From 1 July 2019, Single Touch Payroll is mandatory for all employers, even those with just one employee. This is the most significant change to reporting systems for businesses since the introduction of the GST.
In this episode of Tax Yak, Robyn yaks with John Shepherd, Assistant Commissioner at the ATO and Program Lead for STP, about the introduction of STP and what it means for employers and employees.
Host: Robyn Jacobson
Guest: John Shepherd
Recorded: 15 April 2019
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Small business entities (SBEs) may choose to apply the simplified depreciation provisions and calculate deductions for the decline in value of their depreciating assets under Subdiv 328-D of the ITAA 1997 instead of Div 40. This requires them to:
Definition An entity is a ‘small business entity’ for an income year within the meaning in s. 328-110 of the ITAA 1997 if it carries on a business in that year and:
An entity is also an SBE if it carries on a business in an income year and its aggregated turnover for that income year, worked out as at the end of that year, is less than $10 million.
Until the 2015–16 income year, the threshold was $2 million; on 1 July 2016, the threshold increased to $10 million.
In 2015, the Tax Laws Amendment (Small Business Measures No. 2) Bill 2015 amended the tax law to temporarily increase to $20,000 the threshold below which certain depreciating assets and general small business pools could be immediately deducted by SBEs. The temporary increase applied from 7.30 pm (by legal time in the Australian Capital Territory) on 12 May 2015 until 30 June 2017. While the current instant asset write-off (IAWO) arrangements were introduced in 2015 as a temporary measure to assist small businesses during a period of economic transition and to help counter the risk that the period of economic adjustment would be a protracted one (see paragraph 2.6 of the Explanatory Memorandum to the amending 2019 Bill), the IAWO has been a popular measure and has proven to be beneficial irrespective of economic conditions given the associated cash flow benefits to business. The tax law was subsequently amended by:
Following these amendments, the IAWO threshold was to revert to $1,000 from 1 July 2019.
Recent announcements
Announcement on 29 January 2019
On 29 January 2019, the Prime Minister, Scott Morrison, announced that the Government would increase the IAWO threshold for SBEs from $20,000 to $25,000 and extend the application of the new threshold until 30 June 2020. The Treasury Laws Amendment (Increasing and Extending the Instant Asset Write-Off) Bill 2019 (‘the Bill’) was introduced into Parliament on 13 February 2019 to give effect to this announcement.
Budget announcement on 2 April 2019
On 2 April 2019, as part of the 2019–20 Federal Budget, the Government announced that it would:
On 3 April 2019, the Bill was amended in the Senate to give effect to the Budget announcement, which necessitated the Bill returning to the House of Representatives to accept the Senate’s amendments. This occurred the following day (which was the final Parliamentary sitting day ahead of the impending Federal election), and the Bill finally passed both Houses on 4 April 2019. The Bill received Royal Assent on 6 April 2019.
For small business entities
An entity can claim an immediate deduction for a depreciating asset in an income year under the IAWO for SBEs — contained in s. 328-180 of the ITAA 1997, and its accompanying transitional provision, s. 328-180 of the Income Tax (Transitional Provisions) Act 1997 — if the entity meets all of the following conditions:
The meaning of ‘acquired’ and ‘first used, or installed ready for use’
The term ‘acquired’ is not defined in the tax law so it takes its ordinary meaning, Generally, an asset is acquired when you buy it under a contract, or if there is no contract, you acquire it in some other way. Similarly, the term ‘first used, or installed ready for use’ is not defined in the tax law so it also takes its ordinary meaning.
The meaning of aggregated turnover
Annual turnover is worked out under s. 328-115. An entity’s aggregated turnover for an income year is the sum of the annual turnovers of:
with some adjustments.
The meaning of annual turnover
Annual turnover is worked out under s. 328-120. An entity’s annual turnover for an income year is the total ordinary income that it derives in the income year in the ordinary course of carrying on a business. Annual turnover excludes:
The following modifications also apply:
Working out the IAWO threshold
The threshold that applies to an SBE when working out whether it can immediately deduct the cost of an asset is based on two criteria:
In the new provisions:
The IAWO thresholds for SBEs are summarised in the following table.
IAWO thresholds for SBEs
| Date asset first used (or installed ready for use) | Asset acquired before 7.30 pm on 12 May 2015 | Asset acquired from 7.30 pm on 12 May 2015 to 30 June 2020 | Asset acquired after 30 June 2020 |
| Before 7.30 pm on 12 May 2015 | $1,000 | $1,000 | $1,000 |
| From 7.30 pm on 12 May 2015 to 28 January 2019 | $20,000 | ||
| From 29 January 2019 to 7.30 pm on 2 April 2019 | $25,000 | ||
| From 7.30 pm on 2 April 2019 to 30 June 2020 | $30,000 | ||
| After 30 June 2020 | $1,000 |
Note From 1 July 2020, the IAWO threshold reverts to $1,000 for SBEs.
For medium-sized businesses
A medium-sized business can claim an immediate deduction for a depreciating asset in an income year under the IAWO — contained in new s. 40-82 of the ITAA 1997 (see Schedule 2 to the Bill) — if it meets all of the following conditions:
Working out the aggregated turnover of a medium-sized business
A medium-sized business will need to work out its turnover in the same way as an SBE does, that is, by taking into account both the turnover of the current income year and the previous income year. If in either year the turnover is less than $50 million (but at least $10 million, otherwise it would already be an SBE), then the medium-sized business will be able to claim an immediate deduction (subject to the asset costing less than $30,000 and being acquired/first used within the prescribed period). Accordingly, an entity will be eligible to access the IAWO if it carries on a business during an income year and at least one of the following applies:
However, an entity is not eligible to access the IAWO on the basis of its likely turnover if it has carried on business in the two previous income years and its aggregated turnover for each of those years was $50 million or more.
Important The (less than) $50 million aggregated turnover threshold that applies to medium-sized businesses for the purpose of the IAWO also applies for the purpose of s. 23AA of the Income Tax Rates Act 1986 which determines whether a company is a base rate entity which determines whether it is eligible for the lower corporate tax rate of (currently) 27.5 per cent.
However, the further calculation that is required by s. 23AB of the Income Tax Rates Act 1986 to work out whether the company has base rate entity passive income of more than 80 per cent of its assessable income is not relevant to whether a medium-sized business can claim an immediate deduction under the IAWO.
Accordingly, it is possible that a company with an aggregated turnover of at least $10 million but less than $50 million acquires an asset which:
IAWO thresholds for medium-sized businesses
| Asset acquired or first used (or installed ready for use) before 7.30 pm on 2 April 2019 | Asset acquired and first used (or installed ready for use) from 7.30 pm on 2 April 2019 to 30 June 2020 | Asset acquired or first used (or installed ready for use) after 30 June 2020 |
| Usual rules in Div 40 apply | $30,000 IAWO threshold available Usual rules in Div 40 apply for asset costing $30,000 or more | Usual rules in Div 40 apply No $1,000 IAWO threshold available |
Note The provisions for the new $30,000 IAWO are constructed to direct:
From 1 July 2020, medium-sized businesses will need to work out their asset’s decline in value under the ordinary depreciation provisions in Div 40 (see new s. 40-82(5)). The $1,000 IAWO threshold which will continue to be available to SBEs from 1 July 2020 will not be available to medium-sized businesses.
Consequential amendments
The amendments also:
Five-year lock-out rule modified
Under the lock-out rule arrangements, s. 328-175(10) provides that an SBE that elects for Subdiv 328-D to apply for an income year but then chooses not to apply those provisions in a later income year cannot apply the small business capital allowance provisions for a period of five income years from the first later year in which the entity could have made the choice (this is referred to as the ‘lock-out rule’).
As originally legislated in 2015
Under transitional rules, SBEs are not required to apply the lock-out rule to increased access years i.e. income years that end on or after 12 May 2015 but on or before 30 June 2017. Accordingly, this means that SBEs which balance on 30 June can opt back into applying Subdiv 328-D to access the IAWO during the 2014–15, 2015–16 and 2016–17 income years. The lock-out rule starts to apply again from the first income year that ends after 30 June 2017. The lock-out rule applies from the first income year that ends after 30 June 2017. In determining whether the lock-out rule applies after 30 June 2017, the income years preceding the increased access years are disregarded.
As amended
Prior to these latest amendments, the operation of the lock-out rule was modified (twice) for income years that ended on or after 12 May 2015 but before 1 July 2019 (the increased access years referred to above). The latest amendments further extend the period for which the operation of the lock-out rule is modified. The modifications now apply for income years that end on or after 12 May 2015 but before 1 July 2020. For most SBEs, this results in one further increased access year. A choice by an SBE not to use the rules in Subdiv 328-D in the 2019–20 income year will lock them out of the rules until the 2025–26 income year. Accordingly, careful consideration should be given to any choice made in the 2019–20 income year.
Frequently asked questions
Questions have often arisen in relation to the temporary increase in the IAWO threshold, so the common questions are answered below.
Is an asset acquired by an SBE before 7:30 pm on 12 May 2015 or after 30 June 2020 eligible for the temporarily higher IAWO?
No, an asset is eligible for the temporarily higher IAWO only where it is acquired by an SBE on or after 7.30 pm on 12 May 2015 and before 1 July 2020, and it is first used, or installed ready for use:
Is an asset acquired by a medium-sized business before 7:30 pm on 2 April 2019 or after 30 June 2020 eligible for the temporary IAWO?
No, an asset is eligible for the temporary IAWO only where it cost less than $30,000 and it is acquired and first used, or installed ready for use, by a medium-sized business on or after 7.30 pm on 2 April 2019 and before 1 July 2020.
Can I claim the first $20,000 (or $25,000 or $30,000) of any asset I buy?
No, the IAWO is available only if the cost of the asset was less than the IAWO threshold of $20,000, $25,000 or $30,000 depending on the acquisition date and the date it was first used or installed ready for use. If the asset cost an amount equal to or more than the IAWO threshold, the asset must be:
Can I choose the IAWO for assets I buy under the threshold, but not pool those assets which are equal to or more than the threshold?
No, if an SBE chooses the simplified depreciation rules in Subdiv 328-D, which includes the IAWO, they must adopt all of the rules in that subdivision. It is not possible to choose the IAWO for a $15,000 asset but choose to depreciate a $40,000 asset under Div 40 instead of pooling it. Entities cannot cherry pick from the provisions they want and those they don’t. Entities have a choice whether they apply Subdiv 328-D instead of Div 40 (assuming they are eligible to do so) but they cannot choose to adopt some elements of Subdiv 328-D and exclude others.
Can I choose the IAWO for some assets under the threshold and not others?
No, if an SBE chooses to apply the simplified depreciation rules in Subdiv 328-D, they must immediate deduct all assets that cost less than the IAWO threshold (of $1,000, $20,000, $25,000 or $30,000 depending on the acquisition date and the date it was first used or installed ready for use).
Can I claim the IAWO for all depreciable assets?
No, some assets such as horticultural plants and in-house software remain ineligible for the IAWO as deductions for their decline in value are unable to be worked out under Subdiv 328-D. Taxpayers who use assets to carry on a primary production business (other than horticultural plants) may choose to deduct amounts for those assets under Subdivs 40-F or 40-G or calculate their deductions under Subdiv 328-D.
Can I reduce the asset’s cost by a trade-in or non-taxable use to get under the threshold?
No, when measuring the asset’s cost against the IAWO threshold, you must use the cost of the asset before applying any trade-in value or reducing the deductible amount for any non-taxable use.
| Example |
| An SBE acquired an asset costing $30,800 including GST during the prescribed period when the $30,000 IAWO threshold applies. The asset will be used 75 per cent for a taxable purpose. Is the entity eligible for the IAWO for this asset? Calculation: $30,800 cost less $2,100 input tax credit = $28,700 × 75% TPP = $21,425 deduction IAWO available |
| Example |
| If instead the asset cost $35,200 including GST (assume the same taxable purpose proportion as above), is the entity eligible for the IAWO for this asset? Calculation: $35,200 cost less $2,400 input tax credit = $32,800 × 75% TPP = $24,600 IAWO not available, TPP of asset’s value must be pooled |
Do grouping rules apply if I buy multiple identical assets?
No, there are no asset grouping rules that apply when claiming an immediate deduction under these arrangements. The IAWO threshold applies per asset.
Do grouping rules apply in determining the entity’s aggregated turnover? Yes, the annual turnovers of relevant entities, namely entities that are:
are included in working out the aggregated turnover of the entity. Remember that annual turnover comprises only ordinary income derived in the ordinary course of carrying on a business.
Can I claim the IAWO if I am an employee?
No, the IAWO is available only to entities that are SBEs (within the meaning of s. 328-110) or medium-sized businesses (that meet the conditions in new s. 40-82).
Can I claim the IAWO if I derive personal services income? The impact of the personal services income (PSI) rules on the capital allowance rules can be summarised as follows:
Conducting a personal services business
Not conducting a personal services business
What happens when I sell the asset? If the asset was pooled, a balancing adjustment event (see s. 40-295) occurs when the asset is sold (because the taxpayer ceases to be the holder of the asset). The SBE is required to reduce the value of the pool by the TPP of the asset’s termination value. If the pool value is reduced to below zero, the excess is included in the taxpayer’s assessable income under s. 328-215. If the asset was immediately deducted under the IAWO, the SBE is required to include the TPP of the asset’s termination value in their assessable income under s. 328-215.
How is a change in the use of the asset dealt with? When an SBE adds an asset to the pool (because its cost is equal to or more than the IAWO threshold), only the asset’s TPP is included in the pool. Each year the SBE is required under s. 328-225 to re-estimate the TPP of the use of the asset and make an adjustment for the present year if the estimate differs from the original estimate (or previous estimate requiring an adjustment) by more than 10 percentage points. This adjustment is made to the opening pool balance prior to calculating the deduction for the pool for the income year.
Can an SBE always write-off the pool value if its balance at the end of the year is less than $20,000 (or $25,000 or $30,000)?
Not necessarily.
Closing pool balance Under s. 328-200, the closing pool balance at the end of an income year is:
the opening balance:
Low pool value However, in determining whether the pool has a ‘low pool value’ at the end of an income year which is claimed as a deduction under s. 328-210 if it is below the IAWO threshold, the balance is instead calculated as follows:
the opening balance:
If the ‘low pool value’ is less than the IAWO threshold at the end of that income year, it must be claimed as a deduction. The increased threshold of $30,000 applies to income years that end on or after 2 April 2019 but before 1 July 2020. Thereafter, it reverts to $1,000. This is summarised in the table below.
Note The low value calculation does not take into account any decline in value of the assets. Also, the deduction under s. 328-210(2) where the pool has a low pool value is mandatory i.e. there is nothing in the section that refers to the taxpayer being able to choose to deduct their low pool value balance or continue claiming a 30 per cent deduction each year.
| Income year | Threshold against which the ‘low pool value’ is compared |
| 2014–15 to 2017–18 | $20,000 |
| 2018–19 | $30,000 |
| 2019–20 | $30,000 |
| From 2020–21 | $1,000 |
Will the ATO pay me $20,000 (or $25,000 or $30,000)? No! The IAWO is an immediate deduction for the cost of eligible assets for the decline in value which would ordinarily be claimed over their effective lives in the form of depreciation. The increased IAWO threshold merely provides a timing advantage i.e. bringing forward a deduction that the SBE would have received anyway. The IAWO is not a rebate, an offset or any other form of a refund of tax, and the ATO will not be sending any payments of $20,000, $25,000 or $30,000 to entities that claim the IAWO.
While the new IAWO will continue to be popular with businesses, it pays to remember that tax outcomes should never be the main driver of commercial purchasing decisions. Businesses should not purchase equipment or vehicles they don’t need just to secure an immediate deduction for the purchase price. Why spend $10,000 to get a $3,000 deduction unless you actually need the asset for your business? As welcome as the new arrangements are, this is now the third time the government has extended the IAWO — from originally 30 June 2017 to 30 June 2018, then to 30 June 2019, then to 30 June 2020. To provide certainty to business taxpayers, it would be even more pleasing to see the IAWO legislated as a permanent feature of the tax law, providing an ongoing immediate deduction for the cost of purchasing depreciating assets up to a prescribed threshold … preferably larger than $1,000.[/et_pb_text][/et_pb_column]
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With a Federal election expected to be scheduled for either 11 or 18 May, Treasurer Frydenberg’s first Budget is a crucial platform from which the Government will unofficially launch its election campaign, as it attempts to convey the message that the economy is strong under its management.
In this episode of Tax Yak, Robyn yaks with TaxBanter director, Neil Jones, about the key tax and superannuation measures announced in the Federal Budget on 2 April. Their analysis and commentary will provide you with an understanding of how the measures will affect you and your clients. The discussion will also include an analysis of the key statements made by Bill Shorten in his Opposition Budget-in-reply speech on 4 April.
Host: Robyn Jacobson
Guest: Neil Jones
Recorded: 5 April 2019
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On 1 July 2018, STP reporting was introduced for substantial employers (20 or more employees as at 1 April 2018). Under STP reporting, an employer reports information on their 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 passed by the Parliament on 12 February 2019 (enacted on 1 March 2019) — extends the requirement to report tax and superannuation information through STP to the ATO at the time of the payroll to all employers from 1 July 2019.
There is no need to conduct a headcount on 1 April this year because, from 1 July 2019, all employers will be subject to STP reporting.
This is the most significant change to reporting systems for businesses since the introduction of the GST on 1 July 2000. More than 70,000 employers are now reporting through STP. The ATO expects that as STP reporting is extended to small employers, approximately a further 749,000 employers will be subject to STP reporting.
Of course, small employers are welcome to — and in fact are encouraged to — start reporting through STP voluntarily before they are required to. More than 27,000 small employers are already reporting voluntarily through STP.
Employers yet to start reporting through STP will need to undertake a review of their payroll systems because STP reports are submitted directly to the ATO by STP-enabled compliant software; tax agents cannot lodge STP reports through the tax agent portal.
Some employers will easily transition to STP reporting because they already use electronic payroll solutions which will only necessitate the built-in STP-reporting function to be enabled or the software to be upgraded. However, other ‘digitally-disengaged’ employers (estimated to be around 10 per cent of small employers) who don’t currently use an electronic payroll solution will find the transition more difficult, particularly those who employ only a few people and maintain very basic, and manual, business records and systems.
Over the past 18 months, the ATO has been working with a group of stakeholders — including tax agents and practitioners, BAS agents and bookkeepers, small business owners, and representatives from the superannuation industry and digital service providers (DSPs, otherwise known as software developers). Recognising early that one of the biggest challenges was going to be extending STP to micro employers (those with four or fewer employees), the focus of this working group was to formulate and design alternative reporting solutions and options for micro employers.
The special nature of employers with closely held payees was also considered, as they routinely do not have a regular payroll cycle and often determine or finalise their payroll for closely held payees after the end of the income year, often with their accountant or tax agent as part of the annual compliance process. Special reporting rules have been designed for this specific group of employers.
Joint ATO webinar on 27 March 2019
Our webinar covered:
Our expert presenters, Robyn Jacobson and Michael Karavas, bring their knowledge in the area to ensure that you understand what is involved to implement STP, now that it has been extended to all employers.
Robyn Jacobson (FCA FCPA CTA Registered Tax Agent) is a Senior Tax Trainer with TaxBanter. Robyn regularly consults with The Treasury, the ATO and the professional bodies on technical issues. She has been involved in the ATO’s STP consultation for more than three years, working with, and assisting, the ATO with the design of the STP legislation, alternative reporting solutions for micro employers, and guidance products issued by the ATO. Robyn co-presented an STP webinar in March 2018 with John Shepherd, Assistant Commissioner at the ATO and Program Lead of STP.
Michael Karavas is a Director at the ATO and Design Lead of STP. Michael has over 25 years experience in tax administration with most of the last 20 years focusing on the implementation of new Government initiatives. For two years, Michael was seconded to The Treasury where he was the Policy Lead on the development of STP. Michael also chairs the STP Design Working Group which works collaboratively with a broad range of industry stakeholders on STP design issues.
Our webinar is suitable for all tax agents, BAS agents, bookkeepers, payroll officers, and individuals who fulfil a payroll function within a business.
Our previous Banter Blogs Are clients ready for Single Touch Payroll from 20 December 2017, Prepare now for Single Touch Payroll from 9 May 2018, and New annual registered agent authorisations for Single Touch Payroll from 9 October 2018 discuss the obligation to report payroll information under STP.
STP reporting requires the employer to report to the ATO the following information at the time of the payroll:
Each payroll cycle, STP-enabled electronic payroll software automatically sends to the ATO:
Note
If an employer fails to withhold or report PAYG withholding amounts though STP or activity statements, new measures contained in the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Act 2018 (enacted on 29 November 2018) will, from 1 July 2019, deny a tax deduction to the employer for the payment made to the worker (the measures also apply in respect of contractors where no-ABN withholding applies but this is beyond the scope of STP). The denied deduction may be restored if the employer makes a voluntary disclosure to the ATO.
| Term | Explanation |
|---|---|
| Pay event | This is the electronic file 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. Accordingly, amounts that do not attract a PAYG withholding obligation are not reported through STP. 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. Where an out-of-cycle payment, such as a bonus or a termination payment, is paid, the employer can either report the information:
|
| Update event | 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. |
| 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 (subject to transitional rules announced by the ATO; see below). On 30 June each year, the status of the employees’ information in myGov changes from YTD to Not tax ready. Then once the ATO receives the Finalisation declaration, the status of the employees’ information in myGov changes from Not tax ready to Tax ready. If an Update event results in additional/new information being provided to the ATO after 14 July, the employer must send another Finalisation declaration to the ATO. This advises the ATO that the previously-finalised information needs updating, which will necessitate the ATO advising the affected employee(s) who may have already lodged their income tax return for that year. The amended Finalisation declaration should be reported to the ATO within 14 days of identifying the error. The employer can amend a Finalisation declaration up to five years after the end of a financial year. |
| Deferral | 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. |
| Exemptions | 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. |
The ATO has approved, for 2018–19, the following exemptions from STP where certain conditions are satisfied:
Website
Further information about these exemptions is available at QC 56187.
| Must be reported through STP |
|
| May be reported through STP |
|
| Cannot be reported through STP |
|
Note
Payments to contractors are out-of-scope and are not required to be reported through STP (although payments to contractors covered by a voluntary agreement can be reported through STP). Contractors managed within a payroll system may be reported through STP; contractors managed outside a payroll system (e.g. via accounts payable) do not have to be reported through STP.
I am a small employer. When do I have start reporting? What if I’m not ready by then?
Passage of the amending legislation through Parliament was delayed until 12 February 2019 — just over four months out from the commencement date for small employers. The ATO recognised that it was unrealistic to expect all small employers to start reporting on 1 July 2019, and there needed to be sufficient time for alternative solutions to enter the market. Low-cost and no-cost solutions are currently being developed by a number of DSPs and are starting to enter the market; but more time is needed.
In recognition of this, the ATO has announced that all small employers will not have to start reporting through STP until after 30 September 2019. If a small employer can start reporting by 30 September 2019, they do not need to apply for additional time (including for the period between 1 July 2019 and 30 September 2019). If they are not ready by 30 September 2019, they will need to apply for a deferral or an exemption.
If a small employer feels that they are still not ready to start reporting through STP by 30 September 2019, the ATO will consider applications for deferral or exemption on a case-by-case basis.
The ATO has recognised that some small employers, particularly those who are ‘digitally-disengaged’ may find it difficult to transition to STP reporting. Accordingly, a special range of deferrals and exemptions will be available to small employers, subject to certain conditions.
When assessing the request for a deferral or exemption, the ATO will consider whether:
Note
The granting of any relief is on the condition that the business applicant accepts they must take up a digital option at the expiration date.
An online STP Deferrals and Exemptions solution is available for employers and their agents. Agents can lodge transitional deferrals for multiple clients in the one request.
Requests that:
If the application is accepted, the agent will receive immediate confirmation:
If the application is not immediately accepted, it will be escalated and the ATO will contact the employer within 28 days.
The ATO may grant an employer additional time to commence STP reporting. A deferral should be applied for via the ATO’s automated online deferral process. You may need to provide additional evidence to accompany your application. Documents can be uploaded through the online solution.
The ATO may grant an employer an exemption of up to 12 months to exempt them from reporting through STP for a full financial year. The ATO will assess whether to grant an exemption on a case-by-case basis.
An exemption should be applied for via the ATO’s automated online deferral process. You may need to provide additional evidence to accompany your application. Documents can be uploaded through the online solution.
In addition to the considerations listed above, the small employer will also have to meet at least one of the following criteria:
Relief in the form of less frequent reporting will be available for micro employers (four or fewer employees), subject to certain conditions. If granted, the micro employer will only be required to report through STP on a quarterly basis instead of at the time of the payroll. This quarterly reporting arrangement will be available for two years until 30 June 2021.
When assessing the request for quarterly reporting, the ATO will consider whether:
In addition to the considerations listed above:
Note
The granting of any relief is on the condition that the business applicant accepts they must take up a digital option at the expiration date.
The ATO has been working with the DSPs to design and develop a range of alternative no-cost and low-cost STP reporting solutions which will be available in the market from early 2019. These solutions will best suit micro employers (with one to four employees) who need to report through STP, but do not currently have payroll software.
The no-cost and low-cost STP solutions:
These solutions may include mobile apps, simple reporting solutions and portals.
Website
The ATO publishes a list of these products (the order in which they are listed has been randomly generated and does not imply any preference or endorsement by the ATO of the suppliers listed).
Transitioning employers with closely held payees
During consultation, the ATO came to understand the impact that STP would have on employers with closely held payees, who routinely do not have a regular payroll cycle and often determine or finalise their payroll for closely held payees after the end of the income year, usually with their accountant or tax agent as part of the annual compliance process.
Definition
A ‘closely held payee’ is someone who is directly related to the entity from which they receive payments, for example:
They access funds from the business during the year and often don’t classify them as salaries or wages (e.g. by putting it to a loan account before reclassifying an amount as wages or a director’s fee after year-end). This means that they cannot report real-time transactions through STP.
They may allocate payments during the year to:
Accordingly, special reporting rules have been designed for employers who have closely held payees.
Substantial employers have been required to report under STP since 1 July 2018. The ATO’s administrative approach for substantial employers who have closely held payees is that these employers must finalise their STP data by:
In providing an administrative concession for small employers who have closely held payees, the ATO has recognised the existing concession for lodging payment summaries by the due date for lodgment of the payer’s tax return.
The ATO’s administrative approach for small employers with closely held payees is threefold:
Note
This concession is only available for closely held payees. The standard real-time STP reporting deadlines (and 14 July for the Finalisation declaration) apply to arm’s length employees.
When assessing the request for ongoing quarterly reporting and an extended due date to finalise, the ATO will consider whether:
The employer will have to be registered for PAYG withholding.
This concession does not apply to:
In exchange for allowing these employers to report on a quarterly basis, there is an expectation that they will make a reasonable estimate each quarter of amounts paid to closely held payees.
Any one of the following methods may be used to make a reasonable estimate each quarter:
How do I start reporting through STP?
No, employers do not have to register for STP. Once the employer lodges their first STP report, the ATO will know that the employer is now reporting through STP.
The specific answer to this question will depend on the software being used. The DSP will be able to provide the employer with information and advise them which of the following methods should be used:
This may be summarised as follows:
| At commencement of STP reporting: |
Active employees | Terminated and inactive employees |
|---|---|---|
| Report an opening YTD balance through an update event |  |
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| Report YTD balances through the first pay event | |
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| YTD amounts through the first pay event | |
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| YTD amounts through later update event | |
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| YTD amounts through the first pay event | |
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| Issue payment summary and lodge a PSAR for payments made before the first pay event | |
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| Start STP reporting with zero YTD balances, issue payment summary and lodge a PSAR for payments made before the first pay event | |
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How is superannuation reported through STP?
Under STP, the employer does not report the payment of superannuation to the ATO. This is because this information is already being captured and reported to the ATO via the Member Account Transaction Service (MATS) report (these reports are lodged with the ATO by APRA-regulated superannuation funds when they receive contributions).
STP requires the employer to provide, via the employee-level reports, the liability to pay SG per employee based on 9.5 per cent × their ordinary times earnings for the pay period. Under STP, the employer is required to report either the YTD liability for SG or the employee’s YTD ordinary times earnings, or both if the software allows. This information is then matched to the data received from the funds via the MATS reports to assist in identifying non-compliance with SG obligations.
In some industries, pursuant to an award or enterprise agreement, the employer may contribute more than the standard 9.5 per cent, say 15 per cent, of their employees’ ordinary times earnings. Often the employer’s payroll system does not break up the contribution into the standard SG amount (9.5 per cent) and (in this example) the additional component of 5.5 per cent.
The ATO accepts that STP can report the liability for the entire 15 per cent contribution. If, however, the payroll system separately identifies the components, the employer can choose whether to report the additional component in addition to the standard 9.5 per cent SG amount or just the SG amount.
Like the additional amounts discussed above, the ATO accepts that where an employer is contributing a salary sacrificed amount in addition to the standard SG amount, the employer can choose to report through STP either:
The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 2) Bill 2017 (this Bill is currently before the Senate) proposes to amend the Superannuation Guarantee (Administration) Act 1992, from 1 July 2018 to:
The Treasury Laws Amendment (2004 Measures No. 4) Act 2019 which contains the STP amendments extends the STP reporting requirements to include any salary sacrificed amounts that would have constituted ordinary time earnings or salary and wages had they been paid directly to the employee. Requiring that sacrificed amounts be reported under STP ensures that the Commissioner has visibility of all amounts that are relevant to working out an employee’s pre-salary sacrifice base and their SG entitlements.
Accordingly, for STP purposes, the amount reported by employers will include salary sacrificed amounts contributed to superannuation because they will be taken to form part of ordinary times earnings. Salary-sacrificed amounts in the form of fringe benefits do not affect the calculation of ordinary times earnings and are therefore not reported through STP.
How do I report year end amounts such as RFB and RESC?
Under STP, the employer has a number of choices as to how they report to the ATO the annual Reportable Fringe Benefit Amount (RFBA) and Reportable Employer Superannuation Contributions (RESC) (RESC are additional to the compulsory contributions an employer must make).
The employer may:
If the employer can’t, or chooses not to, report these amounts through STP, they must provide the information to the employee on a payment summary (by 14 July) and provide the ATO with a payment summary annual report (PSAR) by 14 August.
Important
Do not include amounts on a payment summary that are reported through STP.
Online commencement forms
When an employee commences employment, the existing process of completing the employee commencement forms has been streamlined through STP.
Employers now have the option of completing the following forms online:
There are three ways these forms can now be completed:
Website
Further information is available from QC 57579.
STP authorisations
The STP pay event is an approved form submitted to the Commissioner, and requires the following each time it is lodged:
The process for clients to authorise their registered agent to act on their behalf for STP lodgment purposes has been streamlined to avoid a declaration having to be obtained every single time there is an STP lodgment. The STP engagement authority allows eligible employers to provide this to their agent once a year instead of at each pay event.
Website
Further information is available in our Banter Blog titled New annual registered agent authorisations for Single Touch Payroll from 9 October 2018 or from QC 56773.
How does my software connect to the ATO?
STP-enabled software can connect directly to the ATO in the following ways:
How does your firm keep up to date with all the constant tax changes? In this episode of Tax Yak, Robyn yaks with Paul Meissner, a Chartered Accountant who runs a 21st century accounting firm that uses cloud solutions, upfront agreed pricing and no time sheets.
The discussion covers:
Host: Robyn Jacobson
Guest: Paul Meissner
linkedin.com/in/meissnerpaul/
fromthetrenches.com.au/
freedommentoring.com/
Recorded: 26 February 2019
On 1 July 2018, STP reporting was introduced for substantial employers (20 or more employees as at 1 April 2018). Under STP reporting, an employer reports information on their 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) Bill 2018 was passed by the Parliament on 12 February 2019 (at the time of writing, the Bill awaits Royal Assent) — extends the requirement to report tax and superannuation information through STP to the ATO at the time of the payroll to all employers from 1 July 2019.
There is no need to conduct a headcount on 1 April this year because, from 1 July 2019, all employers will be subject to STP reporting.
This is the most significant change to reporting systems for businesses since the introduction of the GST on 1 July 2000. Currently more than 60,000 employers are now reporting through STP. The ATO expects that once STP reporting is extended to small employers, approximately a further 749,000 employers will be subject to STP reporting.
These employers will need to undertake a review of their payroll systems because STP reports are submitted directly to the ATO at the time of the payroll using STP-enabled compliant software. Some employers will easily transition to STP reporting because they already use electronic payroll solutions which will only require the built-in STP-reporting function to be enabled or the software upgraded. However, other ‘digitally-disengaged’ employers who don’t currently use an electronic payroll solution will find the transition more difficult, particularly those who employ only a few people and maintain very basic, and manual, business records and systems.
Over the past 18 months, the ATO has been working with a group of stakeholders — including tax agents and practitioners, BAS agents and bookkeepers, small business owners, and representatives from the superannuation industry and digital service providers (DSPs, otherwise known as software developers). Recognising early that one of the biggest challenges was going to be extending STP to micro employers (those with four or fewer employees), the focus of this working group was to formulate and design alternative reporting solutions and options for micro employers.
The special nature of closely held employers was also considered, as they routinely do not have a regular payroll cycle and often determine or finalise their payroll for closely held employees after the end of the income year, often as part of the annual compliance process. Special reporting rules (with conditions) have been designed for this specific group of employers.
During the webinar, we will discuss:
We will also dispel some of the common myths regarding STP, such as “The ATO requires all employers to purchase expensive payroll software to report through STP”.
Our expert presenters, Robyn Jacobson and Michael Karavas, bring their knowledge in the area to ensure that you understand what is involved to implement STP, now that it has been extended to all employers.
Robyn Jacobson (FCA FCPA CTA Registered Tax Agent) is a Senior Tax Trainer with TaxBanter. Robyn regularly consults with The Treasury, the ATO and the professional bodies on technical issues. She has been involved in the ATO’s STP consultation for more than three years, working with, and assisting, the ATO with the design of the STP legislation, alternative reporting solutions for micro employers, and guidance products issued by the ATO. Robyn co-presented an STP webinar in March 2018 with John Shepherd, Assistant Commissioner at the ATO and Program Lead of STP.
Michael Karavas is a Director at the ATO and Design Lead of STP. Michael has over 25 years experience in tax administration with most of the last 20 years focusing on the implementation of new Government initiatives. For two years, Michael was seconded to The Treasury where he was the Policy Lead on the development of STP. Michael also chairs the STP Design Working Group which works collaboratively with a broad range of industry stakeholders on STP design issues.
Our webinar is suitable for all tax agents, BAS agents, bookkeepers, payroll officers, and individuals who fulfil a payroll function within a business.
A slidepack will be available on the day.
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. |
With limited Parliamentary sitting days until the May Federal election, there is uncertainty about the status of a range of tax measures.
In this episode of Tax Yak, Robyn yaks with fellow TaxBanter trainer, Nicole Rowan, about which tax measures are still before Parliament, which are still announcements, and what we can expect leading up the election.
Shortly after the release of this episode of Tax Yak, we published a TaxBanter Blog that summarises those Bills which have passed and those which remain before Parliament. This can be accessed from our Banter Blog page.
Host: Robyn Jacobson
Guest: Nicole Rowan
https://www.linkedin.com/in/nicole-rowan-78437b44/
Recorded: 25 February 2019
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How does our tax system measure up internationally? Do you have clients who live and work overseas?
In this episode of Tax Yak, Robyn yaks with a fellow TaxBanter trainer, Michael Messner, about:
Host: Robyn Jacobson
Guest: Michael Messner
https://www.linkedin.com/in/michael-messner/
Recorded: 15 February 2019
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Note: This blog article was edited on 17/04/19 to include recent developments.
This year, Australian voters will elect members of the 46th Parliament. According to s. 28 of the Commonwealth of Australia Constitution Act, an election for the members of the House of Representatives must be held every three years. The term of service of a senator is six years, commencing on the first day of July following the day of their election, although half-Senate elections are required to be held every three years, thereby rotating half the senators each election. Incidentally, elections must always be held on a Saturday.
The Constitution does not actually require elections for the House of Representatives and the Senate to be held simultaneously. While there is a precedent for holding separate elections, this is rare, and both governments and voters have long preferred that elections for the two Houses be held simultaneously to limit costs. In any event, voters could have ‘campaign fatigue’ if two federal elections were held in the same year.
A half-Senate election for the State senators only must be held no later than 18 May 2019, and 2 November 2019 is the latest date that an election must be held for the members of the House of Representatives and the Territory senators. It is improbable that separate elections will be held, so while the Government has not yet announced the date of the election, it is expected that a simultaneous election will be held on either Saturday 11 or 18 May 2019. This has forced the rescheduling of the Federal Budget (which has been brought down on the second Tuesday in May since 1994) to Tuesday 2 April 2019.
While the two major parties are yet to officially launch their election campaigns, details of the Opposition’s tax and superannuation policies are starting to emerge.
Update since original release of blog
The Prime Minister has called a Federal election for Saturday 18 May 2019.
Note that the realisation of Labor’s policies outlined below are dependent on:
On 21 June 2018, the Government secured its personal tax cuts package worth $13.4 billion over the forward estimates period to be delivered in three stages from 1 July 2018, 1 July 2022 and 1 July 2024.
Labor has stated it will support the first stage of the Government’s personal tax cuts package that began on 1 July 2018, but as part of its promise to deliver larger, permanent, tax cuts from 1 July 2019, it intends to unwind Stages 2 and 3 (legislated from 2022 and 2024).
Update since original release of blog
In a media release issued on 4 April 2019 accompanying his Budget-in-Reply speech, the Opposition Leader, Bill Shorten, announced that, under Labor, workers earning up to $37,000 a year will receive a tax cut from 1 July 2018 of up to $350 by way of an increase in the Low and Middle Income Tax Offset (LMITO).
This further increases the LMITO beyond the Government’s plan (announced as part of the 2019–20 Federal Budget) to increase the offset from $200 to $255 from 1 July 2018. Under Labor, those earning between $37,000 and $90,000 would receive the maximum offset of $1,080, whereas under a Coalition government only those earning between $48,000 and $90,000 would receive the full $1,080.
Labor has stated that it remains opposed to the removal of the Temporary Budget Repair (TBR) levy which was imposed at the rate of two per cent of each dollar of a taxpayer’s taxable income over $180,000 from 1 July 2014 to 30 June 2017 (i.e. the 2014–15 to 2016–17 income years only).
Labor’s position is that providing a ‘tax cut to people earning more than $180,000 isn’t justified’. Labor describes the reduction in the rate of tax when the TBR levy was removed in 2017 as a ‘tax cut’.
Accordingly, Labor intends to increase the top personal tax rate for four years from 45 per cent to 47 per cent (to 49 per cent including the Medicare levy) for those individuals whose taxable income exceeds $180,000. It is unclear whether this would be achieved by reinstating the now-lapsed two per cent TBR levy or increasing the highest marginal tax rate from 45 to 47 per cent, and the start and end dates of the proposed tax increase have not been announced.
Update since original release of blog
In a radio interview on 5AA Mornings on 5 April 2019, the Shadow Assistant Treasurer, Andrew Leigh, confirmed that Labor would reintroduce the TBR levy from 1 July 2019.
This would also have the effect of returning the FBT rate to 49 per cent (as it was for three years) and would result in consequential changes to other tax rates linked to the top personal tax rate.
During 2018, Labor supported the Government’s 2017–18 Federal Budget measure which proposed to increase the Medicare levy by 0.5 per cent (lifting it to 2.5 per cent) from 1 July 2019 but was opposed to the increase for those earning less than $87,000.
When the Government announced in the 2018–19 Federal Budget that it would not proceed with the proposed increase — because the planned expenditure on the National Disability Insurance Scheme could now be funded through the Budget — Labor reversed its position and no longer supports an increase in the Medicare levy for those earning above $87,000.
Proposed consequential changes to other tax rates linked to the top personal tax rate, such as the FBT rate, will also not proceed.
Australia is only one of three countries in the world (along with New Zealand and Malta) with a full imputation system, and is the only country that offers fully refundable franking credits.
In what is arguably one of the most divisive and controversial Labor policies, it is proposed that, from 1 July 2019, Labor would reverse the decision of the Howard Government to allow cash refunds from 1 July 2000 for excess franking credits. Under this policy, franking credits for individuals and superannuation funds would no longer be a refundable tax offset and would return to being a non-refundable tax offset — cash refunds would not be available if the franking credits exceed the taxpayer’s tax liability.
Labor expects that the policy won’t affect 92 per cent of individual taxpayers (based on data from 2014–15 tax returns).
Self managed superannuation funds (SMSFs) account for 90 per cent of all cash refunds paid to superannuation funds — even though, according to Labor, SMSFs account for less than 10 per cent of all superannuation members in Australia — so it not expected that APRA-regulated superannuation funds will be significantly affected.
More detail is contained in Labor’s fact sheet, including the history of the current regime and Labor’s justification for saving the Budget $11.4 billion over the forward estimates period and $59 billion over the decade to 2028–29.
Comment
Labor has been silent on whether its franking credit policy would affect companies that are not eligible to receive refundable tax offsets resulting from excess franking credits but can convert excess franking credits into carry forward tax losses under s. 36-55 of the ITAA 1997.
Exclusions would apply to:
Under the Pensioner Guarantee:
Note
Labor’s use of the term ‘pensioner’ here refers to individuals receiving a government pension, not those drawing an income stream (commonly referred to as a ‘pension’) from their superannuation fund.
On 19 September 2018, the Treasurer, Josh Frydenberg, asked the Standing Committee on Economics to inquire into the implications of removing refundable franking credits. Under the Terms of Reference, the Committee will inquire into and report on the use of refundable franking credits, their benefits and the implications of their removal, including:
Submissions made to the inquiry and details of public meetings are available here.
In 1985, the Labor Hawke Government (Paul Keating was the Treasurer at the time) changed the negative gearing rules to remove the quarantining of property losses and allowed them to be applied against income from labour (i.e. wages). Then, six months later, after the tax summit in July 1985, the Hawke Government reversed this change, once again quarantining negatively geared interest expenses on new transactions so that they were claimable only against rental income, not other income (these losses were able to be carried forward to offset property income in later years).
The inability to apply negatively geared property losses against other income was deeply unpopular with property investors, so in July 1987, after successful lobbying by the property industry citing concerns about rising rents and lack of affordable housing, the Hawke Government once again reversed its decision and allowed negatively geared property losses to be applied against income from labour; this treatment has remained untouched to this day — negative gearing has continued to be a divisive tax policy topic.
In another highly controversial policy, Labor proposes to limit negative gearing to new housing from a yet-to-be-determined date after the next election. All investments made before this date will not be affected by this change and will be fully grandfathered.
This will mean that taxpayers will continue to be able to deduct net rental losses against their other taxable income, providing the losses come from newly constructed housing.
Notably, the proposed changes to negative gearing would apply not only to property but also to share and similar investments, so that losses from new investments in shares and existing properties would be quarantined against investment income, and could continue to be carried forward to offset the final capital gain resulting from the sale of the investment.
Update since original release of blog
In an address on 29 March 2019 to the Financial Services Council, the Shadow Treasurer, Chris Bowen, announced that Labor’s reforms to negative gearing will commence from 1 January 2020 and confirmed that there will be grandfathering of existing investments acquired before that date.
Labor proposes to halve the CGT discount for all assets purchased after a yet-to-be-determined date after the next election. This will reduce the CGT discount for assets that are held for more than 12 months from the current rate of 50 per cent to 25 per cent. The change would not affect investments held by superannuation funds which instead attract a one-third CGT discount (i.e. a tax rate of 10 per cent on capital gains) when the asset is held for more than 12 months.
Grand-fathering will apply to all investments made before the date of effect, which will continue to attract the full 50 per cent discount.
Comment
Labor’s policy document states that:
The CGT discount will not change for small business assets. This will ensure that no small businesses are worse off under these changes.
It is unclear whether this is referring to the small business 50 per cent reduction which is available as part of the small business CGT concessions in Div 152 of the ITAA 1997.
On 11 May 2017, as part of the Budget-In-Reply speech delivered by the Leader of the Opposition, Bill Shorten, reference was made to 48 Australian taxpayers who, in 2014–15, earned more than $1 million and paid no tax at all, not even the Medicare levy. Using deductions, they reduced their taxable income from an average of nearly $2.5 million to below the tax-free threshold. One of the biggest deductions claimed was amounts paid to their accountants — averaging over $1 million.
This prompted Labor to announce that it would cap the amount individuals can deduct for the management of their tax affairs at $3,000. According to Labor, the change from a yet-to-be-determined date would affect fewer than one per cent of taxpayers and would save the Budget $1.3 billion over the medium-term.
No further detail on this policy is available so it is difficult to determine how the policy would apply in practice, but the following issues have been identified by the tax profession:
These types of arrangements generally involve additional work by tax agents. The more complex the tax affairs, the higher the cost of managing those affairs, and $3,000 may be well below the fee actually being charged to the taxpayer.
Notably, the tax return for 2014–15 (see below) didn’t segregate the types of claims that could be made at item D10,
however, for the first time, the tax return for 2017–18 (see below) now separately identifies the types of claims that can be made at item D10, providing greater transparency to the ATO.
On 30 July 2017, Labor announced that it would tackle a perceived loophole that allows the use of discretionary trusts to minimise tax paid by allocating income to family members who have lower marginal tax rates by accessing multiple tax-free thresholds, unlike wage-earners who can only access one tax-free threshold.
Statistics from the Parliamentary Budget Office from 2013–14 show that the greatest proportion of taxpayers who receive a discretionary trust distribution are those who earn less than the tax-free threshold of $18,200.
Labor will effectively extend the principle of John Howard’s original reform which introduced Div 6AA into the ITAA 1936 from 1 July 1979 to target trust distributions made to minors. Under the proposed reforms, Labor will introduce a new standard minimum tax rate of 30 per cent on discretionary trust distributions made to adult beneficiaries from 1 July 2019.
In circumstances where the minimum tax rate on discretionary trust distributions is lower than what would be paid under the normal marginal tax scales, the higher rate would apply.
Labor states that:
A 30 per cent minimum tax rate is less punitive than John Howard’s reform of penalising income distributions to minors at the top marginal tax rate.
Labor estimates that the reforms will not affect 98 per cent of all individual taxpayers in Australia and will affect 318,000 discretionary trusts.
Comment
It is unclear what mechanism would be used to impose the minimum 30 per cent tax rate; it could be a withholding tax imposed at the trustee level or additional top-up tax payable by the adult beneficiary.
The minimum 30 per cent tax rate would apply only to discretionary trusts, and would not apply to non-discretionary trusts such as:
Labor’s policy will also not apply to:
This saga-laden topic has been the subject of a number of Banter Blogs, including:
On 26 June 2018, Bill Shorten announced that Labor would repeal the enacted tax cuts for companies with an annual aggregated turnover of between $10 million and $50 million. At that time, Labor was still deciding whether it would also repeal the enacted tax cuts for smaller companies with an annual turnover of between $2 million and $10 million. It was committed to retaining the lower tax rate for companies under $2 million turnover.
However, on 29 June 2018, following a shadow cabinet meeting, Bill Shorten reversed his position and announced that Labor would not repeal the enacted tax cuts that are already legislated to come into effect. He stated:
I now accept that simply stopping at $10 million would have created more confusion, uncertainty.
Accordingly, this means that companies under $50 million turnover will retain their tax cuts and Labor will not go to the election undertaking to increase company tax rates that have already fallen or are legislated to fall.
Notably, Labor supported without delay an amending bill in October 2018 which fast-tracked the previously legislated reduction of the tax rate for companies that are base rate entities.
Currently, businesses can claim a deduction for the decline in value of their depreciating assets over their effective lives, unless the taxpayer is a small business entity in which case an immediate deduction is available as long as the asset cost less than $20,000. This concession is legislated to expire on 30 June 2019, when the instant asset write-off threshold reverts to $1,000.
On 29 January 2019, the Prime Minister, Scott Morrison, announced that the Government would extend the instant asset write-off threshold — for the third time — to 30 June 2020, and increase the threshold from $20,000 to $25,000 with effect from 29 January 2019. This is subject to the passage of amending legislation which is expected to be introduced into Parliament in February 2019.
Labor has announced it will back the extension so these two changes should move through Parliament without delay during February 2019.
Labor has released a fact sheet on its proposed Australian Investment Guarantee (AIG) which will allow all businesses from 1 July 2020 to:
| Example adapted from Labor fact sheet |
Manufacturing company A is struggling to purchase a new $10 million piece of machinery that would greatly enhance its productivity and output allowing it to expand and create additional jobs.
Current arrangements (without the Australian Investment Guarantee)Under normal depreciation rules for this piece of machinery (assuming a straight line depreciation method) manufacturing company A is allowed to deduct 10 per cent or $1 million of the $10 million in each year over the effective 10-year life of the asset. Arrangements with Labor’s Australian Investment GuaranteeUnder Labor’s AIG, manufacturing company A will be able to immediately expense 20 per cent ($2 million) of its investment in the first year. The remaining 80 per cent ($8 million) would then be depreciated over the effective life of the asset from the first year in line with the original depreciation schedule — which in this case is 10 per cent per year, or $800,000 of the $8 million. This means Manufacturing company A can write off a total of $2.8 million in the first year ($2 million plus $800,000) of its investment (instead of $1 million under existing arrangements). This means the company has additional immediate cash flow, which tips the balance and triggers the positive investment decision. The company can then use the extra cash flow to bring forward other investments and hire new employees. |
The AIG is a permanent accelerated depreciation scheme and would operate indefinitely.
Note
Labor has delayed the introduction of the AIG by 12 months to 1 July 2021 due to its supporting the Government’s decision to fast-track the reduction of the corporate tax rates for companies under $50 million.
The following assets will be eligible for the AIG:
Comment
It is unclear whether Labor would retain some type of permanent asset write-off for assets costing less than $20,000 (which is being increased to $25,000 from 29 January 2019) and whether such a write-off would be confined to small business entities or available to all businesses.
The following assets will not be eligible for the AIG:
In the ALP National Platform Consultation Draft released in April 2018, Labor set out its proposed superannuation policies.
Labor will reduce the non-concessional contributions cap from $100,000 to $75,000. No start date has been announced.
Where an individual’s Div 293 income (taxable income plus superannuation contributions) exceeds the Div 293 income threshold, an additional 15 per cent tax is payable on concessional contributions (i.e. a total tax rate of 30 per cent instead of 15 per cent).
The Div 293 income threshold was $300,000 from 2012–13 to 2016–17 and was reduced to $250,000 from 1 July 2017.
Labor will reduce the Div 293 income threshold from $250,000 to $200,000. No start date has been announced.
The catch-up concessional contributions measure allows individuals to access their unused concessional contributions caps on a rolling basis for five years, provided their total superannuation balance is less than $500,000 at the end of the previous financial year. Amounts carried forward that have not been used after five years will expire. The measure started on 1 July 2018 but 2019–20 is the first financial year in which individuals can access unused concessional contributions.
Labor will remove the catch-up concessional contributions measure. No start date has been announced.
Labor will remove the tax deductibility of personal contributions, which has been available since 1 July 2017. No start date has been announced.
This infers that the unpopular ‘10 per cent rule’ could be reinstated which would significantly restrict the ability of individuals to claim a deduction for personal contributions, forcing them to utilise salary sacrifice arrangements through employers where available or forgo the deduction.
Labor will end the freeze on the increase in the rate of the Superannuation Guarantee (SG) from 9.5 per cent to 12 per cent (when prudent).
The rate of SG is legislated to increase to:
Labor has announced it will phase out the $450 minimum monthly income threshold for eligibility for SG contributions, in recognition that the income eligibility threshold disadvantages people who work part-time, casually and in multiple low‑paid jobs.
No start date has been announced.
Labor has announced it will prospectively restore the prohibition on direct borrowing by SMSFs for housing investments, i.e. remove the ability for SMSFs to utilise limited recourse borrowing arrangements to acquire property. This infers that existing arrangements would be grand-fathered.
No start date has been announced.
Labor has announced it will implement a number of measures targeting ‘multinational tax avoidance and high wealth tax dodgers’, saving the Budget $4.8 billion over the next decade.
These measures include:
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