Accompanying podcast
Note that our accompanying Tax Yak podcast episode 14 titled Parliamentary status of bills pre-Budget discusses all of these measures.
As we move closer to a Federal Election (expected on either 11 or 18 May 2019), there are a number of Bills tabled in the House of Representatives (HoR) or the Senate which contain important proposed tax and superannuation measures, as well as announcements of new measures which have not yet been introduced into Parliament. The majority of these are unlikely to be passed by the current Parliament prior to the calling of the Federal Election. Some of these measures are currently proposed to commence on 1 July 2019, or even earlier, leaving tax advisers and their clients with a significant level of uncertainty.
This article sets out the likely scenario in relation to the calling of the Federal Election, and summarises those Bills which have recently passed or are tabled in Parliament but have not yet passed. We also include a summary of important announcements that are still in the form of an announcement, consultation paper or exposure draft legislation and have not been introduced into Parliament yet have a start date of 1 July 2019 or earlier.
Note
This article does not provide an exhaustive list of all taxation, superannuation and related Acts that have recently passed, Bills tabled in Parliament or in exposure draft form, or announcements and consultation papers.
An election of half of the 72 state senators must be held by 18 May 2019. An election for the members of the HoR plus the four senators representing the two territories must be held by 2 November 2019. It is expected that the current Government will announce an election of both to be held on 18 May 2019.
Once the Federal Election is called, the Parliament is ‘prorogued’ (i.e. dissolved) and all bills tabled in Parliament will lapse. The Parliament of Australia website advises that:
[w]hen the House is dissolved … all proceedings come to an end and all bills on the Notice Paper lapse. If it is desired to proceed with a bill that has lapsed following a dissolution, a new bill must be introduced, as there is no provision for proceedings to be carried over from Parliament to Parliament.
There are, however, few opportunities for those Bills currently tabled in the HoR and the Senate to be passed ahead of the impending election. This is because:
Practically, this means that only a few Bills will be able to be passed (noting that there are many other non-tax Bills also tabled in the HoR and the Senate). Those Bills already tabled in the Senate will be more likely to pass. Those tabled in, but yet to be passed by, the HoR will only be able to be passed by the Senate if they are voted on early in the HoR’s next sitting period.
Otherwise, the next sitting of the (newly formed) Senate will be 12 August. Newly elected senators will commence their six-year terms on 1 July 2019. The current Parliamentary sitting calendar shows two sitting weeks in May (but these will be cancelled due to the election) and three sitting weeks in June (but it is expected that these will also be cancelled because it will be too close after the election for Parliament to resume). Parliament does not sit in July.
The Treasury Laws Amendment (Enterprise Tax Plan) Act 2017 (enacted on 19 May 2017) reduced the corporate tax rate from 30 per cent to 27.5 per cent from 1 July 2017 for corporate tax entities that are ‘Base Rate Entities’ (BREs). The definition of BRE was subsequently amended with effect from 1 July 2017 by the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Act 2017 (enacted on 31 August 2018).
Note
Our Banter Blog titled Certainty at last for base rate entities … or not? from 3 October 2018 explains the enacted measures which apply to companies with an aggregated turnover of less than $50 million.
A BRE is defined as a company which:
The tax rate will reduce to 26 per cent in 2020–21 and to 25 per cent from 2021–22 following recent changes by made the Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Act 2018 (enacted on 25 October 2018).
Note
Our Banter Blog titled Ten-year plan for corporate tax cuts has now been fast tracked from 31 October 2018 explains in more detail how:
(a) the tax rate for companies that are BREs will decrease from its current rate of 27.5 per cent to:
(b) the small business income tax offset (SBITO) discount rate will increase from its current rate of 8 per cent to:
A $1,000 cap still applies to the SBITO.
The Government’s intention to extend the tax cuts to all companies, contained in the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 was defeated in the Senate on 22 August 2018, and the Government will not proceed with this policy. As a result, only companies that are BREs can able to access the lower corporate tax rate.
The Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Act 2018 extended the operation of the TPRS to two further high-risk industries — cleaning and courier services — from 1 July 2018 to ensure payments made to contractors in these sectors are reported annually to the ATO.
The Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Act 2018 further extended the TPRS to entities that provide the following services from 1 July 2019:
The Government introduced changes to the small business CGT concessions in relation to capital gains on disposal of shares in companies or interests in trusts. These measures are contained in the Treasury Laws Amendment (Tax Integrity and Other Measures) Act 2018 and apply to CGT events happening on or after 8 February 2018 (not 1 July 2017 as originally announced). The measures introduce additional conditions in s. 152-10 of the ITAA 1997 which must be satisfied when a CGT event happens to a share in a company or an interest in a trust.
The Treasury Laws Amendment (Personal Income Tax Plan) Act 2018 (enacted on 21 June 2018) introduced a new low and middle income tax offset to reduce the tax payable by low and middle income earners who are Australian residents in the 2018–19 to 2021–22 income years. It also merges the low and middle income offset and the current low income tax offset into a new low income tax offset from the 2022–23 income year, and progressively increases the income tax rate thresholds in the 2018–19, 2022–23 and 2024–25 income years.
Implementing part of the Black Economy Taskforce package announced in the 2018–19 Federal Budget, the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Act 2018 (enacted on 29 November 2018) removes the tax deductibility of certain payments — including payment of wages and payments to contractors — if the entity making the payment fails to comply with its obligations to withhold and report information to the Commissioner, namely a failure to:
It will apply to payments made, or non-cash benefits provided, on or after 1 July 2019.
The Treasury Laws Amendment (Work Test Exemption) Regulations 2018 (the Regulations) were registered on 7 December 2018 and provide a three-year exemption from the ‘work test’ for eligible recent retirees to allow them to make voluntary contributions to boost their superannuation balances.
The Regulations amend the SIS Regs and the RSA Regs to ensure that an individual aged 65 to 74 years whose total superannuation balance (TSB) at the end of the previous financial year is below $300,000 can make voluntary contributions — from the 2019–20 financial year — to their superannuation for 12 months from the end of the income year in which they last met the work test.
On 17 December 2018, the Government announced as part of MYEFO 2018–19 that it would allow an individual aged 65 to 74 years who is eligible for the work test exemption to also be eligible for the ‘bring-forward rule’, enabling them to make a non-concessional contribution of as much as $300,000. (Ordinarily, the non-concessional contributions cap of an individual aged 65–74 years is $100,000 as they cannot access the ‘bring-forward rule’.)
The Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Bill 2017 supplements the ‘same business test’ with a new alternative ‘similar business test’ for the purposes of working out whether a company’s tax losses and net capital losses from previous income years can be used as a tax deduction in a later income year. The new test applies to losses made in income years commencing from 1 July 2015.
Note
At the time of writing this article, the Bill had passed the Parliament and was awaiting Royal Assent.
The new test will require loss companies to meet the following four factors:
The ATO’s Law Companion Ruling LCR 2017/D6 describes how the Commissioner will apply these amendments.
Note
The Bill also proposed to provide taxpayers with the choice to self-assess the effective life of certain intangible depreciating assets they start to hold on or after 1 July 2016. However, the Senate agreed with the Government’s suggested amendment to remove this measure from the Bill citing that the proposed application date of 1 July 2016 and the likely further delay in the passage of the bill was creating uncertainty for taxpayers which could be eliminated by the Government not proceeding with the measure.
The Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 (at the time of writing this article, the Bill had passed the Parliament and was awaiting Royal Assent) extends Single Touch Payroll (STP) reporting to all employers, regardless of the number of employees, from 1 July 2019.
Website
More information about employer’s obligations to report payroll and superannuation information to the ATO at the time of the payroll is available here:
www.ato.gov.au/stp
Details of the ATO’s webcast to be held on 5 March 2019 (it is being recorded and will be available as a download) are available here:
https://publish.viostream.com/app/s-npmrp7s
The Bill also includes the Government’s Superannuation Guarantee (SG) integrity package that will enable the Commissioner of Taxation to issue directions to employers to pay unpaid SG and undertake SG education courses.
The Bill also amends s. 307-80(3) of the ITAA 1997 to ensure that a reversionary transition to retirement income stream (TRIS) will always be allowed to automatically transfer to eligible dependants upon the death of the primary recipient.
Currently, a director penalty cannot be remitted if a company is placed into liquidation or voluntary administration where the company has an obligation to pay:
The Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 (at the time of writing this article, the Bill had passed the Parliament and was awaiting Royal Assent) removes the three-month period from both circumstances in order to prevent directors delaying placing the company in liquidation or voluntary administration by taking advantage of the three-month period before the director penalty is ‘locked down’.
This measure does not affect the operation of the three-month rule as it applies to PAYG withholding liabilities (and estimates thereof). The measures commences:
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 was passed by the Parliament on 19 February 2019 with 58 Government amendments (at the time of writing this article, the Bill was awaiting Royal Assent).
The Bill creates a single whistleblower protection regime in the Corporations Act, to cover the corporate, financial and credit sectors, and creates a new whistleblower protection regime in the taxation law to protect those who expose tax misconduct. Large companies will be required to have a whistleblower policy to support good corporate governance and culture. Among other things, the reforms broaden the whistleblower definition to include both current and former employees, officers, and contractors, as well as their spouses and dependants, and anonymous disclosures. ASIC’s Office of the Whistleblower will oversee the implementation of the reforms when they commence from 1 July 2019.
The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 was passed with 22 amendments moved by the Greens and agreed to by the Government, but not Labor (at the time of writing this article, the Bill had passed the Parliament and was awaiting Royal Assent).
The amendments remove the proposed opt-in rule for insurance within superannuation for people aged under 25 years and for people with account balances of less than $6,000. The Senate’s changes will see the opt-out rule retained for group insurance for people aged under 25 years with default superannuation, and those with account balances of less than $6,000.
The Senate’s amendments also increase the period of ‘inactivity’ to 16 months (instead of 13 months) to prevent it inadvertently capturing parents on parental leave. The definition of ‘inactivity’ has been amended so that it will not be interrupted simply because a member changes their investment options or alters their insurance cover or nominates a beneficiary. The Senate’s amendments will also require the ATO to consolidate and transfer inactive low-balance accounts into an active account of the member within 28 days.
The changes will apply from 1 July 2019.
Note
Having voted for the amendments, the Government then promptly introduced the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 on 20 February 2019 which contains all the original policy proposals.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was introduced to the HoR on 13 February 2019. The Bill proposes to expand the application of the Director Penalty Notice regime to include company liabilities for unpaid GST, LCT and WET. This change is proposed to commence on the first day of the quarter starting after the Bill receives Royal Assent.
The Bill also proposes to make amendments to ensure directors are held accountable for misconduct by preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors, to authorise the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information to the Commissioner that may affect the amount the Commissioner refunds. It also proposes to introduce new phoenixing offences to prohibit creditor-defeating dispositions of company property.
The Bill is still before the HoR and was sent to the Senate Economics Legislation Committee for report by 26 March 2019.
The Government announced on 29 January 2019 that it would extend by 12 months to 30 June 2020 the period during which small business entities (within the meaning of s. 328-110 of the ITAA 1997) can access expanded accelerated depreciation rules (instant asset write-off). This is now the third extension to the write-off period, following earlier extensions from the initial end date of 30 June 2017 to 30 June 2018, then to 30 June 2019.
The Government also announced that it would increase the threshold to $25,000 (from its current threshold of $20,000) below which amounts can be immediately deducted under these rules. The change to the threshold applies to assets first used or installed ready for use on or after 29 January 2019 but before 1 July 2020.
The Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019 was introduced into the HoR on 13 February 2019. Amendments have been proposed by the Greens to further increase this amount to $50,000 where the assets relate to ‘energy efficiency or clean energy’.
The Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 was introduced into Parliament on 20 September 2018 and remains before the HoR, even though the measures are proposed to commence on 1 July 2018.
Amongst other things, the Bill proposes to implement the reforms to the research and development (R&D) tax incentive announced by the Government as part of the 2018–19 Federal Budget in response to the 2016 review of the tax treatment of R&D.
The proposed changes to the main residence exemption (MRE) contained in the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2018 were announced on 9 May 2017; the Bill was introduced into Parliament on 8 February 2018. It appears to be well and truly stalled and this is creating significant ongoing uncertainty for affected taxpayers.
The Bill proposes to remove access to the MRE for individuals who are foreign residents at the time that the CGT event happens.
The amendments to the MRE are proposed to apply to CGT events that happen on or after 7.30 pm (AEST) on 9 May 2017. However, under a proposed two-year transitional rule, the amendments would not apply in relation to a capital gain or loss from a CGT event that happens on or before 30 June 2019, if the individual held an ownership interest in the dwelling to which the CGT event relates at all times from immediately before 7.30 pm (AEST) on 9 May 2017 until immediately before the CGT event happens.
The measures propose to effectively remove the MRE retrospectively for Australian expatriates, as if they had never lived in a property which may have been their home for decades before they moved to live and work overseas. Our Banter Blog Draconian and retrospective CGT main residence exemption amendments hit Parliament from 28 March 2018 explains the impact of the amendments on Australian expatriates and deceased estates. There are also concerns regarding the interaction of the proposed changes with the marriage breakdown CGT roll-over where a taxpayer’s former spouse or partner is a non-resident at the time that the CGT event happens to the taxpayer, when they sell the former family home, perhaps many years after the family law settlement was reached.
While a (more than) two-year transitional rule was intended to be available for individuals who owned the property at the time of the announcement in 2017, the end of this proposed transitional period — 30 June 2019 — is rapidly approaching. The Bill has been before the Senate since 19 March 2018; its failure to be passed and the limited sitting days between now and the election — combined with a softer property market around the country and tighter lending conditions for borrowers in the wake of the release of the Final Report of the Banking Royal Commission — makes it nearly impossible for a property to be listed for sale in a buyer’s market and a contract entered into within the next four months. This has created significant uncertainty for taxpayers who are living and working abroad as non-residents.
Labor and some of the independent cross-benchers in the Senate have publicly expressed their concerns about the retrospective nature of the proposed amendments, but it is still unclear whether the Government will be able to secure passage of the Bill on 2 or 3 April. If the Senate does not pass the Bill in April, it will lapse with the calling of the Federal election, leaving thousands of taxpayers uncertain about the tax treatment of gains made on the sale of these properties. It is imperative that the Government state their intentions regarding these measures and provide guidance about the status of the proposed amendments and soon-to-end transitional rule. Presumably, the ATO will also need to provide taxpayers with guidance as the prolonged uncertainty will impact on the preparation of 2018 and 2019 tax returns.
The Treasury Laws Amendment (2019 Measures No. 1) Bill 2019, among other things, proposes to amend relevant Acts to increase with effect from 1 July 2019 the maximum number of allowable members in a self managed superannuation fund (SMSF) from four to six. It also makes amendments to the sign-off requirements in the SIS Act about the accounts and statements that the trustees of an SMSF must ensure are prepared for each income year.
The Bill remains before the HoR and was sent to the Senate Economics Legislation Committee for report by 26 March 2019.
The proposed Superannuation Guarantee (SG) Amnesty is contained in Schedule 1 to the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018 which has been before the Senate since 25 June 2018.
The Amnesty period is proposed to run from 24 May 2018 to 23 May 2019 being the dates between which the disclosures and payments must be made in order to receive the benefits of the Amnesty. The Amnesty applies to SG shortfalls arising for quarters starting as far back as 1 July 1992 and ending no later than 31 March 2018.
The benefits for qualifying amounts include:
However, unless it is legislated, employers will not be able to claim an income tax deduction and the administrative component would still apply. The reduction of penalties is at the discretion of the Commissioner.
Employers with SG shortfalls who:
Note
Our Banter Blogs titled The New Superannuation Guarantee Amnesty from 13 June 2018 and SG Amnesty — Q&A from 14 August 2018 explain the proposed measures.
Our Banter Blog The SG Amnesty: What should employers do? from 14 September 2018 looks at the considerations facing employers who are contemplating or hesitating coming forward.
It is hoped that the Senate will pass the Bill on 2 or 3 April, although this would leave only around 50 days before the Amnesty is proposed to end. If the Bill does not pass the Senate on 2 or 3 April, the Bill will lapse with the calling of the Federal Election, and it is unknown what the Government’s position will be should they be returned to office. Labor does not support the Amnesty. In the meantime, the ATO must continue to administer and apply the current law; this means that no deduction is available for payments made during the Amnesty period unless it becomes law.
Contained in the same Bill as the SG Amnesty is a proposal to amend the SGA Act to allow individuals to ‘opt-out’ of the SG regime to avoid unintentionally breaching their concessional contributions cap when they receive superannuation contributions from multiple employers. Instead, employees can apply to the ATO for a ‘employer shortfall exemption certificate’ which will relieve the employer that is the subject of the certificate from any SGC liability if they don’t make SG contributions on behalf of the individual, who can then negotiate with their employer to receive additional cash or non-cash remuneration.
The amendments are proposed to apply in relation to SG quarters starting on or after 1 July 2018.
Applications for the certificates must be made with the ATO at least 60 days before the start of the relevant quarter. Given that this deadline has now passed for all quarters of the 2018–19 income year, either the start date of the measure will need to be delayed if it becomes law or the ATO will need to advise its administrative approach.
This same Bill also proposes to introduce an integrity measure requiring outstanding balances of limited recourse borrowing arrangements (LRBAs) entered into from 1 July 2018 to be included in a member’s total superannuation balance from 1 July 2017.
The Commonwealth Registers Bill 2019 and the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 propose to create a modern business registry regime and introduce a director identification number (DIN) requirement to assist in deterring and penalising phoenix activity in order to protect those who are negatively affected by such fraudulent behaviour.
Both Bills are still before the HoR and have been sent to the Senate Economics Legislation Committee for report by 26 March 2019.
| Measure | More information |
| Proposed $10,000 economy-wide cash payment limit — from 1 January 2020 | On 25 May 2018, the Government released a consultation paper which proposes to introduce a cash payment limit that removes the ability of any individual or business to make a single transaction in cash in excess of $10,000 to businesses for goods and services.
Transactions in excess of this amount would need to be made through the electronic payment system or by cheque. |
| 3-year audit cycle for SMSFs — from 1 July 2019 | On 6 July 2018, the Government released a consultation paper on the proposed implementation of a measure announced in the 2018–19 Federal Budget to change the annual audit requirement to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance. |
| ABN reforms | On 20 July 2018, the Government released a consultation paper which considers ways to strengthen and modernise the Australian Business Number (ABN) system.
Action to reform the ABN system responds to findings of the Black Economy Taskforce that participants in the black economy are using the ABN system to facilitate their fraudulent activity. This will also provide an opportunity to consider improvements to the ABN system which will better support ABN data for end users and underpin the growing use of ABNs across a wide range of purposes. |
| Circular trust distributions — from 1 July 2019 | On 12 October 2018, the Government released exposure draft legislation and explanatory material containing the proposed measures which will extend a specific anti-avoidance rule for closely held trusts engaging in circular trust distributions to family trusts. |
| Vacant land — from 1 July 2019 | On 15 October 2018, the Government released exposure draft legislation and explanatory material containing the proposed measures which will deny certain deductions for expenses associated with holding vacant land. Certain exemptions will apply. |
| Everett assignments and small business CGT concessions — from 8 May 2018 | On 15 October 2018, the Government released exposure draft legislation and explanatory material containing the proposed measures which will ensure partners who alienate their income by creating, assigning or otherwise dealing in rights to the future income of a partnership will no longer be able to access the small business CGT concessions in relation to these rights. |
| Division 7A — from 1 July 2019 | On 22 October 2018, the Government released a consultation paper on the proposed implementation of the amendments to Div 7A of Part III of the ITAA 1936. The measures arose from a Board of Taxation review that was commissioned by the then Labor Government in 2012 and completed in November 2014.
The Government announced the proposed changes in the 2016–17 Federal Budget and advised that they would commence on 1 July 2018, but in the 2018–19 Federal Budget the Government announced that they would instead commence on 1 July 2019. |
| Income for image or fame — from 1 July 2019 | On 13 December 2018, the Government released a consultation paper on its proposed 2018–19 Federal Budget measure to ensure that all remuneration (including payments and non-cash benefits) provided for the commercial exploitation of a person’s fame or image is included in the assessable income of that individual from 1 July 2019. |
| Reporting tax debts ≥ $100,000 overdue > 90 days | As part of the MYEFO 2016–17 released on 19 December 2016, the Government announced that it would improve the transparency of taxation debts by allowing the Commissioner of Taxation to disclose business tax debt information to credit reporting bureaus where the business:
The Government announced in the MYEFO 2018–19 that it will amend the proposed measure by increasing the threshold of business tax debts that can be disclosed to credit reporting bureaus from $10,000 to $100,000. |
| Board of Tax review — Residency rules | The Board of Taxation is currently reviewing the income tax residency rules to determine how they could be reformed and modernised, including a possible ‘bright-line’ test to determine tax residency supported by a secondary test. The Board’s earlier report sets out the background and initial proposals. |
| Board of Tax review — Small business tax concessions | The Board’s review of the small business concessions involves assessing the effectiveness of existing concessions and, where appropriate, recommending new concessionary approaches to the Government. |
| Board of Tax review — Tax and the sharing economy | The Board of Taxation conducted a self-initiated review to consider issues surrounding tax related to the sharing economy.
This report makes recommendations to the Government on modifications that can be made to simplify and improve tax compliance within the sharing economy. On 23 January 2019, the Government released a consultation paper on how to implement the Black Economy Taskforce recommendation for a sharing economy reporting regime. |
| Proposed Board of Tax review — ‘Granny flats’ | On 29 November 2018, the Government announced that it has requested the Board of Taxation to undertake a review of the tax treatment of ‘granny flat’ arrangements and recommend any potential changes.
This review is in response to the 2017 Australian Law Reform Commission’s Report: Elder Abuse – a National Legal Response, which identified the development of formal and legally enforceable family agreements as a measure to prevent elder abuse. |
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