The Government has released draft legislation on “improving the integrity of GST on property transactions”, as announced in the 2017/18 Federal Budget.
They intend to amend the GST law so that, from 1 July 2018, purchasers will withhold the GST on the purchase price of new residential premises and new residential subdivisions, and remit the GST directly to the ATO as part of settlement.
This is to address tax evasion through “phoenixing arrangements”, where developers collect GST from their customers but dissolve their company to avoid paying it to the ATO.
To provide certainty for contracts that have already been entered into, the draft legislation provides a two-year transitional arrangement – contracts entered into before 1 July 2018 will not be affected as long as the transaction settles before 1 July 2020.
Editor: In addition, the GST Act has been amended to ensure that supplies of digital currency receive equivalent GST treatment to supplies of money (particularly foreign currency).
The ATO is recommending that taxpayers use their recently updated GST property decision tool to work out if GST applies to their property sales.
The tool can be used to determine GST on the sale, lease or purchase of real property, and was recently updated for easier use on mobile devices.
In particular, after providing the relevant information, the tool will generate a GST decision that:
- advises whether GST is payable on a sale;
- estimates the amount of GST payable when applying the margin scheme; and
- advises whether the taxpayer is eligible to claim input tax credits.
Note that the ATO does not record any personal information and users will remain anonymous.
Following detailed consultation with the transport industry, the ATO has amended their determination for travel expenses for truck drivers to provide separate reasonable travel allowance expense amounts for breakfast, lunch and dinner for employee truck drivers for the 2017/18 income year.
The reasonable amount for travel expenses (excluding accommodation) of employee truck drivers who have received a travel allowance and who are required to sleep away from home was originally reduced for 2017/18 to a total of $55.30 per day, but this daily rate has now been replaced with the following amounts for all domestic travel destinations for the 2017/18 income year:
The amounts for each of these meal breaks are separate and cannot be aggregated into a single daily amount, and amounts cannot be moved from one meal to another (e.g., if the full amount for breakfast is not expended, it cannot be carried over to lunch or dinner).
A driver’s work diary (as maintained for fatigue management purposes) can be used to demonstrate when meal breaks were taken.
This year, the ATO’s annual office closure is between noon Friday 22 December and 8.00am Tuesday 2 January 2018.
Also, the ATO may have systems maintenance on some weekends, so they recommend that lodgments be made as early as possible, as even returns or activity statements lodged in early December may not be finalised until after 2 January 2018.
The ATO has announced that, from 1 July 2018, SMSF event-based reporting regarding events impacting a member’s transfer balance account (i.e., via a Transfer Balance Account Report) will be limited to SMSFs with members with total superannuation balances of $1 million or more.
Editor: This new reporting is only required if an event that impacts a member’s transfer balance account actually occurs (e.g., such as starting an account based pension, or commuting such a pension).
This effectively means that up to 85% of the SMSF population will not be required to undertake any additional reporting with respect to a member’s transfer balance cap, outside of current time frames (as SMSFs with members with account balances below $1 million can choose to simply report events which impact their members’ transfer balances when the fund lodges its SMSF annual return).
However, from 1 July 2018, SMSFs that have members with total superannuation account balances of $1 million or more will be required to report any events impacting members’ transfer balance accounts within 28 days after the end of the quarter in which the event occurs.
Editor: Whilst SMSFs are not required to report anything to the ATO until 1 July 2018, SMSF trustees should be mindful that, where the $1.6 million transfer balance cap has been breached in respect of a member from 1 July 2017, any resulting tax liability will continue to accrue until the excess amount is commuted (i.e., irrespective of when reporting that breach is required).
Editor: The ongoing citizenship saga in Parliament has resulted in the Government losing its one-seat majority in the House of Representatives, thanks to the resignations of Barnaby Joyce and John Alexander.
By-elections have been scheduled in the relevant electorates and, in the meantime, some of the cross-benchers have guaranteed the Government’s (current) survival by committing to vote with it on motions of no-confidence and supply.
Tax legislation passed
In other news, the Government has passed changes to the tax legislation that will limit, or deny, deductions for travel expenses and depreciation claims for certain residential premises.
Legislation to impose vacancy fees on foreign acquisitions of residential land has also been passed.
Editor: The ATO has released a discussion paper to facilitate consultation regarding the definition of ‘taxi’ contained in the FBT Act, and the exemption from FBT for taxi travel undertaken to or from work or due to illness.
Although the provision of travel by an employer to an employee would generally be a benefit upon which FBT would be payable, employers are specifically exempted from having to pay FBT in respect of travel undertaken by their employees in a ‘taxi’ to or from work or due to illness of the employee.
The ATO has previously advised that this exemption “does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi.”
However, in light of a recent Federal Court decision regarding Uber, and proposed changes to licensing regulations in a number of states and territories, the ATO is reviewing its interpretation of the definition of ‘taxi’ in the FBT Act and may adopt an interpretation that accepts that a taxi may include a ride-sourcing vehicle or other vehicle for hire.
Editor: Until this matter is resolved, private travel (including between home and work) undertaken using ride-sourcing vehicles and other vehicles for hire may possibly be exempt from FBT under the minor benefits exemption.
A recent decision by the Full Court of the South Australian Supreme Court has provided guidance about the operation of BDBNs.
Editor: Members of super funds may generally make a BDBN directing the trustee of the fund to pay out their superannuation benefits after their death in a particular way and/or to particular beneficiaries.
In this case, the member had executed a BDBN that nominated his legal personal representative (‘LPR’) as the beneficiary to receive his death benefits.
Because he frequently lived outside Australia, he had also executed an enduring power of attorney (‘EPOA’) allowing his brother to be the sole director of the corporate trustee of his SMSF in his place.
Following his death, the executor of his estate (Dr Booth) brought an action for declarations that the trustee was bound by the BDBN.
Editor: Both the executor of a will and a person acting under an EPOA are ‘LPRs’ for superannuation purposes.
The Full Court held that the BDBN was effective and that Dr Booth, as executor of the will, was the LPR for these purposes.
Although the brother was the LPR of the deceased during his lifetime, the EPOA was terminated upon his death.
Editor: The recent superannuation reforms introduced the concept of a ‘transfer balance account’, to basically record the value of member balances moving into or out of ‘retirement phase’. In order to monitor these amounts, the ATO is introducing new reporting requirements and forms.
The ATO has released the new Transfer Balance Account Report (‘TBAR’), which is now available on ato.gov.au, and the ATO plans to have an online TBAR form available from 1 January 2018.
The TBAR is the approved form to provide data relating to transactions associated with the payment of retirement phase income streams to the ATO.
Reporting on events that affect a member’s transfer balance account is vital to minimising the taxation consequences if the transfer balance cap is exceeded.
While SMSFs will not be required to report anything until 1 July 2018, SMSFs can use the TBAR to report events that affect an individual member’s transfer balance account from 1 October 2017.
SMSFs with relatively straightforward affairs are likely to have only a few events per member to report over the life of the fund, including the commencing values of any retirement phase income streams to which an SMSF member is entitled (e.g., account based pensions, including reversionary income streams), and the value of any commutation of a retirement phase income stream by an SMSF member.
The ATO’s ‘Tax Avoidance Taskforce – Trusts’ continues the work of the Trusts Taskforce, by targeting higher risk trust arrangements in privately owned and wealthy groups.
The Taskforce will focus on the lodgment of trust tax returns, accurate completion of return labels, present entitlement of exempt entities, distributions to superannuation funds, and inappropriate claiming of CGT concessions by trusts.
Arrangements that attract the attention of the Taskforce include those where:
- trusts or their beneficiaries who have received substantial income are not registered, or have not lodged tax returns or activity statements;
- there are offshore dealings involving secrecy or low tax jurisdictions;
- there are agreements with no apparent commercial basis that direct income entitlements to a low-tax beneficiary while the benefits are enjoyed by others;
- changes have been made to trust deeds or other constituent documents to achieve a tax planning benefit, with such changes not credibly explicable for other reasons;
- there are artificial adjustments to trust income, so that tax outcomes do not reflect the economic substance (e.g. where someone receives substantial benefits from a trust but the tax liability on those benefits is attributed elsewhere, or where the full tax liability is passed to entities with no capacity/intention to pay);
- transactions have excessively complex features or sham characteristics (e.g., round robin circulation of income among trusts);
- revenue activities are mischaracterised to achieve concessional CGT treatment (e.g., by using special purpose trusts in an attempt to re-characterise mining or property development income as discountable capital gains); and
- new trust arrangements have materialised that involve taxpayers or promoters linked to previous non-compliance (e.g., people connected to liquidated entities that had unpaid tax debts)