thriveadmin, Author at TaxBanter Pty Ltd.

Tax Yak – Episode 24: Managing tax risk

Posted on July 12, 2019November 2, 2022 by thriveadmin

Today’s business environment is complex and managing your tax risk is a core part of responsibly managing your business. Managing task risk involves far more than dealing with ATO audits. Regardless of the size of your business, tax risk impacts on every aspect of a business either directly or indirectly, it permeates all phases of a business’s decision making process and can affect its commercial success.

In this episode of Tax Yak, Robyn yaks with ATO Assistant Commissioner – Private Wealth, Anna Longley, about the key areas that attract the ATO’s attention and how businesses and individuals can minimise their tax risk.

Host: Robyn Jacobson

Guest: Anna Longley, ATO Assistant Commissioner – Private Wealth
Link: New Information System Risk Assessment tool (ISRA)

Recorded: 11 July 2019

The new personal tax cuts

Posted on July 9, 2019 by thriveadmin

The legislative journey of the personal tax cuts

The Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Act 2019 (the 2019 Act) passed the Senate without amendment on 4 July 2019 and received Royal Assent as Act No. 52 of 2019 on 5 July 2019. The 2019 Act gives effect to the further three-stage personal tax cuts announced in the 2019–20 Federal Budget.

The previously legislated tax cuts

The changes introduced by the 2019 Act, which take effect from 2018–19, build upon and modify the Government’s previously legislated Personal Income Tax Plan (‘the original Plan’). The Plan was codified in the Treasury Laws Amendment (Personal Income Tax Plan) Act 2018, which received Royal Assent on 21 June 2018 as Act No. 47 of 2018 (the 2018 Act).

The 2018 Act:

progressively increases the personal income tax rate thresholds in the 2018–19, 2022–23 and 2024–25 income years;
introduced a new low and middle income tax offset (LMITO) for the 2018–19 to the 2021–22 income years (four years only); and
merges the new LMITO and the existing low income tax offset (LITO) into a new LITO from the 2022–23 income year.

More tax relief promised pre-election

On 2 April 2019, the Government announced further tax relief for individuals from the 2018–19 income year as part of the 2019–20 Federal Budget (‘the proposed Plan’). Broadly (details are set out below), this will be delivered in three stages:

provide immediate further relief to low- and middle-income earners for the 2018–19 to the 2021–22 income years by increasing the maximum amount of the new LMITO from $530 to $1,080;
from 1 July 2022 — raising the upper income threshold of the 19 per cent tax bracket from $41,000 to $45,000, and increasing the new LITO from $645 to $700; and
from 1 July 2024 — reducing the 32.5 per cent marginal tax rate for those with taxable incomes between $45,001 to $200,000 to 30 per cent.

In the lead-up to the Federal Election held on 18 May 2019, the proposed Plan became a key feature of the Government’s re-election campaign. Rather than seek to enact the further tax cuts before the election, the Government intended to take the proposed Plan to the election. Due to the timing of the election, the Government was unable to introduce the promised legislation into Parliament in time for it to be passed by 30 June 2019. This was because the 46th Parliament did not commence until 2 July 2019 — i.e. after the last day of the 2018–19 income year during which the increase in the LMITO was intended to take effect.

Passage of the Bill through Parliament

Labor initially opposed stages 2 and 3 of the original Plan and vowed if elected to government to unwind the already enacted tax cuts scheduled to take effect from 1 July 2022 and 1 July 2024. However, following the election, the Opposition subsequently reversed its position and indicated that it supported stages 2 and 3 of the original Plan. Labor further indicated that it also supported stages 1 and 2 of the proposed Plan.

Just prior to the resumption of Parliament, while the Government now had bipartisan support for the first two stages of the proposed Plan — which provides targeted relief to low and middle income taxpayers — Labor remained opposed to the third stage, which provides a tax cut for those on higher incomes up to $200,000.

In particular, the Opposition was conditionally willing to support the package if the Government:

separated out the third stage (i.e. reducing the 32.5 per cent tax rate to 30 per cent) for debate at a later time; and
brought forward the increase in the 32.5 per cent rate threshold from $90,000 to $120,000 from 1 July 2022 to 1 July 2019.

However, the Government was unwilling to split up or modify its package which it had taken to the voters.

On 2 July 2019, when Parliament resumed, the Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 was promptly introduced into, and passed by, the House of Representatives, without the support of the Opposition. During debate, the Leader of the Opposition, Anthony Albanese, moved to amend the title of the Bill to the Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money But Not For A Really Long Time) Bill 2019. The motion was rejected by the Government.

To pass the Bill in the Senate, the Government — which holds 35 of the 76 Senate seats — required the support of either the Opposition, or at least four of the six crossbench senators.

By the evening of Thursday 4 July 2019, the Opposition ultimately supported the Bill in its entirety, after its proposed amendments failed, as did Centre Alliance (Senators Stirling Griff and Rex Patrick) and Senator Jacqui Lambie (Jacqui Lambie Network). The Bill was passed with 56 votes to 9, with the Australian Greens senators casting the opposing votes. The two One Nation senators (Pauline Hanson and Malcolm Roberts) abstained from voting and Cory Bernardi (Independent) was absent.

On Friday 5 July 2019, the Bill received Royal Assent as Act No. 52 of 2019.

The new personal tax regime from 2018–19

Below are two tables setting out the previously legislated and the newly enacted rates, thresholds and LMITO/LITO from the 2018–19 income year. The 2017–18 information has been included for comparison.

Note
These tables only apply to Australian tax residents. Non-resident taxpayers and working holiday makers also receive consequential tax relief.

The 2018 amendments (enacted 21 June 2018)

The 2019 amendments (enacted 5 July 2019)

How much tax relief will taxpayers receive?

The following tables compare the income tax consequences of the latest changes for five taxpayers on different taxable incomes in each of the 2018–19, 2022–23 and 2024–25 income years (i.e. the first year in which each of the three stages of the 2019 Act take effect).

The ‘Benefit’ column illustrates the amount by which each taxpayer is better off under the newly enacted law as compared to the previous law before the 2018 amendments were enacted.

The analysis does not take into account the Medicare levy, the various higher education loan repayment schemes or other personal tax offsets.

Comparison tables

Note
The tax benefit of $1,080 provided to the taxpayer earning $50,000 in this case represents the full LMITO.

Note

For the taxpayer earning $50,000
The tax benefit of $1,080 provided to the taxpayer earning $50,000 in this case represents the tax cut resulting from the increase in the upper income threshold of the 19 per cent tax bracket from $37,000 prior to the 2018 amendments to $41,000 from 1 July 2022, and to $45,000 from 1 July 2024. That is, from 1 July 2024, $8,000 of their taxable income will be taxed at the rate of 19 per cent rather than 32.5 per cent, a saving of $1,080. This has nothing to do with the increase in the LMITO to a maximum of $1,080 for the 2018–19 to the 2021–22 income years.

For the taxpayer earning $30,000
From 1 July 2022, following the removal of the LMITO, the amount of the LMITO (i.e. $255) is added to the taxpayer’s LITO causing it to increase from $445 to $700.

Immediate relief for 2019 — the LMITO

The immediate tax relief delivered by the 2019 Act comes in the form of a more generous LMITO. There are no changes to the 2018–19 tax rates or thresholds beyond the lifting of the upper 37 per cent income threshold from $87,000 to $90,000 resulting from the 2018 Act.

The following table sets out the LMITO that taxpayers in different income bands may expect upon lodgment of their 2019 tax return.

Calculation of LMITO ($)

Myth-busting the LMITO

Readers should note the following points about the increase in the LMITO:

Politicians and the media have been describing the effect of the package for low- and middle-income earners as a ‘$1,080 tax cut’. It should more accurately be described as a reduction of income tax payable effected by the increase in the LMITO. It is not a cash bonus, and taxpayers will not be receiving a payment from the ATO for $1,080.
Taxpayers with taxable incomes not exceeding $37,000 will receive an offset of $255. The maximum offset of $1,080 is available only to taxpayers on taxable incomes more than $48,000 and no more than $90,000. Up to $48,000 of taxable income, the offset is reduced by 7.5 cents for each dollar up to $48,000, capped at a minimum of $255. Above $90,000 of taxable income, the offset is reduced by 3 cents for each dollar above $90,000, resulting in no offset above $126,000.
The 2018 amendments had already brought in a maximum offset of $530, so the passage of the 2019 Act results in an extra $550 of immediate tax relief at most, not an extra $1,080. However, as some individuals have only just begun lodging their 2019 tax returns, the delivery of the existing maximum $530 offset on assessment was not visible to taxpayers.
The LMITO will be available for only four income years — from 1 July 2018 to 30 June 2022. From 1 July 2022, following the removal of the LMITO, the entry amount of the LMITO (i.e. $255) will be added to the LITO causing it to increase from its current maximum amount of $445 to a maximum of $700.
The (increase in the) LMITO is delivered to taxpayers on assessment of their tax return. The offset amount is not factored into the PAYG withholding tables.
Section 63-10 of the ITAA 1997 sets out the priority rules for applying tax offsets. The LITO and the LMITO are both non-refundable tax offsets, i.e. they are only available to the extent of income tax payable (excluding any liability for Medicare levy) and any excess is not refundable.The order of applying the offsets is broadly as follows:
- Seniors and pensioners tax offset (SAPTO);
- …
- Low income tax offset (LITO);
- Low and middle Income tax offset (LMITO);
- Foreign income tax offset;
- Child care tax offset;
- …
- Other refundable tax offsets.
The LMITO is available only to individuals who are resident taxpayers. The amount of the LMITO does not need to be pro rated for that part of an income year that the taxpayer was not a resident. The LMITO is available only to individuals who are resident taxpayers. The amount of the LMITO does not need to be pro rated for that part of an income year that the taxpayer was not a resident.
In the case of a person who dies during an income year, the LMITO does not need to be pro rated for that part of an income year following the date of death.

How will the ATO administer 2019 tax returns?

In April 2019, the ATO confirmed that — as expected — it could not issue assessments based on the new tax rates until the law is enacted. On 5 July 2019, once the 2019 Act became law, the ATO issued a statement to clarify how it intends to administer the new LMITO.

The ATO is implementing the necessary system changes so taxpayers who have already lodged their 2019 tax return will receive any increased entitlement to the offset. Any tax refund will be deposited in the taxpayer’s nominated bank account.

For tax returns already lodged, the ATO expects to begin issuing refunds towards the end of the second week of July, which is in line with the normal processing of refunds for this time of year.

Taxpayers who are yet to lodge their tax return will have any entitlement to the offset taken into account during the normal processing of their return.

Critical Point
Taxpayers (or their tax agents) who already lodged their tax returns before the law was enacted do not need to request an amendment to their assessment.

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STP myth-busting

Posted on June 19, 2019 by thriveadmin

Starting to report through STP

We are now at the pointy end of implementing STP reporting which has applied to substantial employers (20 or more employees as at 1 April 2018) since 1 July 2018 but has been expanded to include small employers (19 or fewer employees) from 1 July 2019. This is the most significant change to reporting systems for businesses since the introduction of the GST on 1 July 2000.

Under STP, an employer reports information on their employees’ salaries and wages, PAYG withholding and superannuation to the ATO in line with their payroll cycle.

Amending legislation — contained in the Treasury Laws Amendment (2004 Measures No. 4) Act 2019, which was enacted on 1 March 2019 — extends the requirement to report employees’ payroll and superannuation information through STP to the ATO at the time of the payroll to all employers from 1 July 2019.

Current STP data
As of 17 June 2019, there were 137,000 employers reporting through STP, comprising 55,000 substantial employers and 82,000 small employers, and covering 7.5 million employees.

	There is no, and will be no, ability to lodge any STP reports through the agent or business portal, or via activity statements. STP reports can only be lodged via an STP-enabled software solution. The ATO will not be providing a software solution.
	This does not mean that the employer or registered agent must acquire expensive cloud-based STP-enabled payroll software but they will need to lodge through an STP-enabled solution. Alternative, low-cost and no-cost reporting solutions are available here: www.ato.gov.au/stpsolutions
	There is no need to conduct a headcount on 1 April this year because, from 1 July 2019, all employees will be subject to STP reporting.

No blanket exemptions

There are no carve-outs or blanket exemptions as such for groups of employers or types of industries. All employers, including not-for-profit entities, will be required to do payday reporting through STP from 1 July 2019 (subject to any deferrals in place until 30 September 2019 or beyond). The ATO has designed special reporting arrangements for micro employers, employers with closely held payees and employers with seasonal or intermittent employees (see below).

While there are no general exemptions, the ATO has registered a number of legislative instruments which exempt the following from STP reporting:

employers with a Withholding Payer Number — for 2018–19 and 2019–20 only;
insolvency practitioners and employers subject to their appointment — for 2018–19 only; and
payments made to members by Portable Long Service Leave and Portable Redundancy Scheme Providers — for 2018–19 and 2019–20 only.

Key terminology

Term

Explanation

Employer-level data

This part of the STP report contains for all employees for the pay period:

gross salaries and wages; and
total PAYG withholding.

Employee-level data

This part of the STP report contains for each employee:

Year-to-date (YTD) gross salary or wage;
YTD PAYG withholding; and
YTD liability for superannuation guarantee.

During the year, the status of the employees’ information in ATO Online (accessed through myGov) shows as Year to Date.

Employment income statement

This is the ATO equivalent of an employer-issued payment summary containing the annual STP data reported by employers. It is:

made available by the ATO in ATO Online (accessed through myGov);
pre-filled in tax agents’ software;
available from the ATO.

Employment income statements will not be available from employers.

Exemptions and deferrals

An exemption relieves an employer from reporting through STP for a whole income year. Exemptions are granted by the ATO on a case-by-case basis.

An employer who is not yet ready to report may apply for a deferral seeking to delay reporting through STP. Deferrals apply for only part of an income year and are granted by the ATO on a case-by-case basis.

Businesses can apply for their own deferral or exemption by logging in to the Business Portal and selecting Manage employees ⇒ STP deferrals and exemptions.

Registered agents can apply for a deferral or exemption for a client through:

the Tax Agent or BAS Agent Portal — select Client’s employer obligations ⇒ STP deferrals or exemptions
Online services for agents — select Business ⇒ STP deferrals and exemptions.

Finalisation declaration

The process by which employers ‘lock-down’ the information provided to the ATO during the year and declare that the information reported is correct.

The Finalisation declaration must be done no later than 14 July (by 31 July for the employer’s first year of STP reporting) and is indicated on a per employee basis as part of each employee’s STP report.

On 30 June each year, the status of the employees’ information in myGov changes from YTD to Not tax ready. Once the ATO receives the Finalisation declaration from the employer, the status of the employees’ information in ATO Online (accessed through myGov) changes from Not tax ready to Tax ready.

An employee is not prevented from lodging their tax return using unfinalised data.

What happens if an employee uses unfinalised data to lodge their tax return?
If an employee uses data that is Not tax ready to lodge their tax return, they should be aware that once the employer submits the Finalisation declaration, the income statement may have different amounts and they may need to amend the tax return. An amendment can result in a tax bill that could also have Shortfall Interest Charge applied.

Where an employee lodges using ’Tax ready’ data that is subsequently amended by the employer, an amendment will still be required to correct the return, however generally any Shortfall Interest Charge will be remitted.

myGov

Your myGov account lets you select and link to government online services from the one place.

Once an employer starts reporting through STP, their employees’ payroll and superannuation information is available in ATO Online which is accessed through myGov.

You don’t have to set up a MyGov account, but you will have better access to data if you do.

Pay event

This is an electronic file generated by the STP-enabled software which captures the salary or wage, PAYG withholding and liability for SG amounts at the time of the payroll.

A pay event always involves the payment of an amount to the employee that is subject to PAYG withholding. This could be in line with the periodic payroll cycle, e.g. every week, fortnight or month, or it could involve an out-of-cycle payment such as a bonus or a termination.

Each pay event provides the ATO with both employer-level data and employee-level data (see above) as part of the STP report.

SSID

There are 3 ways your software can connect to the ATO:

Connect to the ATO using a software service ID (SSID) which is usually displayed by your software during the STP setup. You will need to provide the ATO with your SSID (call the ATO on 1300 852 232 or complete a
one-off notification through Access Manager). The ATO will not be able to receive your STP report without the correct SSID.
Connect to the ATO through a sending service provider (SSP).
Connect directly to the ATO using a device AUSkey.

Note
AUSkey will be decommissioned in March 2020 and replaced with myGovID which is the Government’s new digital identifier when using government online services. Don’t be confused by the name; it has nothing to do with myGov!

STP engagement authority

A written agreement which evidences a registered agent’s authorisation to prepare STP reports on behalf of an employer. It will allow the registered agent to make the relevant declaration to the Commissioner at the time of lodging each STP report.

The STP engagement authority is subject to eligibility criteria and does not apply to other approved forms or the Finalisation declaration.

An authority must be reviewed and signed by an employer and their registered agent every 12 months or any time there has been a significant change in the industrial relations, taxation or payroll process.

There is no template available but guidelines on what to include in the authority are available here.

STP solution

Refers to an online software solution which reports STP data to the ATO. It may be a full-featured cloud-based payroll solution or a low-cost or no-cost solution (available only to micro employers and their registered agents) which may be app-based or web-based.

Update event

This is an electronic file generated by the STP-enabled software which provides payroll information to the ATO but is not associated with a payment to the employee.

This may be used to update YTD amounts to correct information previously incorrectly reported to the ATO, or to provide year-end information such as reportable fringe benefit amounts and reportable employer superannuation contributions.

Transitioning to STP

You don’t need to wait until 1 July 2019 to start reporting through STP – you can start at any time.

Many small employers will have a deferred start date, i.e. other than 1 July 2019. This may be because their software is not ready, or for other circumstances beyond their control.

The employer’s digital service provider (DSP) will be able to let them know which method (listed below) the employer should or can use when they start reporting through STP.

Available methods to start reporting through STP

Provide an opening YTD balance for all employees (active, inactive and terminated) in an update event.
Report YTD balances for all employees (active, inactive and terminated) in the first pay event.
Report YTD amounts for current employees through a pay event and YTD amounts for inactive and terminated employees in a later update event which must be lodged by 14 July or the deferred due date.
Report the current YTD balances for the current employees in the first pay event. Provide payment summaries to terminated and inactive employees and lodge a PAYG payment summary annual report to cover the payments made before the first pay event.
Start STP reporting with zero YTD balances and provide payment summaries to all employees (current, inactive and terminated). Lodge a PAYG payment summary annual report for payments made before the first pay event.

Simple example
The Employer starts reporting through STP on 1 May 2019. Their broad options for reporting the payroll information are as follows: they can issue part-year payment summaries for the period 1 July 2018 to 30 April 2019, which will need to be issued by 14 July 2019, and a PAYG payment summary annual report will need to be lodged by 14 August 2019. The employees’ YTD opening balances in the first STP report in May 2019 are zero, and the STP reports only contain information for the period 1 May 2019 to 30 June 2019. The Finalisation declaration, also covering only the period 1 May 2019 to 30 June 2019, needs to be made by 31 July 2019 (first year only; thereafter by 14 July); or they can start reporting through STP on 1 May 2019 and the employees’ YTD opening balances can include all the payments back to 1 July 2018. The first STP report contains information for the period 1 July 2018 to the first pay run in May 2019. The Finalisation declaration covers the full year, from 1 July 2018 to 30 June 2019, and needs to be made by 31 July 2019 (first year only; thereafter by 14 July). No payment summaries are required, nor do they have to lodge a PAYG payment summary annual report.

Simple example

The Employer starts reporting through STP on 1 May 2019.

Their broad options for reporting the payroll information are as follows:

they can issue part-year payment summaries for the period 1 July 2018 to 30 April 2019, which will need to be issued by 14 July 2019, and a PAYG payment summary annual report will need to be lodged by 14 August 2019. The employees’ YTD opening balances in the first STP report in May 2019 are zero, and the STP reports only contain information for the period 1 May 2019 to 30 June 2019. The Finalisation declaration, also covering only the period 1 May 2019 to 30 June 2019, needs to be made by 31 July 2019 (first year only; thereafter by 14 July); or

they can start reporting through STP on 1 May 2019 and the employees’ YTD opening balances can include all the payments back to 1 July 2018. The first STP report contains information for the period 1 July 2018 to the first pay run in May 2019. The Finalisation declaration covers the full year, from 1 July 2018 to 30 June 2019, and needs to be made by 31 July 2019 (first year only; thereafter by 14 July). No payment summaries are required, nor do they have to lodge a PAYG payment summary annual report.

Payment summaries

Payment summaries will still be required to be provided to employees by 14 July where:

the employer is not reporting through STP for the full income year (i.e. the year in which they start STP reporting) and they choose not to report opening YTD data in the first STP report; or
the employee receives reportable fringe benefits or reportable employer superannuation contributions and the employer chooses not to report these amounts through STP.

Small employers

You don’t need to apply for a deferral as long as you can start STP reporting by 30 September 2019.

If you are not ready to start STP reporting by 30 September 2019, you will need to apply for a deferral. This can be done through the Tax Agent or BAS Agent Portal, or ATO Online services, or by the business through the Business Portal.

Micro employers (1-4 employees)

Low-cost and no-cost STP solutions

Micro employers who don’t need or want payroll or accounting software can choose a simple low-cost (no more than $10 per month per business) or no-cost STP solution. The ATO has published a list of the certified providers, and some basic product information, at www.ato.gov.au/STPsolutions.

Some of these solutions are also available to registered agents.

The micro employer’s registered tax or BAS agent will need to apply for this two-year quarterly reporting concession.

Quarterly reporting for micro employers is:

available only through the employer’s registered agent, and the agent must lodge the quarterly STP report;
available only for two years — from 1 July 2021, the micro employer will be expected to transition to payday reporting; and
subject to conditions (see below).

The registered agent will need to lodge the quarterly STP report by the due date of lodgment of the BAS, and also complete W1 and W2 on the BAS.

The registered agent cannot lodge a client’s quarterly STP reports via the Tax Agent or BAS Agent Portal or via the activity statement. The registered agent will need their own STP solution.

Conditions for micro employers to report quarterly through their registered agent

To be eligible for quarterly reporting through a registered agent, the micro employer must satisfy the following conditions:

Conditions for quarterly reporting for micro employers through registered agent
Four or fewer employees	The employer will need to determine if they are a micro employer. They will need to have four or fewer employees at the time they apply for this quarterly reporting concession, based on the actual number of employees and not full-time equivalent. Closely held payees do not need to be included in this count. For example, if the employer has four employees and also pay two directors, the employer is still considered to be a micro employer (i.e. for this purpose, they have four employees not six) and would be eligible for this two-year quarterly reporting concession. They will not become ineligible for the concession if the number of employees increases to 5 or more, but the software solution may have its own limitations (i.e. not permit more than 4 employee records).
Non-computerised	There is no specific ATO guidance on this, but this two-year quarterly reporting concession is typically available to employers who: are heavily reliant on their registered tax or BAS agent; and have limited digitally capability. This reporting concession is intended to support micro employers who need assistance and time to take graduated steps towards payday reporting and not those who simply want to delay.
Good compliance history	The employer must meet both of the following: all amounts owing to the ATO are either not yet due or are subject to a payment plan; all lodgment obligations are either not yet due or are subject to a deferral.

Employers with closely held payees

Employers with 20 or more employees with closely held payees

If the employer has 20 or more employees, they should be doing payday reporting for their closely held payees along with their arm’s length employees.

However, the employer has until 30 September each year to finalise their closely held payees’ information (instead of 14 July).

Exemption until 30 June 2020 for small employers with closely held payees

If the employer has 19 or fewer employees, they do not need to start reporting closely held payees through STP until 1 July 2020. However, all arm’s length employees must be reported as normal through STP from 1 July 2019 unless a deferral or exemption has been granted (this includes the deferred deadline for small employers of 30 September 2019).

You don’t need to apply for the exemption from reporting closely held payees until 30 June 2020. In the meantime, the current processes (including payment summaries) apply.

Ongoing quarterly reporting concession for small employers with closely held payees

Beyond 1 July 2020, the employer with 19 or fewer employees will need to do payday reporting unless they report quarterly using an STP solution for their closely held payees (conditions apply). Each closely held payee covered by this concession will need to be notified to the ATO (the online form will be available soon from the ATO).

The closely held quarterly reporting concession applies only to closely held payees. There is no application process (unlike the quarterly reporting for micro employers); however the employers will need to notify the ATO of their closely held payees via the online form.

Under the closely held quarterly reporting concession, the employer:

will be able to lodge an STP report on an ongoing quarterly basis;
or their registered agent will need to lodge the quarterly STP report by the due date of lodgment of the BAS, and also complete W1 and W2 on the BAS;
will complete the quarterly STP report by making a ‘reasonable estimate’ from which PAYG is withheld. A reasonable estimate can be calculated using one of the following methods:
- actual withdrawals taken by the closely held payee during the quarter (excluding payments of dividends and repayments of credit loans owed to the closely held payee);
- calculating 25 per cent of the remuneration from the previous income year;
- varying the previous year’s amount (to take into account trading conditions) within 15 per cent of the remuneration for the current income year;
will have until the due date of their income tax return to finalise their closely held payees’ information (instead of 14 July).

Conditions for closely held reporting concession

To be eligible for ongoing quarterly reporting for closely held payees, the employer must satisfy the following conditions:

Conditions for closely held reporting concession
Eligibility conditions	The employer must: have 19 or fewer employees; and be registered for PAYG withholding.
Ineligibility conditions	This concession does not apply to: large withholders with an annual withholding of more than $1 million; those who have not demonstrated good compliance behaviour (see below); those who do not make a genuine attempt to lodge under STP.
Good compliance history	Must meet both of the following: all amounts owing to the ATO are either not yet due or are subject to a payment plan; all lodgment obligations are either not yet due or are subject to a deferral.

Query — SG obligation
We have concerns that the making of a reasonable estimate under the closely held concession could constitute ‘ordinary times earnings’ for the purposes of the Superannuation Guarantee (SG) Charge. This could be problematic where an obligation to pay SG contributions to a superannuation fund arises from the making of an estimate which may change by the time the information is finalised after the end of the income year (and after the date by which the SG contribution was made).

We have raised this issue with the ATO and it is currently with the ATO’s legal team. It is hoped that the ATO will determine that the making of an estimate under this concession does not constitute ‘ordinary times earnings’ for SG purposes.

Employers with seasonal or intermittent employees

Some businesses have irregular employment patterns, such as those who employ seasonal or intermittent employees including shearers and fruit-pickers.

The ATO will provide further details soon, but broadly the ATO will make special reporting arrangements available to these employers who may find it difficult to do payday reporting. Under these arrangements, these employers will be able to lodge an STP report on an ongoing quarterly basis.

The seasonal or intermittent employer or their registered tax or BAS agent will need to apply for this quarterly reporting concession. The ATO will provide details soon on how to apply for this concession.

The employer or their registered agent will need to lodge the STP report through an STP-enabled solution.

Conditions for seasonal or intermittent reporting concession

To be eligible for ongoing quarterly reporting for seasonal or intermittent employees, the employer must satisfy the following conditions:

Conditions for seasonal or intermittent reporting concession
Number of employees	The employer or their registered agent must apply for this concession however if the employer has: 19 or fewer employees — they will automatically be accepted; 20 or more employees — the ATO will consider this on a case-by-case basis.
Good compliance history	Must meet both of the following: all amounts owing to the ATO are either not yet due or are subject to a payment plan; all lodgment obligations are either not yet due or are subject to a deferral.

Conditions for seasonal or intermittent reporting concession

Number of employees

The employer or their registered agent must apply for this concession however if the employer has:

19 or fewer employees — they will automatically be accepted;
20 or more employees — the ATO will consider this on a case-by-case basis.

Good compliance history

Must meet both of the following:

all amounts owing to the ATO are either not yet due or are subject to a payment plan;
all lodgment obligations are either not yet due or are subject to a deferral.

Further resources

ATO resources on STP

Primary webpage for STP guidance: ato.gov.au/stp
Employer reporting guidelines (recommended reading)
No-cost and low-cost solutions for STP: ato.gov.au/stpsolutions
News, events and resources which includes news, events, webinars and digital resources to help you understand STP.

TaxBanter resources on STP

Banter Blog

Our previous blogs on STP include:

Prepare now for Single Touch Payroll from 9 May 2018 which explains how STP works and provides a handy checklist;
New annual registered agent authorisations for Single Touch Payroll from 9 October 2018 explains how the new STP engagement authority allows eligible employers to provide a signed authorisation to their registered agent who is lodging STP reports on their behalf only once a year instead of at each reporting event.

Tax Yak podcast

We also have two Tax Yak podcasts available on STP:

Episode 17: Single Touch Payroll: A chat with the ATO from 16 April 2019 in which our host, Robyn Jacobson, chats with John Shepherd, former Assistant Commissioner of STP at the ATO (he has only recently departed the ATO after many years of leading the STP design team) about the implementation of STP;
Episode 18: Single Touch Payroll: Q&A with the ATO from 18 April 2019 in which our host, Robyn Jacobson, chats with Michael Karavas, Director at the ATO and Design Lead of STP, in a Q&A format, addressing all your questions about the ATO’s approach to transitioning around 750,000 small employers into STP from 1 July 2019.

Joint TaxBanter–ATO webinar

The recording of our STP webinar Single Touch Payroll – it’s happening! Are you ready to start reporting from 1 July 2019? presented on 27 March 2019 is available to purchase.

Tax Yak – Episode 23: Small business conversation with the ATO

Posted on June 17, 2019November 2, 2022 by thriveadmin

There are more than 3.8 million small businesses in Australia, accounting for 33% of Australia’s GDP, and employing over 40% of Australia’s workforce.

In this episode of Tax Yak, Robyn yaks with the ATO’s Deputy Commissioner – Small Business, Deborah Jenkins, about the ATO’s engagement with small business, the small business tax issues the ATO has identified, the role of tax agents, the Black Economy and the tools, products and services available to assist small business.

Host: Robyn Jacobson, Senior Tax Trainer, TaxBanter

Guest: Deborah Jenkins, Deputy Commissioner, Small Business, ATO
Twitter – @ATOSmallbizExec & @ato_gov_au
www.ato.gov.au/sbsupport

Recorded: 14 June 2019

Tax Yak – Episode 22: Turning compliance water into consulting wine

Posted on June 4, 2019November 2, 2022 by thriveadmin

How should a practice go about converting the staple annual compliance work into cash cow advisory work that is truly valued by clients?

In this episode of Tax Yak, Robyn yaks with Brent Szalay, Managing Director, SEIVA, about how his practice has successfully changed the lives of their business clients. The SEIVA philosophy is to make positive changes through designing a strategic plan and establishing a clear vision and purpose by working closely and regularly with their clients. Brent explains how starting a conversation on tax compliance serves as a base from which valuable strategic discussions can emerge.

Host: Robyn Jacobson, Senior Tax Trainer, TaxBanter

Guest: Brent Szalay, Managing Director, SEIVA

Recorded: 3 June 2019

The post-election landscape

Posted on May 29, 2019 by thriveadmin

Background

The Federal Election held on 18 May 2019 returned a Coalition Government with a majority in the House of Representatives (although counting continues in some seats). At the time of writing, one seat remains in doubt.

Following the dissolving of the House of Representatives (HoR) and with the calling of the election, all Bills tabled in the HoR lapsed. Many of these Bills contained important proposed tax and superannuation measures. At this election, the Senate was not dissolved (unlike the double dissolution election held on 2 July 2016). The Senate’s agenda is therefore regarded as continuing until the day before the opening of the next session of Parliament. Any Bills tabled before the Senate remain ‘before the Parliament’ and do not lapse until the day before the next session of Parliament.

Some of these measures were proposed to commence on 1 July 2019. Additionally, there are measures due to commence on 1 July 2019 that are still in the form of announcements, subject to a consultation paper or in exposure draft form (and not yet tabled in Parliament). The lack of clarity in relation to these proposed measures continues to leave tax advisers and their clients with a significant level of uncertainty.

Further, the proposed Superannuation Guarantee Amnesty finished on 23 May 2019 without being enacted.

This article examines the current status of the election outcome and what this means for Parliamentary sitting days. It sets out a summary of those tax and superannuation measures that became law and examines the implications of the numerous unenacted measures.

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.

The 46^th Parliament

Who will make up the 46^th Parliament?

House of Representatives

As at 26 May 2019, the Australian Electoral Commission (AEC) Tally Room has the Coalition leading in the HoR with 78 seats, which is two more than the 76 needed to form a majority Government. Only five seats in New South Wales have been formally declared at the time of writing.

The HoR may be summarised as follows (noting that there are now 151 seats in the HoR, up from 150):

	Counted	Predicted	Previous
In doubt	1
Coalition	77	77	75
Labor	67	68	69
Greens (Adam Bandt)	1	1	1
Crossbenchers: Bob Katter (Katter’s Australian Party) Rebekha Sharkie (Centre Alliance) Helen Haines (Independent) Zali Steggall (Independent) Andrew Wilkie (Independent)	5	5	5 (not listed)

Senate

The Senate is made up of 76 Senators and 39 seats are needed to form a majority. The 76 Senators comprise 12 from each of the six States and two for each of the Territories. At this election, 40 of the 76 seats were contested, being half of the 72 State Senators plus the four Senators representing the two Territories.

The Senate result is also still unknown and the AEC has little guidance on which candidates will likely be elected. According to the ABC Federal Election coverage, of the 40 contested seats, the Coalition will likely secure 18; Labor: 13; the Greens: 5; and the Jacqui Lambie Network: 1. The remaining three seats, all in Queensland, are uncertain.

The current election results (as at the time of writing this article) in the Senate may be summarised as follows:

	Counted	Predicted	Previous
In doubt	3
Coalition	34	35	30
Labor	26	26	26
Greens (Adam Bandt)	8	9	9
Crossbenchers: Stirling Griff and Rex Patrick (Centre Alliance, SA) Pauline Hanson and Malcolm Roberts (One Nation, Qld) Jacqui Lambie (Lambie Network, Tas) Corey Bernardi (Australian Conservatives, SA)	5 2 1 1 1	6 2 2 1 1	11 (not listed)

On these numbers, the Coalition Government will hold at least 34 seats, probably 35, which means that the Coalition will likely require 4 additional votes from the crossbench in circumstances where Labor is not voting with them. History tells us that Labor votes with the Coalition 75 per cent of the time when they are in Federal Government so negotiation with the crossbench is only required for 25 per cent of bills presented.

When will the new Parliament sit?

The final process in all elections is the return of the election writs. For this election, these are due on Friday, 28 June 2019. That is 41 days after polling day and is designed to be in time for the new Senators to commence their terms on Monday 1 July 2019 (hence why the latest date that the half-Senate election could be held was 18 May).

With regards to the Senate, the previous State Senators that were up for re-election retain their position until 30 June 2019. The newly elected or returned State Senators commence their terms on 1 July 2019. The terms of the continuing State Senators expire on 30 June 2022. However, the terms of the previous four Senators from the Territories ceased on the dissolution of the HoR so the terms of the newly elected Territory Senators commence upon issuing of the writ for their particular division; their terms are tied to the term of the HoR and they face election at every HoR election.

This means that if Parliament sits prior to 30 June 2019, it will be all the previous State Senators plus the newly elected Territory Senators. Note, however that:

Australian Capital Territory (ACT) Senator David Smith (Labor) resigned before the 2019 election and has been succeeded by Katy Gallagher (Labor), so the ACT trend of electing one Labor and one Liberal Senator continues (this has occurred at every election since the first contest in 1975); and
Northern Territory (NT) Senator Nigel Scullion (Country Liberal) retired at the 2019 election and has been succeeded by Sam McMahon (Country Liberal), so the NT trend of electing one Labor and one Country Liberal Senator also continues (this has occurred at every election since the first contest in 1975), so nothing has changed with regards to the ACT or the NT.

This means that the numbers in the Senate remain effectively unchanged should the Senate sit before 30 June 2019.

The writs for the HoR are likely to be returned earlier and, in some cases, before all votes are counted. This can occur where the Returning Officer is satisfied that the votes recorded on the remaining ballot papers to count could not possibly affect the result. However, where the vote is close, the result may not be called until after 31 May 2019. This is because postal votes are still able to be received up until this date, provided that they have been postmarked before 6:00 pm on election day.

With no formal confirmation of any seat in the HoR, it will still be some time before the new 46^thParliament can convene.

Once the election writs are returned on 28 June 2019, the new Parliament must then sit within 30 days of the writs being returned. At the first sitting, all members of the 46^th Parliament are sworn in. No other business may be conducted at this sitting.

The 2019 sitting calendar was removed upon the dissolution of the 45^thParliament. This means that there are currently no formally scheduled sitting dates for the remainder of 2019. Prior to that, there were three sitting weeks scheduled in June (but it was expected that they would be cancelled because it is too close after the election for Parliament to resume). Parliament does not generally sit in July and was previously scheduled to then sit on 12 August 2019. It will be up to the new Government, once officially declared, to determine the sitting calendar for the remainder of the year.

In regard to the June 2019 dates, it is very likely that the sitting week previously scheduled for 3–6 June will be cancelled. There is a possibility that the Parliament may sit either on the previously scheduled dates of 17–20 June or 24–27 June as the Coalition will be keen to get their proposed personal tax cuts through before 1 July 2019 (see below).

What does this mean?

For those unenacted Bills and announcements with a scheduled start date of 1 July 2019, there may be an opportunity for them to be enacted prior to this date but this will depend on the priorities of the re-elected Coalition Government.

All Bills will have either lapsed on the dissolution of the 45^th Parliament or will lapse before the next sitting of Parliament (see under “Lapsed Bills” below). Therefore the new Government will have to re-table those Bills (if they decide to proceed with the measures contained in them) to have them considered by the new Parliament as a Bill cannot be carried over from one Parliament to the next. As discussed above, if Parliament sits in June 2019, the Senate will be constituted by most of the previously serving Senators, not the newly elected ones (except for the four newly elected Territory Senators but the composition of the Senators won’t change).

Key enacted measures with a 1 July 2019 start date

Taxable Payments Reporting System (TPRS)

The Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Act 2018 (enacted on 29 November 2018) extended the TPRS to further high risk industries to ensure payments made to contractors in these sectors are reported annually to the ATO. Entities that provide the following services will need to report under the TPRS from 1 July 2019:

road freight;
information technology; and
security, investigation or surveillance.

The Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Act 2018 had previously extended the operation of the TPRS to cleaning and courier services from 1 July 2018.

Non-compliant payments (employer withholding obligations)

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 — broadly salaries and wages to employees 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:

withhold PAYG withholding or non-ABN withholding; or
report the withheld amounts through activity statements or Single Touch Payroll (see below).

It will apply to payments made, or non-cash benefits provided, on or after 1 July 2019.

A deduction that would otherwise be denied is maintained in the original income year if the taxpayer voluntarily notifies the Commissioner of their mistake before the Commissioner commences audit activity.

New work test exemption for recent retirees

The Treasury Laws Amendment (Work Test Exemption) Regulations 2018 (the Regulations) were registered on 7 December 2018 and provide an exemption from the ‘work test’ for eligible recent retirees (i.e. in their first year of retirement) 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 less than $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 (Mid-Year Economic and Fiscal Outlook) 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 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’.)

Single Touch Payroll

The Treasury Laws Amendment (2018 Measures No. 4) Act 2019 (enacted on 1 March 2019) extends Single Touch Payroll (STP) reporting to all employers, regardless of the number of employees, from 1 July 2019.

Website
More information about employers’ obligations to report payroll and superannuation information to the ATO at the time of the payroll, including employer guides and webcasts, is available on the ATO website.

TaxBanter has produced two podcasts on the operation of STP; both of these consist of interviews with senior ATO staff members responsible for the rollout of STP, one titled Single Touch Payroll: A chat with the ATO (Ep 17) and the other titled Single Touch Payroll: Q&A with the ATO (Ep 18).

TaxBanter has also produced a Banter Blog on the ATO’s approach to transitioning small employers, micro employers and employers with closely held payees to STP reporting.

The same Act also includes the Government’s Superannuation Guarantee (SG) integrity package that enables the Commissioner of Taxation to issue directions to employers to pay unpaid amounts of SG and undertake SG education courses. These changes apply from 1 July 2018.

The same Act also amended 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.

Enhancing Whistleblower Protections

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (enacted on 12 March 2019).

The Act creates:

a single whistleblower protection regime in the Corporations Act, to cover the corporate, financial and credit sectors; and
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.

Protecting your Superannuation

The Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 was enacted on 12 March 2019 with 22 amendments moved by the Greens and agreed to by the Government.

The amendments remove the proposed opt-in rule for insurance within superannuation for individuals aged under 25 years and for individuals with account balances of less than $6,000. The Senate’s changes will see the opt-out rule applied for group insurance for individuals 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 employees 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. This Bill lapsed with the dissolution of the HoR.

Key enacted measures with an earlier start date

Personal tax cuts — 1 July 2018

The Treasury Laws Amendment (Personal Income Tax Plan) Act 2018 (enacted on 21 June 2018) introduced a new Low and Middle Income Tax Offset (LMITO) 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 LMITO and the current Low Income Tax Offset (LITO) into a new LITO 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.

Note
See below for further discussion on proposed changes announced in the 2019–20 Federal Budget to the LMITO, which has led to a timing problem for the Government, the ATO and taxpayers.

Instant asset write-off for small business entities — up to $30,000 and extended to 30 June 2020 — various dates

The Government announced on 29 January 2019 that it would increase the threshold to $25,000 (from its previous threshold of $20,000) below which amounts can be immediately deducted by small business entities (within the meaning of s. 328-110 of the ITAA 1997) under expanded accelerated depreciation rules. The change to the threshold applies to depreciable assets first used or installed ready for use on or after 29 January 2019 but before 1 July 2020.

The Government also announced that it would extend by 12 months to 30 June 2020 the period during which small business entities can access the instant asset write-off (IAWO). This is the third extension to the IAWO period, following earlier extensions from the initial end date of 30 June 2017 to 30 June 2018, then to 30 June 2019. However, the Government wasn’t finished there …

On Budget night (2 April 2019), the Treasurer announced an additional extension of the IAWO to medium-sized businesses with an aggregated turnover of less than $50 million, as well as a further increase in the threshold to $30,000. Both changes were proposed to commence from 7.30 pm on 2 April 2019 and continue until 30 June 2020.

The Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Act 2019 (enacted on 6 April 2019) incorporates the latest changes to the IAWO announced as part of the 2019–20 Federal Budget.

This means that for the 2018–19 income year, three different thresholds apply to small business entities (i.e. $20,000, $25,000 and $30,000), depending on the date on which the asset was first used or first installed ready for use. In contrast, medium-sized businesses can apply the IAWO using a single threshold of $30,000 which applies to depreciating assets acquired and first used or installed ready for use during the period starting at 7.30 pm on 2 April 2019 and ending on 30 June 2020.

More information about the IAWO is provided in our Banter Blog.

Similar business test for company losses — 1 July 2015

The Treasury Laws Amendment (2017 Enterprise Incentives No. 1) Act 2019 (enacted on 1 March 2019) 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.

The new test requires loss companies to consider the following four factors:

the extent to which the assets used to generate income were also used formerly;
the extent to which the activities and operations were also the same as the previous business;
the identity of the current business and the identity of the former business; and
the extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods, of the former business.

The ATO’s Law Companion Ruling LCR 2019/1 describes how the Commissioner will apply these amendments.

Removal of three-month rule for SGC — 1 July 2018

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:

an SG charge and the company does not report the SG liability to the Commissioner within three months from due date of the liability; or
an estimate of an SG charge within three months from the day by which the company was obliged to pay the underlying liability to which the estimate relates has passed.

The Treasury Laws Amendment (2018 Measures No. 4) Act 2019 (enacted on 1 March 2019) removed 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 commence:

for SG charge liabilities that are made on or after 1 July 2018;
for estimates of SG charge liabilities made on or after 1 July 2018 (whether the underlying liability arose before, on or after that day).

Lapsed Bills

At the time of writing this article, the Parliament House website shows:

180 Bills Not Proceeding; and
171 Bills Before Parliament.

The description Bills Not Proceeding refers to the 180 bills which were before the HoR when the election writs were issued on 11 April 2019. As the issuing of the writs dissolved the HoR, these bills have lapsed as they cannot be carried over from one Parliament to the next. The returning Coalition Government may re-introduce some of the measures in these bills but that is yet to be determined.

The description Bills Before Parliament refers to the 171 bills which were before the Senate when the HoR was dissolved, and have technically not lapsed yet; they will, however, lapse the day before the first session of the 46^th Parliament. This is because, unlike the HoR, the Senate was not dissolved with the calling of the election.

The bills listed as Not Proceeding also include those that have been introduced by non-Government members (referred to as private members’ bills), as well as bills which have been negatived (such as the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 which proposed further corporate cuts to companies with a turnover of $50 million or more).

Listed below are significant tax and superannuation measures which are contained in bills that either have lapsed or will lapse before the next Parliament commences.

SG Amnesty — 24 May 2018–23 May 2019 (Status: Before the Senate; will lapse)

The proposed Superannuation Guarantee (SG) Amnesty was contained in Schedule 1 to the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018. It has been before the Senate since 25 June 2018.

The SG Amnesty period was proposed to run from 24 May 2018 to 23 May 2019 being the (inclusive) dates between which the disclosures and payments must be made in order to receive the benefits of the Amnesty.

The benefits for qualifying amounts included:

the ability of the employer to claim income tax deductions in respect of payments made during the Amnesty period;
the waiver of the $20 per employee per quarter administrative component in respect of the SG shortfall; and
no penalties under Part 7 of the Superannuation Guarantee (Administration) Act 1992 (SGA Act) for a failure to lodge an SG statement.

However, unless it was legislated, employers would 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. As set out in PS LA 2011/28, the Commissioner will remit 100 per cent of the Part 7 penalty where an employer makes a voluntary disclosure to the ATO as part of a genuine attempt to comply.

It was announced in the Government’s MYEFO 2018–19 that employers with SG shortfalls who do not come forward will face the full force of SG penalties, including an additional 100 per cent penalty for employers who could have come forward during the SG Amnesty period, but did not and are subsequently caught.

The ATO has recently advised TaxBanter that:

the latest ATO estimate of the annual difference between the value of the SG contributions required to be paid under the law and actual SG contributions made by employers (the SG Gap) is $2.79 billion (2015–16 figures);
over 21,000 employers have voluntarily come forward and lodged SG statements in the past year;
the ATO has completed 22,883 SG compliance cases raising $634 million in liabilities this financial year (1 July 2018 to 30 April 2019).

Note
With the Coalition being re-elected, there may still be an opportunity for the SG Amnesty to be legislated, notwithstanding that the 12 month period ended on 23 May 2019.

In the absence of legislation, the ATO must administer and apply the current law which means that no deduction is currently available for payments made during the proposed SG Amnesty period. If it becomes law, it may be retrospectively applied to cover those payments.

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.

Illegal Phoenix activity (Status: Lapsed)

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was introduced into the HoR on 13 February 2019. The Bill proposed to expand the application of the Director Penalty Notice (DPN) regime to include company liabilities for unpaid GST, LCT and WET. This change was proposed to commence on the first day of the quarter starting after the Bill receives Royal Assent.

The Bill also proposed 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;
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;
introduce new phoenixing offences to prohibit creditor-defeating dispositions of company property.

R&D reforms — 1 July 2018 (Status: Lapsed)

The Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018 was introduced into the HoR on 20 September 2018 and remained before the House, even though the measures were proposed to commence on 1 July 2018.

Schedules 1 to 3 of the Bill proposed 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.

Given the passage of time, it is hoped that any future Bill containing this measure would have a prospective or later start date than the original proposed start date of 1 July 2018.

MRE changes for foreign residents — 9 May 2017 (1 July 2019) (Status: Before the Senate; will lapse)

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. The Bill proposes to deny individual taxpayers access to the MRE who are foreign residents at the time of the CGT event.

Perhaps due to a lack of support in the Parliament and the extensive lobbying efforts of a number of advocates seeking a fairer outcome for Australian expatriates living and working overseas, this Bill has not progressed in its current form to become enacted law. Nonetheless, it is creating significant ongoing uncertainty for affected taxpayers.

The amendments to the MRE were proposed to apply to CGT events that happened 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 happened 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.

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.

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.

While the (more than) two-year transitional rule was intended to be available for individuals who owned the property at the time of the 2017 announcement, 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, the uncertainty of post-election Parliamentary sitting days, a softening property market and tighter lending conditions for borrowers (in the wake of the release of the Final Report of the Banking Royal Commission) continue to make it difficult for affected owners to make decisions about their properties.

On 15 March 2019, at The Tax Institute’s National Convention in Hobart, the then Assistant Treasurer Stuart Robert responded to a question posed about the status of the MRE measures still before the Senate. In answering an unrelated question about changes to the tax treatment of income from testamentary trusts, the Minister replied:

Sometimes things get announced and don’t get progressed and it’s just best to leave it that way.

When asked about the MRE measures, the Minister replied:

Go back to my previous comment.

Unfortunately, with no clear statement from the Coalition, this significant uncertainty for taxpayers who are living and working abroad as non-residents will continue. The ATO will also need to provide taxpayers with guidance as the prolonged uncertainty impacts on the preparation of 2018 and 2019 tax returns.

Increase maximum number of SMSF members from 4 ⇒ 6 — 1 July 2019 (Status: removed from Bill which passed)

The Treasury Laws Amendment (2019 Measures No. 1) Act 2019 (enacted on 5 April 2019) was amended to remove Schedule 1 prior to putting the Bill to a vote which resulted in its subsequent passage through Parliament. Schedule 1, if passed, would have increased the maximum number of allowable members in a self managed superannuation fund (SMSF) from four to six with effect from 1 July 2019.

Employees with multiple employers — 1 July 2018 (Status: Before the Senate; will lapse)

Contained in the same Bill as the SG Amnesty (above) 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, individuals would be able to 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. The individual can then negotiate with their employer to receive additional cash or non-cash remuneration.

The amendments were proposed to apply in relation to SG quarters starting on or after 1 July 2018.

Applications for the certificates have to 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 and for the first quarter of the 2019–20 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.

Include new LRBAs in TSB — 1 July 2018 (Status: Before the Senate; will lapse)

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.

Introduce Director Identification Numbers (Status: Lapsed)

The Commonwealth Registers Bill 2019 and the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 proposed 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.

What’s going on with…

Below we list the significant tax and superannuation measures which were announced with a start date of 1 July 2019 that have not been tabled as a Bill before Parliament. As a result of this delay, even if they become law the start date may change.

LMITO changes

As discussed above, the introduction of the Low and Middle Income Tax Offset (LMITO) from 1 July 2018 has been enacted as part of the Coalition’s personal tax cuts policy. However, they announced further changes to the LMITO on Budget night (2 April 2019), with those changes proposed to apply from 1 July 2018 (i.e. they would apply to the lodgment of 2019 Income Tax Returns).

The changes are proposed to increase the lowest amount of the LMITO from $200 to $255 and the maximum LMITO amount from $530 to $1,080. A further minor amendment would mean access to the LMITO would cut out once an individual’s taxable income was $126,000 rather than the currently legislated amount of $125,333. Labor announced in their 2019 Budget-in-Reply speech on 4 April 2019 that they would also introduce the same changes; however the lowest amount of the LMITO would increase to $350 (rather than to $255).

What happens if the proposed changes are not law by 30 June 2019?

Despite having the opportunity to do so, the Government decided not to pass these further changes to the LMITO prior to the dissolution of the HoR. The Prime Minister stated that the ATO could administratively deliver the changes in time for the 2019 tax season, however the ATO advised in a statement dated 9 April 2019 that they ‘could not issue assessments based on the tax cuts until these are passed into law’.

This issue has received media attention (for example, see this ABC article) and the Prime Minister has confirmed that they will apply to the 2018–19 income year even if Parliament does not sit and pass these changes prior to 30 June 2019. The ATO’s position is that if the legislation passes:

before 1 July 2019, the increase in the LMITO can be administered in the normal way through assessments;
after 1 July 2019, the ATO will automatically amend assessments, with no requirement for the taxpayer to lodge another tax return or seek an amendment.

The ATO could therefore be processing large numbers of amended assessments given the likelihood of retrospectively passed law!

Division 7A changes

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. A further delay to the start date until 1 July 2020 was announced by the Government as part of the 2019–20 Federal Budget.

The profession would welcome certainty on the changes, particularly regarding whether previously quarantined loans (pre-4 December 1997) and Unpaid Present Entitlements (UPEs (pre-16 December 2009) will remain quarantined or instead need to be placed on Div 7A-compliant terms (proposed to be no more than 10 years).

Deductions for the cost of holding vacant land

On 15 October 2018, the Government released exposure draft legislation and explanatory material containing measures which propose to deny certain deductions for expenses associated with holding vacant land from 1 July 2019. Certain exemptions will apply however there was widespread concern that, as drafted, the changes would impact on owners of primary production land where the owners or their associates were not carrying on a business on that land (for example, retired farmers or land used for agistment).

3-year audit cycle for SMSFs

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.

These changes were proposed to commence from 1 July 2019 but, given that this proposal was universally unpopular, it is unlikely that this measure will proceed.

Income for individual’s image or fame

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.

This proposal has not progressed beyond the consultation paper stage.

Circular trust distributions

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.

The changes would have effect from 1 July 2019 but have not progressed beyond the exposure draft.

Further measures still in draft/announcements

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.
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. The Treasurer announced two measures in the 2019–20 Federal Budget: from 1 July 2021 — where an ABN holder has an income tax return obligation, they will be required to lodge their tax return. There are more questions about this announcement than answers, such as what would be implications of non-lodgment, i.e. would their ABN be cancelled? from 1 July 2022 — ABN holders will have to confirm their details on the ABR.
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.
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 to disclose business tax debt information to credit reporting bureaus where the business: has not engaged with the ATO to manage their debt; and has a tax debt, of which at least $10,000 is overdue and has been owing for more than 90 days. 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 tax 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.

What happens to Labor’s tax and superannuation policies?

TaxBanter published a Banter Blog prior to the election setting out Labor’s proposed tax and superannuation policies. The realisation of these policies was always subject to Labor both winning the election and being able to pass them through both houses of Parliament.

Labor’s recent election loss may not spell the end of these key policies or ensure that that some of the policies won’t be implemented in some other form. Since the election result, there has been some media commentary in regard to the difficulties that the Coalition Government faces in balancing the Budget and delivering the promised surplus.

For example, the Coalition campaigned heavily against Labor’s proposal to deny refundable franking credits but, as reported by The Australian, it will have to find savings in other areas to continue to afford the ever-increasing cost of refunding excess franking credits.

The Coalition could cherry pick from Labor’s policies, which could see the resurrection of debate on Labor’s proposals to reinstate the Temporary Budget Repair Levy or prospective changes to negative gearing or the CGT discount.

Final observations

There is widespread commentary that the Coalition’s policy offering seems to contain no significant measures other than the proposed further personal tax cuts. However, it is clear that they still have a full agenda as they determine whether to reintroduce lapsed bills, and advance previous exposure drafts, consultation papers and announcements, comprising more than 80 proposed measures that remain unenacted.

As TaxBanter told Accountants Daily immediately following the election result:

As a profession, we are waiting for the government to clarify its position on the unenacted measures so that we know whether or not clients are going to be subject to measures that were previously announced …

There is an imperative for the government in the weeks and months ahead to prioritise where they stand on each of these measures.

Tax Yak – Episode 21: Post-election perspective

Posted on May 28, 2019November 2, 2022 by thriveadmin

What does the Coalition’s win in the Federal election mean politically and from a policy perspective? In this episode, our regular host Robyn Jacobson is the guest of host Michael Messner (via Skype from sunny Queensland), a fellow Senior Tax Trainer. Together, they discuss the implications of the Coalition’s return to Government, the long list of announced but unenacted measures, and practitioners need to look out for from 1 July 2019 and beyond.

Host: Michael Messner, Senior Tax Trainer, TaxBanter

Guest: Robyn Jacobson, Senior Tax Trainer, TaxBanter

Recorded: 27 May 2019

Tax Yak – Episode 20: TaxBanter offerings

Posted on May 16, 2019November 2, 2022 by thriveadmin

You may be familiar with our regular Update or Special Topic papers, but are you aware of the full suite of our offerings to the tax profession? In this episode, Robyn yaks with fellow Senior Tax Trainer, Lee-Ann Hayes, about the range of TaxBanter’s products and services, including our online offerings. Robyn also yaks with TaxBanter’s Manager of Content & Projects, Steve Griffiths, about TaxBanter’s Tax Library and also about TaxEd, who provide tax education and support to Government bodies and not-for-profit organisations.

Host: Robyn Jacobson

Guests:
Lee-Ann Hayes, Senior Tax Trainer, TaxBanter
Steve Griffiths, Content & Projects Manager, TaxBanter

Recorded: 14 May 2019

Tax Yak – Episode 19: The ATO perspective on WRE and rental property claims

Posted on May 9, 2019November 2, 2022 by thriveadmin

The ATO has made no secret of the fact that it is targeting incorrect claims of work-related and rental property expenses by individuals. In this episode of Tax Yak, Robyn yaks with Justin Untersteiner, Assistant Commissioner, Individuals of the ATO about the ATO’s focus on WRE claims and rental properties. They discuss some of the positive trends emerging from the ATO’s compliance focus, and the common mistakes taxpayers make when claiming.

Host: Robyn Jacobson

Guest: Justin Untersteiner, Assistant Commissioner, Individuals

Recorded: 9 May 2019

Tax Yak – Episode 18: Single Touch Payroll: Q&A with the ATO

Posted on April 18, 2019November 2, 2022 by thriveadmin

In this episode of Tax Yak, Robyn yaks with Michael Karavas, Director at the ATO and Design Lead of STP, in a Q&A format, addressing all your questions about the ATO’s approach to transitioning around 750,000 small employers into STP from 1 July 2019. The discussion covers the transitional approach for small employers, micro employers and employers with closely held payees.

Host: Robyn Jacobson

Guest: Michael Karavas, ATO Director & STP Design Lead

Recorded: 17 April 2019

Online Tax Training

Face-to-face Tax Training

The legislative journey of the personal tax cuts

The previously legislated tax cuts

More tax relief promised pre-election

Passage of the Bill through Parliament

The new personal tax regime from 2018–19

The 2018 amendments (enacted 21 June 2018)

The 2019 amendments (enacted 5 July 2019)

How much tax relief will taxpayers receive?

Comparison tables

Immediate relief for 2019 — the LMITO

Calculation of LMITO ($)

Myth-busting the LMITO

How will the ATO administer 2019 tax returns?

Starting to report through STP

Conditions for micro employers to report quarterly through their registered agent

Further resources

Background

The 46th Parliament

Key enacted measures with a 1 July 2019 start date

Key enacted measures with an earlier start date

Lapsed Bills

What’s going on with…

Further measures still in draft/announcements

What happens to Labor’s tax and superannuation policies?

Final observations

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The 46^th Parliament