.
Deductible Gift Recipients (DGRs) and Other Changes: The bill introduces "community charities" as a new class of DGRs, simplifies DGR endorsement processes, and extends tax exemptions for various organizations.

These changes aim to stimulate growth, reduce compliance complexities, and provide a supportive environment for small businesses, charities, and superannuation funds. Keep an eye on further developments related to this important legislation

In: Small Business Entity (SBE)

Social Security Payment Increases: A Positive Change Starting September 20, 2023

In a heartening development for recipients of social security benefits, the Australian government has unveiled a series of rate adjustments set to become effective on September 20, 2023. These changes form part of the government's ongoing commitment to providing support to individuals and families reliant on government assistance. In this blog post, we'll take an in-depth look at these crucial adjustments and their implications for those who depend on social security payments.

1. Single JobSeeker Payment Receives a Substantial Boost

Single JobSeeker Payment recipients are in for a significant increase in their base payments. Commencing September 20, 2023, these individuals will receive a base payment of $749.20 per fortnight, marking an impressive $56.10 rise. This boost offers essential financial relief to those actively seeking employment and striving to meet their financial obligations.

2. Positive Changes for Parenting Payment Single Recipients

Parenting Payment Single recipients will also benefit from an uplift in their base payment rates. These recipients will see their base payment rate increase to $942.40, reflecting a notable $20.30 enhancement. Furthermore, single parents transitioning to this payment category due to the government's 2023 Federal Budget amendment, extending eligibility until their youngest child turns 14 (previously aged eight), will receive an additional $227.50 per fortnight compared to their current rates, inclusive of supplements. This change is designed to provide added support to single parents during the pivotal child-rearing years.

3. Partnered Rates Witness Significant Upgrades

Recipients on a partnered rate of JobSeeker and Parenting Payment are not overlooked in these adjustments. Their base payment rate will rise to $686.00, signifying a noteworthy $54.80 increase. These enhancements aim to ensure that partnered individuals and families have the financial resources necessary to meet their ongoing needs.

4. Indexation Benefits Age Pension, Disability Support Pension, and Carer Payment Recipients

Through indexation, several other social security payments will also see an increase. The single pension rate will experience a growth of $32.70, reaching $1,096.70, while the combined rate for couples will receive a $49.40 increase, reaching $1,653.40. These adjustments are essential to help these recipients keep pace with the rising cost of living, particularly for seniors and individuals with disabilities.

5. Veterans and Renters Gain Additional Support

Veterans receiving service pensions and the Disability Compensation Payment (Special Rate) will also experience positive changes. Single veterans on a service pension will receive an extra $32.70, bringing their service pension to $1,096.70 per fortnight. Veterans on the Disability Compensation Payment will witness an increase of $53.00 per fortnight, raising their payment to $1,729.20. These adjustments recognize the sacrifices made by veterans and provide them with the financial support they rightfully deserve.

Income support recipients who are renting will also reap the benefits of an increase in the maximum rates of Commonwealth Rent Assistance. These changes result from a 15 percent increase outlined in the 2023 Federal Budget, combined with regular indexation. For single recipients without children, the maximum rate will rise by $27.60 to $184.80 per fortnight. For family payment recipients with one or two children, the maximum rate will increase by $32.34 to $217.28 per fortnight. These adjustments aim to alleviate the financial burden of renting, which can be a substantial expense for many Australians.

6. Income and Assets Limits for Commonwealth Seniors Health Card

Finally, income and assets limits for Commonwealth Seniors Health Card recipients will undergo indexation. For singles, this means an increase of $5,400, raising the limit to $95,400 per annum. For couples combined, the limit will rise by $8,640 to $152,640 per annum. This change ensures that seniors with modest incomes can access essential healthcare services without enduring financial strain.

In summary, these upcoming increases in social security payments represent a significant stride toward providing enhanced financial security to individuals and families across Australia. They underscore the government's unwavering commitment to supporting vulnerable and disadvantaged members of the community, assisting them in leading more comfortable lives. As these changes come into effect on September 20, 2023, countless Australians will benefit from this much-needed boost to their payments.

In: Social Security

Bill Proposing Changes to FHSS Scheme and Financial Advice Industry Awaits Final Approval

NSW Enacts Revenue and Fines Bill with Notable GP Payroll Tax Adjustments

In an exciting turn of events, the corridors of the New South Wales Parliament have witnessed a transformative development with the passage of the Revenue, Fines, and Other Legislation Amendment Bill 2023 (NSW). This landmark legislation carries pioneering amendments that are poised to revolutionize the taxation landscape and redefine how breaches of confidentiality are handled. Let's delve into the essential highlights of this momentous legislative stride:

In: Tax

Unveiling the Taxation Conundrum: A Case Study on Delayed Bonus Payments

In a recent legal precedent, the Administrative Appeals Tribunal (AAT) made a momentous ruling concerning the taxation of delayed bonus payments. This ruling brings to light the intricate timing intricacies that dictate the taxability of such payments, especially when a taxpayer's residency status undergoes a shift between entitlement and reception. In this blog post, we will delve into the particulars of the case, examine the arguments put forth, and elucidate the outcome of the AAT's verdict.

In: Tax

Navigating SMSF Residency Test: Ensuring Compliance and Tax Benefits

Managing a self-managed superannuation fund (SMSF) in Australia involves grappling with the intricate and evolving taxation and superannuation landscape. One pivotal determinant of SMSF compliance is passing the residency test – a litmus test for eligibility to access favorable tax rates. In this article, we dive into the nuances of the SMSF residency test and its implications, shedding light on its complexity and impact on SMSF trustees.

In: SMSF