The benchmark interest rate for 2019, for the purposes of the deemed dividend provisions of Division 7A and the associated complying Division 7A loan agreements, has been set at 5.20% (i.e., down from 5.30% for 2018).
In the last week of the August Parliamentary sittings, the controversial corporate tax cut plan for the big end of town (i.e., companies with an aggregated turnover of over $50 million) was defeated.
In addition, long-awaited legislation impacting the company tax and franking rates for small to medium companies (i.e., introducing a new ‘base rate entity passive income test’ from the 2018 income year to qualify for the lower 27.5% tax rate) was passed.
This legislation was particularly relevant for company rates applicable to passive investment and ‘bucket’ companies, which may now need to reconsider earlier lodged 2018 company tax returns, as well as the amount of franking credits attached to dividends paid from 1 July 2017.
Additionally, consideration may also need to be given to the company tax rates (and in certain circumstances, the franking rates) previously applied with respect to the 2016 and 2017 income years.
This is in light of the recently issued ATO compliance and administrative approaches for the 2016, 2017 and 2018 income years.
Editor: Unfortunately, the recent Government delays have created much confusion in this area, and in certain cases, a review and possible amendments may be required for previously lodged returns.
The proposed superannuation guarantee (‘SG’) amnesty is a one-off, 12-month opportunity to self-correct past non-compliance (i.e., from 24 May 2018 to 23 May 2019).
It will apply to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018.
The ‘carrot’ currently on the table is that employers who voluntarily disclose previously undeclared SG shortfalls during the amnesty (i.e., importantly, before the commencement of an ATO audit) will:
- not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
- be able to claim a deduction for catch-up payments made during the relevant 12-month period.
This means that employers will still be required to pay all employee entitlements, including any unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge.
Employers who are not up-to-date with their SG payment obligations and who do not come forward during the proposed SG amnesty have been put on notice by the ATO that they may face higher penalties in the future.
Editor: While the SG amnesty is being actively promoted by the ATO, it is important to be aware that the proposed concessions currently on the table are not guaranteed until the relevant legislation becomes law.
Note that the Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2018 will not be considered again at least until Parliament resumes on 10 September 2018.
Editor: With interest in cryptocurrencies (such as Bitcoin) increasing, the ATO has issued guidance regarding various tax consequences of transactions involving cryptocurrencies.
Any capital gains made on the disposal of a cryptocurrency (including using the cryptocurrency or converting it to Australian dollars) may be taxed, although certain capital gains or losses from disposing of a cryptocurrency that is a ‘personal use asset’ are disregarded.
Cryptocurrency may be a personal use asset if it is kept or used mainly to purchase items for personal use or consumption (but the longer the period of time that a cryptocurrency is held, the less likely it is that it will be a personal use asset).
Note: If the cryptocurrency is held as an investment, the taxpayer will not be entitled to the personal use asset exemption but, if they hold the cryptocurrency as an investment for 12 months or more, they may be entitled to the CGT discount.
If the disposal is part of a business the taxpayer carries on, the profits made on disposal will be assessable as ordinary income and not as a capital gain.
Editor: The ATO has also provided guidance regarding the tax consequences of the loss or theft of cryptocurrency, as well as of ‘chain splits’.
The ATO has become aware of people in some suburban areas of major cities attempting to encourage others to illegally access their super early (generally for a fee) to help them to purchase a car, to pay debts, to take a holiday, or to provide money to family overseas in need.
The ATO advises that anyone approached by someone telling them that they can access their super early, or anyone hearing about it from family, friends or work colleagues:
- should not sign any documents nor provide them with any personal details;
- stop any involvement with the scheme, organisation or the person who approached them; and
- seek advice from a professional advisor or the ATO.
The Commissioner of Taxation has determined that the rate at which work-related car expense deductions may be calculated using the cents per kilometre method is 68 cents per kilometre for the income year commencing 1 July 2018 (up from 66 cents per kilometre).
Editor: Single Touch Payroll (STP) officially commenced for larger employers on 1 July 2018, and the ATO has provided some further guidance for affected entities.
The ATO is writing to employers who started reporting through STP before 1 July 2018, providing them with information about how their employees’ payment summary for 2017/18 may change with STP, including the following:
- They are not required to provide their employees with payment summaries for the information they report through STP (although they may choose to provide payment summaries for the first year of STP reporting).
- ‘Income statements’ will replace payment summaries.
- Employees’ income statements are available through pre-filling and myGov.
- The income statement has three categories: ‘Tax ready’, ‘Not tax ready’ and ‘Year-to-date’. Only ‘tax ready’ income statements are complete and will be available through pre-filling.
- Income statements may not be tax ready until 14 August this year. Employers have until this date to finalise their STP data.
Editor: The ATO has also recognised that some employers may not have been ready to start STP reporting from 1 July 2018, and these employers (or their tax agent) may be able to apply for a deferral.
For example, employers that live in an area where there is no internet connection, or where the connection or service is intermittent or unstable, can apply for a deferral or even (in very limited circumstances) an exemption.
Please contact our office if you would like our assistance in this regard.
As Tax Time 2018 has ‘kicked off’, the ATO has profiled the five most common mistakes they see, including taxpayers who are:
- leaving out some of their income (e.g., forgetting a temp or cash job, capital gains on cryptocurrency, or money earned from the sharing economy);
- claiming deductions for personal expenses (e.g., home to work travel, normal clothes or personal phone calls);
- forgetting to keep receipts or records of their expenses (around half of the adjustments the ATO makes are because the taxpayer had no records, or they were poor quality);
- claiming for something they never paid for – often because they think everyone is entitled to a ‘standard deduction’; and
- claiming personal expenses for rental properties – either claiming deductions for times when they are using their property themselves, or claiming interest on loans used to buy personal assets like a car or boat.
ATO Assistant Commissioner Kath Anderson reiterated the three ‘golden rules’ for work-related expenses: “You must have spent the money yourself and not have been reimbursed, it must be directly related to earning your income, and you must have a record to prove it.”
The Government has decided not to put the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 to a vote in the Senate … for the present point in time (it had already passed the House of Representatives without amendment).
The Bill aims to progressively extend the lower 27.5% corporate tax rate to all corporate tax entities by the 2023/24 financial year, and further reduce the corporate tax rate in stages so that, by the 2026/27 financial year, the corporate tax rate for all entities would be 25%.
Editor: Parliament resumes on 13 August 2018, coincidentally after some by-elections have taken place on 28 July . . .
Opposition confirms it won’t repeal already legislated company tax cuts.
Editor: Just in case the tax cut situation wasn’t confusing enough, the leader of the Opposition, Bill Shorten, announced at a doorstop interview that, if elected, Labor would repeal the existing company tax cuts for companies with turnover between $10 and $50 million.
However, a few days later, after a Shadow Cabinet meeting, Mr Shorten confirmed that a Labor government would not touch business tax cuts that have already been legislated, due to the uncertainty that would generate.
However, he reiterated that Labor does not support the further tax cuts for larger companies that may be legislated in the future.
The ATO claims that it is committed to supporting small businesses and making it as easy as possible for them to understand and meet their tax obligations at tax time.
Consequently, Assistant Commissioner Mathew Umina has some tips to help small business in the lead up to and during tax time, including:
- keeping up-to-date records, which will help small businesses to complete and lodge their tax returns, manage cash flow, meet their tax obligations and understand how their business is doing;
- consider small business tax concessions, such as:
- simplified trading stock rules (if the estimate of the difference between opening and closing trading stock is $5,000 or less, the small business doesn’t need to do a stocktake);
- concessions that allow new small businesses to claim an immediate deduction for start-up costs like professional, legal and accounting advice;
- simplified depreciation rules, including the $20,000 instant asset write-off for assets costing less than $20,000 bought and installed by 30 June 2018.
Please contact our office if you need any advice as to how any of the abovementioned small business tax concessions may be relevant to your business.