Archive for year: 2021

ATO scrutinising gifts or loans from overseas

The ATO has recently issued an alert warning taxpayers against disguising undeclared foreign income as gifts or loans from related overseas entities, including family and friends. It says it has continued to encounter situations where Australian resident taxpayers have derived amounts of income or capital gains offshore that are assessable, but the taxpayers have failed to declare the amounts in their income tax returns.

Individuals who are Australian residents for tax purposes should remember that their worldwide income, as well as certain profits derived by offshore entities they control, is assessable income for Australian tax purposes.

The ATO will now be looking closely at arrangements where taxpayers are aware of their residency status and the tax implications that flow from it, but attempt to avoid or evade tax of their foreign assessable income by concealing the character of the funds upon repatriation to Australia by disguising the amounts as either gifts or loans from a related overseas entity.

Whether or not a gift or loan is genuine depends upon the following criteria being satisfied:

• the characterisation of the transaction as a gift or loan is supported by appropriate documentation;
• the behaviour of the parties is consistent with that characterisation; and
• the monies provided are sourced from funds genuinely independent of the gift or loan receiver.

If family or friends who reside overseas have provided a genuine gift to an individual or their business, it is prudent for them to keep supporting documents such as:

• any declarations the donor has made in their country of residence about the nature of the amounts transferred;
• an executed contemporaneous deed of gift prepared by the donor;
• formal identification of the donor (eg a copy of their photo identification from their passport or identity card);
• a copy of the donor’s bank statements showing the gift and donor’s wealth before they made the gift; and
• financial records reflecting the donor’s transfer.

Gifts also include inheritances. Where an inheritance is received, a certified copy of the donor’s will or a distribution statement for the estate should be a part of the recordkeeping.

In relation to genuine loans from overseas entities made to help start up a business or to acquire income-producing assets, supporting documents may include the following:

• a properly documented loan agreement that details parties to the loan, date, amount, interest rate, frequency of repayments and terms of the loan;
• correspondence relating to the loan, such as pre-contractual negotiation communications or variations made post-agreement);
• documents in relation to security or guarantees provided;
• arrangements governing the drawdown and transmission of funds;
• financial records showing advance of funds and subsequent repayments, including interest and principal payments over the loan term;
• financial and accounting records showing how the loan amounts were used; and
• documents showing the payment of withholding tax.

If there is any uncertainty about whether particular amounts are genuine gifts or loans, the ATO has said it will form a view based on all the available evidence – therefore, keeping contemporaneous and complete records is strongly recommended. The ATO notes that a deed of gift or a statutory declaration (provided either by the donor or the receiver) may not be accepted as conclusive evidence.

New data matching program: government payments

A new data matching program designed to identify and address non-compliance with tax and super obligations is under way in relation to government payments for the 2018–2019 to 2022–2023 income years. In essence, it covers most services that the Commonwealth Government pays third-party program providers to deliver.

Specifically, data will be obtained from the following agencies in relation to these programs that they deliver:

• Comcare – services provided under the Safety Rehabilitation and Compensation Act 1988;
• Department of Education, Skills and Employment – VET FEE-HELP scheme, VET student loans program, child care subsidy, employment services;
• Department of Health – aged care subsidy, hearing services program, Commonwealth home support program;
• National Disability Insurance Agency – National Disability Insurance Scheme (NDIS);
• National Indigenous Australian Agency – Indigenous Advancement Strategy;
• Department of Home Affairs – youth transition support services, national community hubs, humanitarian settlement program, Australian cultural orientation program, adult migrant English program, free translating service, and settlement engagement and transition support program;
• Department of Veterans’ Affairs – health treatment program; and
• clean energy regulator – large-scale renewable energy target and small-scale renewable energy scheme.

The wide-ranging nature of this program is designed to identify and address non-compliance with tax and super obligations by service providers receiving government payments or helping deliver the specified programs. The data collected will enhance the information the ATO currently receives from government entities through the taxable payments annual report (TPAR).

This means that contractors, subcontractors and consultants in any type of business structure (sole trader, company, partnership or trust) that receive payments from government under any of these programs may be subject to extra scrutiny.

Service provider identification details obtained under the program will vary depending on whether they are individuals or entities. For individuals and sole traders, basic details collected will include names (first and last), dates of birth, addresses (residential, postal, etc), ABNs, service types, email addresses and phone numbers. For entities, basic details collected will include service provider business names, addresses (business, postal, registered, etc), ABNs, ACNs, organisation or service types, contact names, email addresses and phone numbers.

Payment information obtained under the program will consist of service provider IDs, names of services, types of services (linked to programs), value of payments received for the relevant financial years, counts and types of claims, and withholding and re-credit amounts.

It is estimated that 36,000 service providers will be captured under this program each financial year; of that number, approximately 11,000 will be individuals and the rest will be companies, partnerships, trusts and government entities.

The ATO will be checking the registration obligations of third-party providers (ABNs, TFNs, GST and PAYG withholding) as well as lodgment obligations (outstanding income tax, BAS and FBT returns). It will also look at whether service providers have correctly reported income, comparing the data obtained against income records, and will check for any outstanding tax and super debts and assess the entity’s ability to pay those debts.

Source: www.ato.gov.au/General/Gen/Government-Payments-Program/

www.legislation.gov.au/Details/C2021G00763

Do you need a Director Identification Number?

Directors of companies will soon have to enrol in the Director Identification Number regime. This requires current and future directors to apply for director identification numbers (DIN) which will be permanently linked to the individual, even if they are no longer a director. It is hoped the regime will make it easier to trace relationships across companies and reduce instances of phoenixing and other illegal activity. Most existing directors will have until 30 November 2022 to apply for the DIN through the ATO.

The Director Identification Number regime came into force late in 2020 as a tool for the Federal Government to reduce phoenixing and black economy activities. Broadly, the regime will require all directors to confirm their identity with the ATO, at which time they will be issued a unique identifier. This identifier will then be permanently linked to the individual, even if they cease to be a director.

The Government has recently introduced an instrument that extends the time available for persons who are eligible officers immediately before the commencement of the obligations to apply for a DIN. Individuals that operate under the Corporations Act 2001 and became a director on or before 31 October 2021 are required to apply for a DIN before the end of the transitional period, which is between 4 April 2021 and 30 November 2022.

Directors who operate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and became a director on or before 31 October 2021 will have even more time to apply for a DIN – until 30 November 2023 (with a transition period between 4 April 2021 and 30 November 2023). Any individuals who are appointed directors between 1 November 2021 and 4 April 2022 will have within 28 days of their appointment to apply for the DIN, and from 5 April 2022 individuals seeking to become directors will need to apply for a DIN before their appointment.

It is envisaged that the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and preventing the use of fictitious entities. It will also assist regulators to investigate a director’s involvement in what may be repeated unlawful activity, including illegal phoenixing.

The Australian Securities and Investments Commission (ASIC) and external administrators will also benefit, saving time and money, as the DIN will make it simpler to track the corporate history of various directors and assist liquidators in improving the efficiency of the insolvency process. The DIN is also expected to protect individuals against the fraudulent use of stolen identities to set up companies, and is expected to improve overall data integrity and security.

To prevent abuse of the regime, any conduct that undermines the DIN requirement will be subject to civil and criminal penalties. This includes deliberately providing false identity information, intentionally providing a false DIN or intentionally applying for multiple DINs.

Directors will be able to use the new Australian Business Registry Services (ABRS) online services to register from 1 November 2021.

Sign-ins and director identity verification will be conducted using the myGovID app. This app requires a compatible smart device and will require an individual to enter personal details and verify at least two Australian identity documents (drivers licence, birth certificate, citizenship certificate, passport, etc) to obtain the “standard identity strength”. The “strong identity strength” which is currently in testing phase will require the completion of an additional face verification check.

Source: www.legislation.gov.au/Details/F2021L01391

www.ato.gov.au/General/Gen/Modernising-Business-Registers/

www.abrs.gov.au/director-identification-number/who-needs-apply-and-when

COVID-19 relief for SMSFs extended

Due to the ongoing economic impacts of COVID-19 on large parts of Australia, the ATO has announced the extension of various COVID-19 relief measures for trustees of self managed superannuation funds (SMSFs). The relief previously only applied to the 2019–2020 and 2020–2021 financial years, but will now also be available for the 2021–2022 financial year.

SMSF residency test

To be a complying super fund and receive tax concessions, SMSFs must be an “Australian super fund” at all times during the year. This requires, among other things, for the central management and control of the SMSF (ie individual trustees, or directors of a corporate trustee) to ordinarily be in Australia. Under the relief, a fund will still meet this requirement even if its central management and control is temporarily outside of Australia for up to two years.

Obviously, with the Australian borders pretty much closed during the entirety of the pandemic, and many other countries imposing travel bans, some individual trustees or directors of a corporate trustee may be stranded in another country over the two-year limit through no fault of their own. In these situations, provided there are no other changes in the SMSF or in the circumstances of the individual trustee (or directors of the corporate trustee) affecting other residency conditions, the ATO has indicated it will not apply compliance resources to determine whether a fund meets the residency test.

Rental relief

If an SMSF or a related party has continued to provide rental relief based on the current market conditions, whether it be a rental reduction, waiver or deferral to a tenant, the ATO will provide relief in the form of not taking any compliance action against the fund. However, this is predicated on the rental relief being offered on commercial terms, and there being proper documentation with regards to the arrangement.

The ATO notes that not taking compliance action is only an interim measure. In due course it will be making a formal determination, similar to the one made in 2020, to ensure that rental deferrals offered by SMSFs or related parties to their tenants does not cause a loan or an investment to be an in-house asset in the current and future financial years.

Loan repayment relief

For loan repayment relief provided by an SMSF to a related or unrelated party due to the financial impacts of COVID-19, where the relief is offered on commercial terms and the changes to the loan agreement are properly documented, the ATO will provide relief on similar terms as the interim rental relief – that is, it will not take any compliance action against the fund. This will also apply to limited recourse borrowing arrangements (LRBAs).

In-house assets

Where an SMSF exceeds the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19, trustees must still prepare a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022. However, the ATO has said it will not take any compliance action where the plan has not been executed by the due date (30 June 2022) as a result of the market not having recovered, or in some cases the plan may be unnecessary owing to the recovery of the market.

PAYG variations

The ATO has also confirmed that its penalty and interest relief for excessive PAYG variations applies to SMSFs that continue to be impacted by COVID-19 during 2021–2022. The ATO will not apply penalties or interest for excessive variations of PAYG instalments during the 2021–2022 income year, provided that the taxpayer has taken reasonable care to estimate their end-of-year tax.

This ATO concession for penalties and interest applies to 30 June ordinary balancers for the 2021–2022 income year and entities that have been granted a substituted accounting period (SAP). For an entity with a SAP, any variation must relate to instalments made during the 2021–2022 income year.

A PAYG instalment variation requires a reasonable and genuine attempt to determine the liability. When considering if a genuine attempt has been made, the ATO takes into account what a reasonable person would have done in the taxpayer’s circumstances.

The ATO notes that PAYG variations do not carry over into the new income year. Therefore, if a taxpayer made variations in the 2020–2021 income year, they may need to vary again in 2021–2022. The varied amount or rate then applies for all of the taxpayer’s remaining instalments for the income year, or until they make another variation.

The ATO encourages PAYG instalment payers to review their tax position regularly and vary the PAYG instalments as their situation changes. Taxpayers who realise they have made a mistake working out their PAYG instalment can correct it by lodging a revised activity statement or varying a subsequent instalment.

If a taxpayer is unable to pay an instalment amount, the ATO requires them to still lodge an instalment notice and discuss a payment arrangement with the ATO so that they don’t have a debt at the end of the year.

Audits

The ATO has also extended to 2021–2022 its existing COVID-19 relief in the Addendum to the Auditor/actuary contravention report (ACR). The ACR relief for 2021–2022 will apply for:

• rental relief (including rental reductions, waivers and deferrals);
• loan repayment relief (including for LRBAs); and
• in-house assets.

Approved SMSF auditors need to refer to the Addendum when determining whether a contravention arises because of the relief, when to report a contravention to the ATO via an ACR for the 2021–2022 financial year, and what evidence to obtain from the trustees to support the relief. In summary, SMSF auditors need to check that:

• rental relief is offered on commercial terms due to the financial impacts of COVID-19 (having regard to relevant state and territory COVID-19 support measures) and the arrangement is appropriately documented;
• loan repayment relief is offered on commercial terms due to the financial impacts of COVID-19 (having regard to the terms of relief offered by commercial lenders), and the changes to the loan agreement are properly documented;
• funds that exceeded the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19 have prepared a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022.

The ATO has said that SMSF auditors need to use their professional judgment when determining whether relief is offered on commercial terms due to the financial effects of COVID-19. If there is insufficient appropriate evidence to support the relief, including that it is offered on commercial terms, SMSF auditors should report this via an ACR where the reporting criteria are met.

Audit opinion modifications

The existing ACR Addendum notes that auditors may still need to modify their opinion in Part B of the audit report where they identify any material breach of the provisions and regulations listed within the audit report, even if those breaches have arisen from the impacts of COVID-19 in circumstances where the ATO will not be taking compliance action against them. Even where a modification is not necessary, for example because the auditor forms an opinion that the contravention is not material, the auditor must still notify the trustee of these contraventions. This could be done in the management letter to the trustee.

The ATO also recommends that auditors add to the management letter that the ATO will not be taking any compliance action against these contraventions for the 2019–2020, 2020–2021 and 2021–2022 financial years. All other contraventions identified in the fund need to be reported to the trustee in the management letter and reported to the ATO in the ACR where the reporting criteria are met.

Arm’s length terms must be documented

The ATO relief generally only applies where a landlord has “acted in good faith” and agreed that the tenant can defer payment of rent on arm’s length terms during one or all of the 2019–2020, 2020–2021 and 2021–2022 income years in order to ease the financial hardship caused by COVID-19.

The National Cabinet Mandatory Code of Conduct (or any relevant state-based codes or legislation) may assist in assessing whether the rental deferral has been negotiated in good faith and on arm’s length terms.

There must also be contemporaneous documentation reflecting the arm’s length terms and that the lease remains enforceable. Any deferred amounts must also be repaid by the tenant as soon as practicable.

Source:

www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf

www.service.nsw.gov.au/campaign/covid-19-help-businesses/covid-19-assistance-commercial-and-residential-landlords

www.vsbc.vic.gov.au/your-rights-and-responsibilities/retail-tenants-and-landlords/

www.ato.gov.au/Super/Sup/Varying-your-pay-as-you-go-instalments-due-to-COVID-19/

www.ato.gov.au/Forms/Auditor-actuary-contravention-report-instructions/?anchor=AddendumAuditorContraventionReportingins#AddendumAuditorContraventionReportingins

www.ato.gov.au/Super/Sup/COVID-19-relief-in-ACR-Addendum-extended-to-2021-22-financial-year/

 

Federal COVID-19 support developments

Additional financial support for child care providers

On 23 August the Prime Minister and the Minister for Education and Youth issued a joint media release announcing new support measures for child care providers impacted by extended COVID-19 lockdowns.

Child care services in Commonwealth-declared hotspots will be eligible for new fortnightly payments of 25% of their pre-lockdown revenue, while outside school hours care (OSHC) services will be eligible for fortnightly payments of 40% of pre-lockdown revenue.

This measure will apply to services seven days after the hotspot is declared, where state and territory governments have directed families to keep their children at home. Where children are still allowed to attend child care, the supports will kick in four weeks after the hotspot declaration.

The new payments will immediately benefit child care services in affected areas of Sydney and the ACT and OSHC services in metropolitan Melbourne. All other services in metropolitan Melbourne, regional Victoria and regional NSW will become eligible after seven days of lockdown, with payments to be backdated to 23 August 2021.

The supports will also be available for services who meet the criteria in any future extended lockdowns. The measure is in addition to the existing Commonwealth supports – including gap fee waivers, which allow the Commonwealth Child Care Subsidy to continue even when children are not attending a child care service.

Payments will be contingent on providers:

• expecting attendance below 50%;
• waiving gap fees for all families whose children are not attending;
• maintaining staffing levels;
• agreeing to a fee freeze for the duration of support; and
• not accessing other Commonwealth Government funded supports.

Payments are made available directly to providers. Families in affected areas are not required to do anything.

Source: www.pm.gov.au/media/targeted-assistance-child-care-services-during-covid-lockdown.

Non-assessable non-exempt income status of New South Wales and Victorian programs

The Federal Treasurer has issued the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 2) 2021.

Its effect is to declare certain grant programs administered by NSW and Victoria as “eligible grant programs”. This means that a payment received by an entity from a specified program is non-assessable non-exempt (NANE) income.

For those who have an interest in these things, the Treasury Laws Amendment (2020 Measures No 5) Act 2020 inserted s 59-97 into the Income Tax Act 1997 (ITAA 1997) to give the eligible Minister power to declare certain grant programs as eligible for NANE treatment. Following that, a legislative determination in 2020 set out which programs were eligible for NANE treatment in the 2019–2020 year.

Earlier this year, the Treasury Laws Amendment (COVID-19 Economic Response) Act 2021 extended the tax-free status of state recovery grants to the 2021–2022 year (because s 57-97(1)(c) of ITAA 1997 only otherwise applied to grants received in 2020–2021).

Accordingly, it should be noted that the latest Declaration does not create anything new, but rather extends the status quo to the current income year (and applies it to programs that may not have earlier existed).

New South Wales

The following NSW programs now qualify as eligible grant programs, meaning payments received under them are NANE income:

• the 2021 COVID-19 business grant;
• the 2021 COVID-19 JobSaver payment;
• the 2021 COVID-19 micro-business grant; and
• the NSW Performing Arts COVID Support Package.

Victoria

The following Victorian programs now qualify as eligible grant programs, meaning payments received under them are NANE income:

• the Alpine Resorts Support Program (Streams 1, 2 and 3);
• the Business Continuity Fund;
• the Business Costs Assistance Program Round Two – July Extension;
• the Licenced Hospitality Venue Fund 2021 – July Extension; and
• the Small Business COVID Hardship Fund.

As a reminder, the first Determination, the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 1) 2021, listed the following Victorian grants as declared eligible grant programs:

• the Alpine Support Program;
• the Business Costs Assistance Program Round Two;
• the Impacted Public Events Support Program;
• the Independent Cinema Support Program;
• the Licensed Hospitality Venue Fund 2021;
• the Live Performance Support Program; and
• the Sustainable Event Business Program.

Source: www.legislation.gov.au/Details/F2021L01178.

State and territory COVID-19 support developments

Australian Capital Territory: support extended and expanded

The Federal Treasurer and the ACT Chief Minister have issued a joint media release announcing expanded and additional support for businesses affected by COVID-19 lockdowns. The support takes the form of two tranches.

COVID-19 Business Support Grants

The two governments had already agreed to jointly fund ACT “COVID-19 Business Support Grants”, which take the form of one-off grants of up to $20,000 for employing businesses and $7,500 for non-employing businesses where those businesses’ turnover has declined by 30% or more as a result of the COVID-19 health restrictions.

There will be an additional ACT “COVID-19 Business Grant Extension” payment of $10,000 for all employing businesses and $3,750 for non-employing businesses, to be paid to all businesses who were eligible for the COVID-19 Business Support Grant in industries that are “still significantly impacted by the health restrictions”.

Additional one-off top-up payments will also be made for larger businesses at the following rates:

• $10,000 for employing businesses with a turnover greater than $2 million and less than $5 million;
• $20,000 for employing businesses with a turnover greater than $5 million and less than $10 million; and
• $30,000 for employing businesses with a turnover greater than $10 million.

Both governments have agreed to discuss any additional extensions under the COVID-19 Business Support Grant program on 1 October.

COVID-19 Tourism, Accommodation Provider, Arts and Events and Hospitality Grants

Further one-off grants to businesses in the tourism, accommodation provider, arts and events and hospitality industries will be provided at the following rates:

• $1,000 for non-employing businesses;
• $3,000 for employing businesses with turnover less than $2 million;
• $10,000 for employing businesses with turnover greater than $2 million and less than $5 million; and
• $20,000 for employing businesses with turnover greater than $5 million.

The eligibility criteria will match the eligibility criteria for the COVID-19 Business Support Grant.

Details are still being finalised. These payments will not be administered until October, pending an assessment of the COVID-19 Business Support Grants. Approximately 2,000 businesses could be eligible for this additional one-off grant.

Businesses can find further information and apply for the grants on the ACT Government’s website.

Source: www.act.gov.au/business/business-support/covid-19-economic-support-for-business

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/further-support-act-businesses-impacted-covid-19

Queensland: support for New South Wales border businesses

The Federal Treasurer and the Queensland Premier have issued a joint media release outlining details of business support packages aimed at businesses on the NSW and Queensland border affected by the COVID-19 economic downturn.

The $52.8 million emergency support package is stated to help Queensland businesses suffering due to the border restrictions between the two states and to provide targeted support to tourism and hospitality businesses facing significant hardship.

The joint Federal–State package includes:

• $40 million for the “Tourism and Hospitality Sector Hardship Program” to deliver one-off grants of $15,000, $25,000 and $50,000 for small, medium and large employing businesses across Queensland that have experienced a reduction in turnover of at least 70% for at least seven consecutive days between 1 July and 30 September;
• $6.3 million to extend the existing “COVID-19 Business Support Grants” program; and
• $6.5 million to provide one-off “Hardship Scheme” grants of $5,000 for employing businesses and $1,000 for non-employing sole traders to recipients of the “COVID-19 Business Support Grants” in the border zone in the event of an extended border closure.

The state-funded elements include:

• up to $1 million to match City of the Gold Coast Council and Destination Gold Coast’s “Play Money” campaign, encouraging Gold Coasters to patronise border businesses;
• $50,000 support for marketing campaigns in Coolangatta; and
• $700,000 for additional mental health support for business owners and their families in the border zone.

These special hardship grants will be available from mid-October 2021. Further details are available on the Queensland Business webpage.

Source: www.business.qld.gov.au/

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/queensland-businesses-new-south-wales-border-benefit

South Australia: support for tourism and hospitality industries; hardship grants

The Federal Treasurer and the SA Premier have issued a joint media release outlining details of business support packages aimed at SA businesses affected by the COVID-19 economic downturn.

As seems to be the case with these announcements, this package involves a tinkering of already announced measures mixed in with some new measures.

The programs will deliver support to an estimated 3,500 local businesses and will be administered by the SA state government. The SA Treasury website has a useful tabular summary of grants, but also sets out other business support measures (eg land tax, payroll tax) which have been implemented during the pandemic.

The “COVID-19 Tourism and Hospitality Support Grant” is aimed at businesses in eligible tourism and hospitality sectors (and other sectors such as performing arts, creative artists, taxis and car rental) that have already received the “COVID-19 Additional Business Support Grant”, as follows:

• a grant of $3,000 for employing businesses with turnover less than $2 million;
• a grant of $10,000 for employing businesses with turnover of greater than $2 million;
• a grant of $20,000 for employing businesses with turnover of greater than $5 million; and a grant of $1,000 for non-employing businesses.

There is also a new “COVID-19 Business Hardship Grant” of $6,000 for employing businesses with annual payrolls below $10 million and $2,000 for non-employing businesses that have experienced a minimum 50% reduction in turnover over the eligible period and haven’t been eligible for previous business grant support since July 2021.

In addition, the SA government is increasing its state-funded “Major Events Support Grant”, to provide grants of up to $100,000 for large cancelled or postponed events where attendee numbers at the event were expected to be greater than 10,000, in recognition of the significant costs incurred with large events. Eligible events that have already applied for the $25,000 grant will now receive a top-up of up to a further $75,000, bringing total assistance to $100,000.

Source: www.treasury.sa.gov.au/Growing-South-Australia/COVID-19

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/further-support-south-australian-small-businesses

Tasmania: support increased

The Federal Treasurer and the Premier of Tasmania have issued a joint media release outlining details of an expanded business support package aimed at operators impacted by border closures.

The existing Business Support Package will be boosted from $20 million to $50 million, with grants of up to $50,000 to be available to eligible businesses across two funding rounds.

In addition, the Tasmanian government will provide support including:

• payroll tax relief for tourism and hospitality industry businesses where there has been a 30% reduction in turnover in the September 2021 quarter;
• waiving vehicle registration and passenger transport accreditation fees for vehicles including taxis, luxury hire cars, tour operator buses and rental car operators for renewal notices received between 1 July and 31 December 2021; and
• waiving the license fees payable to Parks & Wildlife, which removes a significant burden for tourism businesses operating within Tasmania’s parks.

Full details about the program can be accessed on the Business Tasmania website, and eligible businesses can apply immediately.

Source: www.business.tas.gov.au/home

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/supercharge-business-support-package-way-tasmanian

Victoria: Commercial Tenancy Relief Scheme

The Victorian Premier has announced that new regulations have been made to provide relief for commercial tenants struggling with rent payments.

The Commercial Tenancy Relief Scheme was implemented via the Commercial Tenancy Relief Scheme Act 2021, which received assent on 10 August 2021. The Act came into operation on 10 August 2021 but will sunset on 30 April 2022 (with the Regulations remaining in force until 30 October 2022).

The scheme is designed to assist small and medium-sized businesses with an annual turnover of less than $50 million that have experienced a loss in turnover of more than 30% during the pandemic. Eligibility for rent relief has been broadened, with tenants now able to choose three consecutive months between 1 April and 30 September 2021 to compare to their turnover in the same three months in 2019.

Businesses will get financial relief in the form of a proportionate reduction in rent. For example, a business with a turnover of 40% of pre-pandemic levels can only be charged 40% of its rent. Of the balance, at least half must be waived, with the remainder to be deferred.

As part of the scheme, the Victorian Small Business Commission will provide information so that landlords and tenants can negotiate an agreement, and free mediation for those who need assistance.

New businesses are also protected under the scheme, with any business which has opened since April 2019 eligible for assistance.

The scheme will apply retrospectively from 28 July 2021 and will run until 15 January 2022.

To help landlords that are doing the right thing by eligible tenants, the Victorian government will provide land tax relief of up to 25%, in addition to any previous relief, with the support worth up to $100 million.

Small landlords who can demonstrate acute hardship will be eligible to apply for payments as part of a $20 million hardship fund.

More details can be found on the VSBC website.

Source: www.vsbc.vic.gov.au

Western Australia: assistance grants for tourism businesses

The Federal Treasurer and the WA Premier (among others) have issued a joint press release announcing that WA tourism businesses impacted by COVID-19 will soon be able to apply for funding support under a new joint Commonwealth–state program.

It is anticipated about 3,500 businesses will be eligible for grants of up to $10,000 under the program – including tourism operators, accommodation providers and travel agents.

To be eligible for support, applicants must demonstrate at least a 30% reduction in turnover (by comparing the period 15 May to 25 June with 10 July to 20 August). The following funding amounts will be made available to eligible businesses:

• $2,000 grant for all sole traders and for employing businesses with an annual turnover between $50,000 and $100,000;
• $5,000 grant for employing businesses with an annual turnover between $100,000 and $1 million; and
• $10,000 grant for employing businesses with an annual turnover between $1 million and $10 million.

In order to be eligible, a business must be:

• registered with Tourism WA as a previous grant recipient or as part of the agency’s marketing campaigns in 2020 or 2021;
• a member of, or accredited through, a relevant tourism organisation; or
• a travel agent that has been offering domestic product to travellers.

More information should be available on the WA COVID-19 coronavirus: support for business website.

Source: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/assistance-grants-wa-tourism-businesses-impacted

www.wa.gov.au/organisation/department-of-the-premier-and-cabinet/covid-19-coronavirus-support-business

https://treasury.gov.au/

Closing a business? Don’t forget the GST registration

If the current prolonged lockdowns and economic conditions have prompted your clients to sell or close their business, it’s important they are aware of the need to cancel the related GST registration within a certain period, unless the business is in a specific industry or performs a specific role.

Typically, unless the business is taxi driving/ride-sourcing, you represent an incapacitate entity (ie an individual who is bankrupt or a company in liquidation and that entity is registered for GST), or you are an Australian resident who acts as an agent for a non-resident that is registered (or required to be registered) for GST, you must cancel your GST registration within 21 days if you sell or close your business.

Remember, cancelling a GST registration will also cancel other registrations such as fuel tax credits, luxury car tax and wine equalisation tax, even if the ABN is not cancelled. If you’re registered for PAYG, PAYG instalments or have FBT obligations, you will need to keep lodging business activity statements (BASs) even if you cancel your GST registration.

While you can usually cancel your GST registration from a date that you choose (which should be the last day you want your previous business to be registered), you cannot cancel the registration retrospectively if you were still operating on a GST-registered basis after the date you chose.

Similarly, if you choose a cancellation date and then continue to operate on a GST-registered basis, you will not be able to cancel the registration.

When you cancel your business’s GST registration, you’ll be required to lodge any outstanding BASs and complete a final GST activity statement which should include all sales, purchases and importations made in the final tax period. This should include the sale of the business, sale of any of business assets, adjustments for any assets held after cancellation, and/or any other adjustments. For taxpayers operating on a cash basis, all the sales and purchases that still need to be attributed from a previous tax period will need to be recorded.

For taxpayers who are cancelling their GST registration because the business has been restructured, sold or closed, the associated ABN must also be cancelled. However, if a company was not restructured, sold or closed, but simply no longer carries on a business, then there is a choice for the business owner to keep the ABN registration. Nevertheless, the GST registration must be cancelled in those circumstances.

Overseas businesses that have been hit by lockdowns in various states may have seen their taxable supplies drop below the GST turnover threshold (ie $75,000) – in those instances, cancellation of GST registration or associated ABNs need to be carefully considered, as the business may still have Australian income tax obligations. This also applies if overseas businesses’ taxable supplies fall below the GST threshold due to not being connected to the Australian Indirect Tax Zone.

New stapled super changes coming for employers

Employers get ready – there’ll soon be an extra step involved when it comes to hiring new employees. From 1 November 2021, employers will need to determine if a new employee has a “stapled” fund and request such details from the ATO in the event that the new employee has not chosen a super fund. A stapled super fund is essentially an existing super account that is linked – or “stapled” – to an individual and follows them throughout their job changes. The change aims to reduce unnecessary account fees for super members by avoiding having a new super account opened every time an employee starts a new job.

Currently, when a new employee starts a new job they are eligible to choose the super fund that their super guarantee contributions will go to. If they do not choose their own fund, the super contributions will be paid into the employer’s default fund.

With the recent passing of legislation to make it easier for employees to take their existing super funds with them when they move jobs, from 1 November if a new employee doesn’t choose a super fund, employers may be required to request their “stapled super fund” details from the ATO. A stapled super fund is essentially an existing super account which is linked or “stapled” to an individual and follows them throughout their job changes.

To ensure you’re ready for this change, your business should check ATO online services to confirm that you have the requisite access levels. If your business does not have full access in ATO online services, you’ll need to have the “Employee Commencement Form” permission in order to request a stapled fund.

From 1 November, you will still need to offer your eligible employees a choice of super fund and pay their super into the account they nominate – that part of your obligations doesn’t change. However, if your employee doesn’t choose a super fund, you will need to request the stapled fund details from the ATO. In most cases, a request can be made after you’ve submitted a TFN declaration or a Single Touch Payroll (STP) pay event linking the new employee to your business. There is no limit to the number of requests you are able to make.

Responses will usually be received through the online portal in minutes. The ATO will also notify the associated employee of the stapled fund request and the fund details provided. If the resulting stapled fund cannot accept new contributions from the employee for some reason, the employer will need to make another request for the employee’s stapled super fund through the online portal.

In the event that this new request returns the same stapled super fund, the employer will be required to call the ATO to obtain an alternative stapled super fund account. At the same time, the ATO will be able to advise whether contributions can be made to a default fund or another fund that meets the “choice of fund” rules in that situation.

Businesses that have over 100 new employees starting can make a bulk stapled fund request to the ATO. Bulk requests will need to be in a particular format and can be made through the secure mail function within online services for businesses. Once the file is processed, a response will be sent through the secure mail function, and can take up to five business days.

Remember, a business/an employer cannot provide recommendations or advice about super to its employees, unless the business/employer is licensed by the Australian Securities and Investments Commission (ASIC) to provide financial advice. Further, if businesses/employers fail to meet the choice of super fund obligations, penalties may apply.

MySuper performance test results and new super comparison tool

This year marks the beginning of annual performance tests on MySuper products, run by the Australian Prudential Regulation Authority (APRA). The requirement was introduced as part of the Federal government’s Your Future, Your Super reforms, and aims to hold super funds to account for underperformance and enhance industry transparency. The first annual test of 76 (out of 80) MySuper products from various super funds or registrable superannuation entities (RSEs) found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make the improvements needed to ensure they pass next year’s test.

Other changes introduced as part of Your Future, Your Super include access to a new interactive online super comparison tool, YourSuper, hosted by the ATO.

APRA notes that there are around 80 MySuper products from various super funds or RSEs in the Australian market. It assessed 76 out of the total 80 products with at least five years of performance history against an objective benchmark, and found that 13 products failed to meet the benchmark.

“It is welcome news that more than 84 per cent of products passed the performance test”, said APRA Executive Board Member Margret Cole, “however, APRA remains concerned about those members in products that failed … Trustees of the 13 products that failed the test now face an important choice: they can urgently make the improvements needed to ensure they pass next year’s test or start planning to transfer their members to a fund that can deliver better outcomes for them.”

Trustees of failed products are required to write to members by 27 September 2021 advising them of their performance test outcome and providing details of the ATO’s YourSuper comparison tool. If the product fails the performance test in two consecutive years, the RSE licensee will be prohibited from accepting new beneficiaries into that product.

The YourSuper comparison tool – available on the ATO website and via your MyGov account – allows users to display a table of MySuper products ranked by fees and net returns (updated quarterly), as well as compare up to four MySuper products at a time in more detail. When comparing products, the investment performance is listed in an easy-to-understand form. A “Performing” result indicates that the product has met or exceeded the performance test benchmark. “Underperforming” means the product has not met the benchmark and “Not assessed” means the product has had less than five years of performance history, so has not yet been rated by APRA.

The data used by APRA for the performance test includes:

• net investment return;
• strategic asset allocation;
• total investments;
• administration fees;
• indirect cost ratio and administration costs;
• administration-related tax expense/benefit;
• advice fees;
• indirect cost ratio advice costs; and
• advice-related tax expense/benefit.

The performance test itself has two parts. It involves the assessment of investment performance relative to a benchmark portfolio created using the product’s strategic asset allocation, and an assessment of administration fees charged in the last financial year relative to the median fee charged for the category of product. If the product underperforms the combined test by more than 0.5%, the product is deemed to have failed the test.

Remember, the results of performance tests conducted by APRA only relate to MySuper products, which are basic super accounts without unnecessary features and fees. RSEs usually offer multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund (RSE) on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the fund you’re in has failed the performance test, it may be time to investigate the reasons why or switch to a different product.

Source: www.ato.gov.au/Calculators-and-tools/YourSuper-comparison-tool

www.apra.gov.au/news-and-publications/apra-releases-inaugural-your-future-your-super-performance-test-results

Single Touch Payroll update

Phase 2 coming soon

The ATO is expanding the information that businesses send through Single Touch Payroll (STP). From 1 January 2022, most employers will be required to send additional information such as the commencement date of employment and cessation date of employment for employees, their reasons for leaving employment and work type. The basic information about salary and wages and super liability information in Phase 1 of the STP rollout will also be further drilled down in Phase 2, moving away from just reporting the gross amounts.

According to the ATO, the Phase 2 report will also include a six-character tax treatment code for each employee. The code will be automatically generated by the STP software and is an abbreviated way of outlining the factors that can influence amounts withheld from payments.

STP was originally introduced in 2016 as a way for employers to report their employees’ tax and super information to the ATO in real time. Most employers, regardless of the number of their employees, were required to start reporting from 1 July 2021.

Employers with a withholding payer number (WPN) have until 1 July 2022 to start reporting payments through STP, and small employers that make payments to closely held payees are exempt from reporting these payees through STP for the 2019–2020 and 2020–2021 financial years.

While the Phase 2 increase in information will be automatically taken care of in most STP software solutions, the increased stratification of reporting may require you to pay more attention to your business’s payroll, to ensure all the information you enter into the system is correct.

Tax time 2021: rental property pitfalls

This tax time, the ATO is again closely monitoring claims in relation to rental properties. The ATO has data-matching programs in place that collect detailed information about properties and owners for income years all the way from 2018–2019 to the 2022–2023. These programs expand the rental income data collected directly from third-party sources, including sharing economy platforms, rental bond authorities and property managers.

In the 2019–2020 financial year over 1.8 million taxpayers owned rental properties and claimed $38 billion in deductions. While most taxpayers do the right thing and are able to justify their claims, the ATO notes that over 70% of the 2019–2020 returns selected for review of rental information needed adjustments.

The most common mistake that rental property owners and holiday homeowners make is not declaring all their income, and their capital gains from selling property.

Another area of concern involves claims for interest charges on personal loans. For example, if you take out a loan to buy a rental property and rent it out at market rates, the interest on the loan is deductible. However, if you redraw money from that mortgage for personal use (eg to buy a car or pay off the mortgage of the house you’re living in), then you can’t claim interest on that part of the loan.

You should also be careful when claiming deductions for capital works. While the cost of repairs for wear and tear are immediately deductible if you’re replacing or fixing an existing item (eg a broken toilet), the cost of upgrading the property or areas of the property is considered capital works and any deductions need to be spread over a number of years.

New sharing economy reporting regime proposed

The government is seeking to legislate compulsory reporting of information for sharing economy platforms in order to more easily monitor the compliance of participants, while at the same time reducing the need for ATO resources.

As the sharing economy becomes more prevalent and fundamentally reshapes many sectors of the economy, the government is scrambling to contain the fall-out. While there no standard definition of the term “sharing economy”, it’s usually taken to involve two parties entering into an agreement for one to provide services, or to loan personal assets, to the other in exchange for payment. Examples of platforms include Uber, Airbnb, Car Next Door, Menulog, Airtasker and Freelancer, to name a few.

With the rapid expansion of various sharing economy platforms, the government’s Black Economy Taskforce has noted that without compulsory reporting, it is difficult for the ATO to gain information on compliance without undertaking targeted audits. Putting formal reporting requirements in place will align Australia with international best practice.

The government has now released draft legislation for consultation to define the scope of compulsory reporting requirements in order to ensure integrity of the tax system and reduce the compliance burden on the ATO.

This new compulsory reporting regime would apply to all operators of an electronic service, including websites, internet portals, apps, gateways, stores and marketplaces. Any platforms that allow sellers and buyers to transact will be required to report information on certain transactions. However, the reporting requirement will generally not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, where title of real property is transferred, or the supply is a financial supply.

Based on the draft legislation, platform operators will be required to report transactions that occur on or after 1 July 2022 if they relate to a ride-sourcing or a short-term accommodation service, unless an exemption applies. From 1 July 2023 all other categories of sharing economy platforms will be required to report, unless an exemption applies.

The initial reporting is expected to be biannual (1 July to 31 December, and 1 January to 30 June) with electronic service operators required to report the relevant information by 31 January and 31 July respectively.

Reminder: super changes for the 2021 financial year

The government’s long-slated “flexibility in superannuation” legislation is finally law. This means from 1 July 2021, individuals aged 65 and 66 can now access the bring-forward arrangement in relation to non-concessional super contributions. The excess contributions charge will be removed for anyone who exceeds their concessional contributions cap, and individuals who received a COVID-19 super early release amount can now recontribute it without hitting their non-concessional cap.

Previously, if you made super contributions above the annual non-concessional contributions cap, you could automatically access future year caps if you were under 65 at any time in the financial year.

The bring-forward arrangement allows you to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.

Previously, individuals who exceeded their concessional contributions cap would have to pay the excess contributions charge (around 3%) as well as the additional tax due when excess contributions were re-included in their assessable income. However, people who exceed their cap on or after 1 July 2021 will no longer pay the charge, but will still receive a determination and be taxed at their marginal tax rate on any excess concessional contributions amount, less a 15% tax offset to account for the contributions tax already paid by their super fund.

Recontributions of COVID-19 early released super

Under the COVID-19 early release measures, individuals could apply to have up to $10,000 of their super released during the 2019–2020 financial year and another $10,000 released between 1 July and 31 December 2020. Between 20 April 2020 and 31 December 2020, the ATO received 4.78 million applications for early release, totalling $39.2 billion worth of super.

Not everyone who applied to have super released ended up needing to use it once the government ramped up its financial support programs. From 1 July 2021, people who received a COVID-19 super early release amount can recontribute to their super up to the amount they released, and those recontributions will not count towards their non-concessional contributions cap. The recontribution amounts must be made between 1 July 2021 and 30 June 2030 and super funds must be notified about the recontribution either before or at the time of making the recontribution.