IN THIS ISSUE
On 26 August 2015 the Tax Laws Amendment (Small Business Measures No 3) Act 2015 received Royal Assent. The Act makes amendments in the following areas:
A previous edition of TaxWise Business detailed these measures. In summary:
Now that these measures have become law, you should speak to your tax agent about whether and how they might apply to your business.
The Commonwealth Treasury has made estimates of the likely regulatory costs of several of the small business tax measures announced in the 2015-16 Budget which have subsequently been enacted.
On 15 October 2015 the Assistant Treasurer introduced into the House of Representatives the Tax and Superannuation Laws Amendment (2015 Measures No 5) Bill 2015. The Bill will make amendments in the following areas:
Detailed below are the new measures in this Bill that might be relevant to your business.
The Bill will change the methods for calculating work-related car expense deductions. Currently, there are four methods taxpayers can use to calculate work-related car expenses (12% of original value method, one-third of actual expenses method, cents per kilometre and logbook method).
The ‘12% of original value’ method and the ‘one-third of actual expenses’ method will be removed from the law leaving the ‘cents per kilometre’ and ‘logbook’ methods as the only two methods available.
The Bill will also provide a streamlined process for calculating the cents per kilometre method by providing a single rate of deduction which more accurately reflects the actual running expenses of a vehicle. In the 2015-16 income year, the cents per kilometre rate will be set at 66 cents per kilometre. The Bill gives the Commissioner the power to set the cents per kilometre rate for later years via legislative instrument.
Changes to the income tax law for this measure will generally apply in relation to the 2015-16 income year and later income years. Changes to the FBT law for this measure will operate from 1 April 2016 and later fringe benefits tax years.
The Bill will amend the FBT law to limit the concessional treatment of salary packaged entertainment benefits by:
This measure will apply to the 2016-17 FBT year and later FBT years.
The Bill will make amendments to improve taxpayer compliance by increasing the information reported to the Commissioner by a range of third parties by creating a new third party reporting regime. This regime will require certain entities (third parties) to report information to the ATO on transactions that could reasonably be expected to have tax consequences for other entities.
The following third parties will be required to report under the regime:
The Bill contains measures dealing with:
Third party reporting obligations in relation to transfers of real property (reported by States and Territories) and ASIC market integrity data (reported by ASIC) will apply to transactions happening on or after 1 July 2016. All other third party reporting obligations will apply to transactions happening on or after 1 July 2017.
A number of these measures could have implications for your business, for example if you use a car in your business, offer fringe benefits to employees or have transactions running through your business which could be required to be reported to the ATO by a third party (which is quite likely). It would be worth sitting down with your tax adviser to consider if there are any potential implications for your business from any of the above measures.
Commonwealth Treasury recently consulted with the public on some proposed changes to the Wine Equalisation Tax Rebate (WET rebate). The WET rebate provides wine producers with a rebate of up to $500,000 per year. The rebate was intended to provide support to the wine industry by reducing, and in some cases eliminating, Wine Equalisation Tax liabilities. The consultation provides an opportunity to consider the current operation of the WET rebate, and seeks input on a range of possible ways to sustainably support the wine industry into the future.
Any proposed changes stemming from this consultation will form part of the broader tax reform process, though it is something that participants in the industry may want to keep an eye on.
The ATO has made a number of legislative determinations affecting various aspects of GST law, as follows:
A number of these determinations may have an impact on your business’ GST registration. Talk to your tax adviser about any possible implications for your business.
There is currently exposure draft legislation out in relation to two measures affecting supplies made from overseas into Australia to:
This exposure draft is likely to be tabled in Parliament and entered into law in the near future.
These changes may have implications for potential GST obligations for your business if you have cross-border transactions and deal with suppliers from overseas.
In October, the ATO finalised Taxation Determination TD 2015/19 “Income tax: if a retiring partner is entitled to an amount representing their individual interest in the net income of the partnership for an income year, will section 92 of the Income Tax Assessment Act 1936 apply?"
The determination sets out the Commissioner’s position on a retiring partner’s individual interest in net income for the partnership for an income year.
Subject to paragraph 3 of the Determination, the partner’s individual interest in the net income of the partnership is included in the partner’s assessable income under section 92 for the income year regardless of:
However, the partner’s individual interest in the net income of the partnership is not assessable under section 92 to the extent that it is attributable to both a period when the partner was not a resident of Australia, and sources outside of Australia.
We previously alerted readers to this Determination in an earlier edition of TaxWise Business.
If you are part of a partnership, now that the Taxation Determination has been finalised particularly if you or one of your partners is close to retiring from the partnership, you should seek advice from your tax adviser about how this Determination might affect you.
The ATO and AusIndustry are cautioning primary producers in the broadacre farming sector against claiming the R&D tax incentive for the cost of fertilisers and soil improvers which do not relate to R&D activities, but rather relate to business-as-usual farming activities.
On 15 October 2015, the ATO released a Taxpayer Alert TA 2015/3 “Accessing the R&D Tax Incentive for ineligible broadacre farming activities", which was developed jointly with AusIndustry.
The ATO and AusIndustry are reviewing arrangements where primary producers involved in broadacre farming are claiming the R&D tax incentive for the cost of fertilisers and other treatments (soil improvers) where a significant part (or all) of the expenditure that is incurred relates to “business as usual" farming activities and not to R&D activities.
The ATO and AusIndustry are also concerned that other entities in the farming industry may be inappropriately claiming the R&D tax incentive under similar circumstances.
Innovation Australia has reviewed certain registered activities and found that they do not meet eligibility requirements under the law. These matters are being tested in the Administrative Appeals Tribunal.
The ATO and AusIndustry will monitor registrations for activities that are similar to those described in this Alert and will conduct compliance activities where appropriate. AusIndustry is developing a Specific Issue Guidance product to assist taxpayers engaged in the farming industry, and their accountants and advisers, to correctly identify and document eligible R&D activities in that industry.
Your tax agent or adviser will be able to assist you if you have any concerns about this caution from the ATO or would like to know more about it.
There is draft legislation out that will amend the superannuation guarantee charge laws to simplify the laws and reduce the associated harshness of penalties under these laws.
Under the current law, employers must make quarterly superannuation guarantee (SG) contributions for their eligible employees to avoid having to pay the SG charge to the ATO. The SG charge regime imposes punitive costs to deter employers from paying their SG contributions late or in part. This can have a significant impact on small businesses.
As a part of the announced changes, the SG charge will be simplified by aligning the earnings base for calculating the SG charge (currently total salary and wages) with the earnings base for calculating SG contributions (ordinary time earnings).
The changes will also reduce the harshness of the SG charge by aligning the interest component on any SG shortfall with the period contributions that are outstanding. These changes will also remove the additional penalties under the current superannuation guarantee administration laws and align them with the administrative penalties under the Taxation Administration Act 1953.
These changes complement two other measures to reduce small business superannuation compliance costs; expansion of the small business superannuation clearing house and simplifying when a standard choice form must be provided by an employer. Both of these changes have applied since 1 July 2015.
The ATO has issued a reminder that large and medium employers must be SuperStream compliant by no later than 31 October.
The ATO previously announced it would allow these employers (those with 20 or more employees) an additional four months to adopt SuperStream, following the 30 June deadline. At the time of issuing this reminder, the ATO said from 1 November 2015, it would turn its attention to identifying those employers not compliant with SuperStream.
The ATO will continue to help employers adopt SuperStream, but there could be penalties for those who deliberately choose not to adopt it.
The ATO has published a checklist for employers to assist them to prepare to make super contributions for their employees using SuperStream. Employers should note that:
During the next few months, the ATO will be contacting small business employers that may not yet be using SuperStream to make super contributions. The ATO plans to contact employers in 22 industry groups.
Employers will receive a SMS message advising SuperStream has started and an email inviting them to register to attend an industry specific SuperStream webinar. The relevant industry groups are:
See your tax agent to ensure your business is meeting its SuperStream obligations.
The ATO has issued a reminder that once the audit of a self-managed superannuation fund (SMSF) has been finalised, an annual return should be lodged. The SMSF annual return is used to report income tax, regulatory information and member contributions, and to pay the supervisory levy.
If a fund was registered on or after 1 January 2015, it must lodge an SMSF annual return for the year it was registered, regardless of the amount of assets it holds, and even if a nil tax assessment is expected.
If a fund was registered before 1 January 2015 and does not have assets, it may not need to lodge a return.
The ATO has issued a reminder that every self-managed super fund (SMSF) registered on or after 1 January 2015 must now lodge an annual return for its first year, regardless of the assets it holds or if a nil tax assessment is expected.
If the SMSF was registered before 1 January 2015 and does not have assets, the ATO can be requested to either:
A RNN is generally only available for a SMSF’s first year of registration.
All self-managed superannuation funds now need to be able to receive SuperStream-compliant contributions.
To do this, an SMSF needs a bank account to receive the contributions, an active electronic service address to receive data associated with contributions, and an ABN.
An SMSF trustee can get an active electronic service address from an SMSF messaging provider, or through the SMSF’s administrator, tax agent, accountant or bank.
Do you have an SMSF? If so, check with your tax agent to make sure it has met all the relevant compliance requirements, including having an active electronic service address.
The ATO has updated its personal services income (PSI) page in consultation with tax professionals and small businesses to make it easier to understand and navigate.
The ATO is also developing a PSI decision tool to make it easier to work out if the PSI rules apply. It is expected to be finalised by the end of the year. The ATO will advise when this tool becomes available.
If you derive personal services income through an entity you own, your tax agent or adviser is the best person who can inform you of your obligations under the tax law and ensure you are meeting your compliance obligations.
The ATO is going to be collecting data relating to credit and debit card payments to merchants for the periods from 1 July 2014 to 30 June 2015.
The data will be collected from the following financial institutions:
The data requested will include information that enables the ATO to match merchant accounts to a taxpayer, including name, address and contact information as well as information on the number and value of transactions processed for each merchant account. This acquired data will be electronically matched with certain sections of ATO data holdings to identify possible non-compliance with taxation law.
The purpose of this data matching program is to ensure that merchants are correctly meeting their taxation obligations in relation to their business income. These obligations include registration, lodgement, reporting and payment responsibilities.
The ATO is undertaking a data matching program through which data will be obtained to determine which individuals might be engaged in providing ride sourcing services.
Details of all payments to ride sourcing providers from identified accounts held by ride sourcing facilitators with various financial institutions will be requested for those financial years. Ride sourcing facilitators provide an electronic platform enabling members of the public to engage the services of a ride sourcing provider (eg, a driver).
The data acquired will be electronically matched with certain sections of ATO data holdings to identify taxpayers that can be provided with tailored information to help them meet their tax obligations, or to ensure compliance with taxation law.
The ATO will obtain the following data items from the source entities:
The ATO is undertaking a data matching program through which information about registrants who sold goods and services to a value of $10,000 or more during the period 1 July 2014 to 30 June 2015 online will be obtained.
Data will be sought from eBay Australia and New Zealand Pty Ltd, a subsidiary of eBay International AG which owns and operates www.ebay.com.au.
The data requested will include information that enables the ATO match online selling accounts to a taxpayer, including name, address and contact information as well as information on the number and value of transactions processed for each online selling account. This information will be matched electronically with certain sections of ATO data holdings to identify possible non-compliance with taxation law.
It is estimated that records relating to between 15,000 and 25,000 individuals will be matched.
The ATO has advised that advisors and their clients who are having difficulty accessing the small business superannuation clearing house (SBSCH) should ensure they are using the correct link to access SBSCH by visiting Superannuation Clearing House – Logon.
The ATO has advised that an enhanced EmployerTICK version 2 will be available from November.
EmployerTICK is an optional service used by employers (and their intermediaries) to validate employee identity details.
EmployerTICK version 2 will be deployed in Standard Business Reporting version 2(SBR2). Some of the potential benefits of using EmployerTICK version 2 include:
SBR enables employers and tax professionals to report without having to log on to each individual government agency website and transcribe the information from their account systems into each agency’s form. SBR2 is the current version.
In previous editions of TaxWise Business, it was noted that the ATO was consulting on the Single Touch Payroll proposal. The ATO has now advised that consultation on Single Touch Payroll with representatives from large businesses, industry and software developers has been completed and included in a summary to government. More information may be found on the ATO website.
Under Single Touch Payroll, employers’ accounting software will automatically report payroll information to the ATO when employees are paid.
This will eliminate the need for employers to report employee-related Pay As You Go Withholding (PAYGW) in their activity statements throughout the year and employee payment summaries at the end of the year.
In addition, the Government will streamline Tax File Number declarations and Super Choice forms by providing digital services to simplify the process of bringing on new employees.
Helpful pages on the ATO website
There are a number of pages on the ATO website that you may find useful:
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.