Tax « Australian Regulatory Compliance Review from Langes+ Lawyers

May 9, 2012

Commonwealth Budget 2012-2013

The key points from this year’s Commonwealth Budget include:

Loss carry-back scheme : Companies that incur losses from 2012-13 will be able to carry back losses so that they get a refund against income tax previously paid in respect of the 2011-12 income year. From 1 July 2012, companies will be able to carry back up to $1 million worth of losses to get a refund of tax paid in the previous year. From 1 July 2013 and later years, companies will be able to carry back up to $1 million worth of losses against income tax paid up to two years earlier.

Write-offs: From 1 July 2012, small businesses will be able to write-off any new business asset costing less than $6,500, for as many assets as they purchase. Assets costing $6,500 or more can be depreciated in a single pool from 2012-13 (15 per cent in the year they are purchased, 30 per cent in each subsequent year). Small businesses will be able to also instantly write-off the first $5,000 of a motor vehicle, from 1 July this year.

Increasing the tax-free threshold: the tax free personal income tax threshold will be increased from $6,000 to $18,200.

Tax on employment termination payments: The existing concession for termination payments will be limited to payments related to hardship, namely redundancy payments, compensation for employment-related disputes, and payments for invalidity or death.

Tax concessions on the super contributions of those earning over $300,000: From 1 July 2012, individuals with income greater than $300,000 will have the tax concession on their contributions reduced from 30 per cent to 15 per cent (excluding the Medicare levy).The reduced tax concession will only apply to the part of the contributions that are in excess of the threshold. The 15 per cent flat tax on earnings within superannuation (and tax exemption for assets supporting pension payments) will not be affected in any way by this reform.

Measures not being proceeded with:

Standard tax deduction for work-related expenses
50 per cent tax discount for interest income
the 1% cut in company tax due to start for small businesses from July 2012 and for larger businesses a year later.
plans to introduce a higher concessional contribution cap (ie $50,000 instead of $25,000 a year) for those with less than $500,000 in super have been deferred until 1 July 2014.

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Posted 9th May 2012 by admin in Business Planning, Superannuation, Tax

April 19, 2012

Director liability for PAYG withholding and superannuation guarantee obligations

Treasury has released drafts of the Tax Laws Amendment (2012 Measures 3 No. 2) Bill 2012: Companies’ non-compliance with PAYG withholding and superannuation guarantee obligations and Pay As You Go Withholding Non-compliance Tax Bill 2012 for consultation.

Currently under the director penalty regime company directors are personally liable for amounts withheld by their company that have not been remitted to the Australian Taxation Office (ATO). The Tax Laws Amendment (2012 Measures No. 2) Bill 2012: Companies’ non-compliance with PAYG withholding and superannuation guarantee obligations will extend the regime to cover Superannuation Guarantee amounts.

A new director will not be liable to a director penalty for company debts that existed when they became a director until 30 days after they became a director.

Currently a director has a defence in relation to a director penalty if the director had an illness that prevented him or her participating in the management of the company, or if the director took all reasonable steps to ensure compliance.

In addition to these defences, a director that becomes liable to a director penalty for not causing its company to comply with its superannuation obligations will not be liable to a director penalty if the company treated the SGA Act 1992 as applying to a matter in a way that was reasonably arguable and the company took reasonable care in applying the SGA Act 1992 to the matter.

The Bills will ensure that directors cannot have their director penalties remitted by placing their company into administration or liquidation when unpaid Pay As You Go (PAYG) withholding or superannuation guarantee amounts remain unpaid three months after the due date. New directors are not subject to these restricted remission options until 3 months after they become a director of a company, rather than 3 months after a debt arose.

There will be restricted access to PAYG withholding credits for company directors and their associates where the company has failed to pay withheld amounts to the Commissioner of Taxation.

Submissions close on 2 May 2012 to allow for the introduction and passage of the legislation in the Winter 2012 sittings of Parliament.

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Posted 19th April 2012 by David Jacobson in Corporations Act, Superannuation, Tax

April 2, 2012

Changes to NFP tax concessions deferred

The Government has announced that it will extend the start date for its changes to Not For Profit tax concessions from 1 July 2011 to 1 July 2012 for new unrelated commercial activities that commenced after 7:30 pm (AEST) on 10 May 2011.

Existing unrelated commercial activities that commenced prior to that date will continue to be covered by transitional arrangements as announced in the 2011-12 Budget.

Under the changes income tax concessions will only apply to profits generated by the unrelated commercial activities of NFPs, if they are directed to the NFP’s altruistic purpose. This means an NFP entity will pay income tax on those profits that are not directed back to its altruistic purpose (that is, the earnings it retains in its commercial undertaking).

An NFP entity will also not have access to a fringe benefits tax (FBT) exemption or rebate, goods and services tax (GST) concessions or deductible gift recipient (DGR) support in relation to their unrelated commercial activities.

Initially only new unrelated commercial activities that commenced after 7:30 pm (AEST) on 10 May 2011 are subject to the new arrangements.

NFP entities with existing unrelated commercial activities at that date will initially be able to continue to use their tax concessions to support these activities. At the end of the transition period an entity operating an existing unrelated business activity will, depending on the model selected, need either to transfer the activity to a new taxable entity or pay tax on income from the activity if profits are retained.

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Posted 2nd April 2012 by admin in Charities, Not-for-profit sector, Tax

March 25, 2012

Compulsory super contributions increased

The Superannuation Guarantee (Administration) Amendment Bill 2011 has been passed by both Houses.

Under the current scheme, all employers are required to make a prescribed minimum level of superannuation contributions to a complying superannuation fund or a retirement savings account (RSA) on behalf of their eligible employees.The Bill increases the Superannuation Guarantee charge from 9 percent to 12 percent of an employee’s ordinary time earnings.

The Superannuation Guarantee charge percentage will be increased to 9.25% on 1 July 2013, 9.5% on 1 July 2014, 10% on 1 July 2015, 10.5% on 1 July 2016, 11% on 1 July 2017 and 11.5% on 1 July 2018. On 1 July 2019 the rate will be set at 12 per cent for 2019-20 and subsequent income years.

The maximum age limit of an employee at which the superannuation guarantee no longer needs to be provided is also abolished. Currently employers are required to contribute to complying superannuation funds of eligible mature age employees aged 70 and older.This Bill removes the SG maximum age limit of 70 and requires employers to contribute to complying superannuation funds of eligible mature age employees aged 70 and older.

The amendments commence on 1 July 2013. They were dependent on the passing of the Minerals Resource Rent Tax package.

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Posted 25th March 2012 by David Jacobson in Superannuation, Tax

March 22, 2012

Taxation ruling on split loans

The ATO has issued Taxation Determination TD 2012/1 in relation to ‘investment loan interest payment’ arrangements (commonly called split loans).

The Determination states that Part IVA of the Income Tax Assessment Act 1936 can apply to deny a deduction for some, or all, of the interest expense incurred in respect of an ‘investment loan interest payment arrangement’.

What is an investment loan interest payment arrangement?

An investment loan interest payment arrangement will exhibit all or a significant number of the features set out as follows:

(a) The taxpayer(s) own at least two properties: one property is the taxpayer(s)’ residence and the other is used to derive rent (‘investment property’).

(b) The taxpayer(s) have an outstanding loan which was used to acquire the residence (or refinance an earlier loan used to acquire the residence) (‘home loan’), an outstanding loan which was used to acquire the investment property (or refinance an earlier loan used to acquire the investment property) (‘investment loan’) and a line of credit or similar borrowing facility with an approved limit (‘line of credit’). All three loan products are typically (but not always) provided by a single financial institution.

(c) The respective interest rates on the home loan and investment loan are typically at or about the same rate. The interest rate on the line of credit is typically (but not always) higher by a small margin (for example, 0.15%).

(d) The investment loan is typically an interest-only loan for a specified period with principal and interest repayments required thereafter, or the interest-only period may be extendable.

(e) The line of credit typically has no minimum monthly repayment obligations provided the balance remains below the approved limit. Alternatively, it may require minimum monthly repayments equal to the accrued interest.

(f) The home loan, investment loan and the line of credit are each secured against the taxpayer(s)’ residence and/or investment property.

(g) The line of credit is drawn down to pay the interest on the investment loan as it falls due. Where no repayments are required on the line of credit, the taxpayer(s) will generally not make any repayments, which results in interest on the line of credit being capitalised and compounded. Where monthly interest repayments are required on the line of credit, the taxpayer(s) meet such repayments from their cash flows.

(h) Typically all or a significant proportion of the taxpayer(s)’ available cash inflows (including that which the taxpayer(s) otherwise might reasonably be expected to use to pay the interest on the investment loan) are deposited into their home loan or an ‘acceptable loan account offset account’, which has the effect of reducing the interest otherwise payable on the home loan.

(i) If the line of credit reaches its approved limit before the home loan has been repaid, the taxpayer(s) may apply to increase the limit on the line of credit in conjunction with a corresponding decrease in the available ‘redraw’ amount in the home loan.

A key feature of the investment loan interest payment arrangement is the use of the line of credit to pay the interest on the investment loan. This results in all or most of the interest on the investment loan, in effect, being capitalised. That is, the payment of the investment loan interest is deferred. This deferral has the economic effect of allowing the taxpayer(s) to repay the home loan at a faster rate than would otherwise be possible: the taxpayer(s) are able to pay an amount equivalent to the deferred investment loan interest on the home loan.

If the taxpayer(s)’ residence is used as security for either the investment loan or the line of credit, the taxpayer(s) will not actually own an unencumbered home any faster under the scheme than would have been the case if they had not entered into the arrangement.

ATO Determination

The ATO has determined that it would be open for a reasonable person to conclude that one or more of the parties that entered into or carried out the scheme did so for the dominant purpose of enabling the taxpayer(s) to obtain a tax benefit in connection with the scheme. If a reasonable person would reach such a conclusion then Part IVA applies to the scheme and the Commissioner would be entitled to cancel under paragraph 177F(1)(b) the tax benefit. That is, the relevant interest incurred on the line of credit would not be deductible to the taxpayer(s).

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Posted 22nd March 2012 by David Jacobson in Financial Services, Tax

March 20, 2012

Minerals Resource Rent Tax package passed

The Minerals Resource Rent Tax Bill 2011 and associated Bills have been been passed by both Houses ofr Parliament and are awaiting Royal Assent before commencement on 1 July 2012.

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Posted 20th March 2012 by admin in Tax

March 14, 2012

Draft Company Tax Reduction Bill

Treasury has released a draft Bill to amend the Income Tax Rates Act 1986 to reduce the corporate tax rate from 30 per cent to 29 per cent for the 2013-14 income year and for subsequent income years.

For small business companies, the 29 per cent rate will apply from the 2012‑13 income year.

A small business entity is defined in section 328-110 of the Income Tax Assessment Act 1997 (ITAA 1997). A company is a small business entity that qualifies for the early reduction in the corporate tax rate if:
• the company carried on business in the 2011-12 income year and had an aggregated turnover of less than $2 million in that income year; or
• the company carries on business in the 2012-13 income year and has an aggregated turnover of less than $2 million in that income year.

UPDATE 10 May 2012: This proposal has been abandoned

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Posted 14th March 2012 by David Jacobson in Tax

March 2, 2012

Superannuation changes

The Government has introduced the Tax and Superannuation Laws Amendment (2012 Measures No. 1) Bill 2012 into the House of Representatives.

The Bill includes measures to:

give eligible individuals the option to have excess concessional contributions of up to $10,000 refunded and assessed at their marginal tax rates, rather than incurring the potentially higher effective rate of excess contributions tax.
sets up the framework for payslip reporting of superannuation benefits. It will require employers to report to employees, on payslips, how much super they will be paying, and when they plan to pay it.
pauses the indexation of the superannuation concessional contributions cap for one year. As a result, the general concessional cap is not expected to increase from $25,000 to $30,000 until 2014-15.
authorises the Australian Taxation Office (ATO) to disclose details of an individual’s superannuation interests and superannuation benefits to a regulated superannuation fund or public sector superannuation scheme, an approved deposit fund, retirement savings account (RSA) provider or their administrators (the bodies).

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Posted 2nd March 2012 by David Jacobson in Superannuation, Tax

February 15, 2012

Disclosure of superannuation contributions

Treasury has released an exposure draft for the payslip reporting of superannuation contributions.

This measure will amend the Superannuation Industry (Supervision) Act 1993 (the SIS Act) to require employers to report, on payslips, any information prescribed in the regulations about superannuation contributions. The regulations will in turn require employers to report the amount of superannuation contributions, as well as the date on which the employer expects to pay them.

Treasury has also released an exposure draft of a measure which will permit the Australian Taxation Office to disclose details of an individual’s superannuation interests and superannuation benefits to superannuation providers and their administrators to enable funds to assist their members to find and consolidate their superannuation interests.

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Posted 15th February 2012 by David Jacobson in Superannuation, Tax

GST treatment of mortgagee sale

Treasury has released an exposure draft of the Tax Laws Amendment (2012 Measures 2 No. 3) Bill 2012 which will clarify that a mortgagee in possession or control which sells the property of a corporation must report for GST Purposes and that the controller of the corporation does not need to report as well.

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Posted 15th February 2012 by David Jacobson in Financial Services, Tax