ALP announces massive (potential) changes to trust taxation
Editor: Although we don’t normally report on Opposition tax policies, this policy change is so fundamental, and the existing state of the Federal Parliament is so chaotic, that we believe it’s worth bringing this to your attention.
The Leader of the Opposition, Bill Shorten, has announced that a Labor Government (should they be elected) will introduce a standard minimum 30% tax rate for discretionary trust distributions to “mature beneficiaries” (i.e., people aged 18 and over).
Although the ALP acknowledges that individuals and businesses use trusts for a range of legitimate reasons, such as asset protection and business succession, “in some cases, trusts are used solely for tax minimisation.”
Labor’s policy will only apply to discretionary trusts, so other trusts – such as special disability trusts, deceased estates and fixed trusts – will not be affected by this change.
Labor’s policy will also not apply to farm trusts and charitable trusts, and other exemptions will apply, such as for people with disability (the Commissioner of Taxation will be given discretionary powers to manage this).
Their announcement also reiterated their other policies regarding tax reform, including further changes to superannuation, changes to negative gearing and CGT, and limiting deductions for managing tax affairs.
Single Touch Payroll update
A limited release of ‘Single Touch Payroll’ began for a small number of digital service providers and their clients on 1 July 2017, with Single Touch Payroll operating with limited functionality for a select number of employers.
Editor: Single Touch Payroll will effectively require some employers to report information regarding payments to employees (or to their super funds)in ‘real time’, via their payroll software.
The following timeline sets out what is happening in the lead-up to the mandatory commencement of Single Tough Payroll next year.
September 2017 – the ATO will write to all employers with 20 or more employees to inform them of their reporting obligations under Single Touch Payroll.
1 April 2018 – employers will need to do a headcount of the number of employees they have, to determine if they need to report through Single Touch Payroll.
From 1 July 2018 – Single Touch Payroll reporting will be mandatory for employers with 20 or more employees.
Keeping ABN details up to date
The ATO finds that businesses tend to forget to update their Australian business number (ABN) details in the Australian Business Register (ABR) when their circumstances or details change, so they have asked that we contact our clients to help keep your ABN details up to date and reduce unnecessary contact from the ATO.
In particular, the ATO says that many partnership and trust ABNs are not in operation, or their business structures have changed, so please let us know if:
The ATO also recommends that we add alternative contacts to clients’ ABN records (so please provide us with alternative contact information, if possible), and to update the ABN records where any contact details have changed.
Register trading names with ASIC
By 31 October 2018, businesses will need to register any existing or old trading names as a business name with the Australian Securities & Investments Commission (ASIC) in order to continue operating with it.
The ABN Lookup website will reflect these changes and will only display business names registered with ASIC from this date.
Limited opportunity to avoid ‘transfer balance cap’ problems
If the total value of a superannuation fund member’s pensions exceeded $1.6 million on 1 July 2017, they may face adverse tax consequences.
However, there is a transitional provision that permits a minor excess over $1.6 million to be ignored, subject to certain conditions being met.
Basically, this will be satisfied if the value of their pension interests on 1 July 2017 exceeded $1.6 million by no more than $100,000 (i.e., their total value did not exceed $1.7 million), but the member is able to commute the pension(s) by an amount that is at least equal to that excess no later than 31 December 2017.
This will mean that no ‘transfer balance cap’ consequences arise (e.g., no ‘excess transfer balance earnings’ will accrue on the excess and no ‘excess transfer balance tax’ will become payable).
Therefore, it is important that this issue is identified and, if applicable, dealt with promptly.
Editor: Please contact us if you believe this may affect you and you need more information.
New Approved Occupational Clothing Guidelines 2017
The government has issued new guidelines to set out criteria for tax deductible non-compulsory uniforms.
Editor: The taxation law only allows a deduction to employees for expenditure on uniforms or wardrobes where either:
The new guidelines outline (among other things):
The guidelines commence on 1 October 2017, and the previous Guidelines are revoked with effect from the same day.
Ability to lodge nil activity statements in advance
The ATO generally issues activity statements by the end of the relevant month under their normal processes, allowing the statement to be lodged by 21 days after the end of the month, or 28 days after the end of the relevant quarter (as appropriate).
However, the ATO recognises that there may be a specific reason for a taxpayer to access their activity statements early, so activity statements can be generated early in some cases, such as where the taxpayer is going to be absent from their place of business before the end of the reporting period (and the business will not be trading during that period), or if the taxpayer’s entity is under some form of administration, or the business has ceased.
Editor: There are certain eligibility requirements to take advantage of this service, so please contact us if this is of interest to you.
ATO warning regarding work-related expense claims for 2017
The ATO is increasing attention, scrutiny and education on work-related expenses (WREs) this tax time.
Assistant Commissioner Kath Anderson said: “We have seen claims for clothing and laundry expenses increase around 20% over the last five years. While this increase isn’t a sign that all of these taxpayers are doing the wrong thing, it is giving us a reason to pay extra attention.”
Ms Anderson said common mistakes the ATO has seen include people claiming ineligible clothing, claiming for something without having spent the money, and not being able to explain the basis for how the claim was calculated.
“I heard a story recently about a taxpayer purchasing everyday clothes who was told by the sales assistant that they could claim a deduction for the clothing if they also wore them to work,” Ms Anderson said.
“This is not the case. You can’t claim a deduction for everyday clothing you bought to wear to work, even if your employer tells you to wear a certain colour or you have a dress code.”
Ms Anderson said it is a myth that taxpayers can claim a standard deduction of $150 without spending money on appropriate clothing or laundry. While record keeping requirements for laundry expenses are “relaxed” for claims up to this threshold, taxpayers do need to be able to show how they calculated their deduction.
The main message from the ATO was for taxpayers to remember to:
GST applies to services or digital products bought from overseas
From 1 July 2017, GST applies to imported services and digital products from overseas, including:
Australian GST registered businesses will not be charged GST on their purchases from a non-resident supplier if they:
However, if Australians purchase imported services and digital products only for personal use, they should not provide their ABN.
Imposition of GST on ‘low-value’ foreign supplies
Parliament has passed legislation which applies GST to goods costing $1,000 or less supplied from offshore to Australian consumers from 1 July 2018.
Using a ‘vendor collection model’, the law will require overseas suppliers and online marketplaces (such as Amazon and eBay) with an Australian GST turnover of $75,000 or more to account for GST on sales of low value goods to consumers in Australia.
The deferred start date gives industry participants additional time to make system changes to implement the measure.
Editor: It should be noted that this is a separate measure to that which applies GST to digital goods and services purchased from offshore websites, as outlined above.
New threshold for capital gains withholding
From 1 July 2017, where a foreign resident disposes of Australian real property with a market value of $750,000 or above, the purchaser will be required to withhold 12.5% of the purchase price and pay it to the ATO unless the seller provides a variation (this is referred to as ‘foreign resident capital gains withholding’).
However, Australian resident vendors who dispose of Australian real property with a market value of $750,000 or above will need to apply for a clearance certificate from the ATO to ensure amounts are not withheld from their sale proceeds.
Therefore, all transactions involving real property with a market value of $750,000 or above will need the vendor and purchaser to consider if a clearance certificate is required.
Action to address super guarantee non-compliance
The Government will seek to legislate to close a loophole that could be used by unscrupulous employers to short‑change employees who choose to make salary sacrificed contributions into their superannuation accounts.
The Government will introduce a Bill into Parliament this year that will ensure an individual’s salary sacrificed contributions do not reduce their employer’s superannuation guarantee obligation.
Change to travel expenses for truck drivers
Editor: The ATO has released its latest taxation determination on reasonable travel expenses, and it includes a big change for employee truck drivers.
For the 2017/18 income year, the reasonable amount for travel expenses (excluding accommodation expenses, which must be substantiated with written evidence) of employee truck drivers who have received a travel allowance and who are required to sleep away from home is $55.30 per day (formerly a total of $97.40 per day for the 2016/17 year).
If an employee truck driver wants to claim more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the amount in excess of the reasonable amount.
Editor: The determination includes an example of a truck driver who receives a travel allowance of $40 per day in 2017/18 ($8,000 over the full year for 100 2-day trips), but who spent $14,000 on meals on these trips.
In terms of claiming deductions for these expenses, he can either claim $14,000 as a travel expense (if he kept all of his receipts for the food and drink he purchased and consumed when travelling), or just rely on the reasonable amount and claim $11,060 ($55.30 x 200 days) as a travel expense (in which case he will need to be able to show (amongst other things) that he typically spent $55 or more a day on food and drink when making a trip (for example, by reference to diary entries, bank records and receipts that he kept for some of the trips)).
Car depreciation limit for 2017/18
The car limit for the 2017/18 income year is $57,581 (the same as the previous year). This amount limits depreciation deductions and GST input tax credits.
In July 2017, Laura buys a car to which the car limit applies for $60,000 to use in carrying on her business. As Laura started to hold the car in the 2017/18 financial year, in working out the car’s depreciation for the 2017/18 income year, the cost of the car is reduced to $57,581.
Div.7A benchmark interest rate
The benchmark interest rate for 2017/18, for the purposes of the deemed dividend provisions of Div.7A, is 5.30% (down from 5.40% for 2016/17).