The Government has released draft tax legislation to clarify that passive investment companies cannot access the lower company tax rate for small businesses of 27.5%, but will still pay tax at 30%.
The amendment to the tax law will ensure that a company will not qualify for the lower company tax rate if 80% or more of its income is of a passive nature (such as dividends and interest).
The Minister for Revenue and Financial Services said the policy decision made by the Government to cut the tax rate for small companies was meant to lower taxes on business, and was not meant to apply to passive investment companies.
The ATO generally issues activity statements by the end of the relevant month under their normal processes, allowing the statement to be lodged by 21 days after the end of the month, or 28 days after the end of the relevant quarter (as appropriate).
However, the ATO recognises that there may be a specific reason for a taxpayer to access their activity statements early, so activity statements can be generated early in some cases, such as where the taxpayer is going to be absent from their place of business before the end of the reporting period (and the business will not be trading during that period), or if the taxpayer’s entity is under some form of administration, or the business has ceased.
The government has issued new guidelines to set out criteria for tax deductible non-compulsory uniforms.
Editor: The taxation law only allows a deduction to employees for expenditure on uniforms or wardrobes where either:
- the clothing is in the nature of occupation specific, or protective clothing; or
- the wearing of the clothing is a
compulsory condition of employment
for employees and the clothing is not
conventional in nature; or
- where the wearing of the clothing is not compulsory, the design of the clothing
is entered on the Register of Approved Occupational Clothing.\
The new guidelines outline (among other things):
- the steps that need to be undertaken by employers to have designs of occupational clothing registered; and
- the factors that will be considered
in determining whether designs of
occupational clothing may be registered.
The guidelines commence on 1 October 2017, and the previous Guidelines are revoked with effect from the same day.
If the total value of a superannuation fund member’s pensions exceeded $1.6 million on 1 July 2017, they may face adverse tax consequences.
However, there is a transitional provision that permits a minor excess over $1.6 million to be ignored, subject to certain conditions being met.
Basically, this will be satisfied if the value of their pension interests on 1 July 2017 exceeded $1.6 million by no more than $100,000 (i.e. their total value did not exceed $1. 7 million), but the member is able to commute the pension(s) by an amount that is at least equal to that excess no later than 31 December 2017.
This will mean that no ‘transfer balance cap’ consequences arise (e.g., no ‘excess transfer balance earnings’ will accrue on the excess and no ‘excess transfer balance tax’ will become payable).
Therefore, it is important that this issue is identified and, if applicable, dealt with promptly.
The ATO finds that businesses tend to forget to update their Australian business number (ABN) details in the Australian Business Register (ABR) when their circumstances or details change, so they have asked that we contact our clients to help keep your ABN details up to date and reduce unnecessary contact from the ATO.
In particular, the ATO says that many partnership and trust ABN’s are not in operation, or their business structures have changed, so please let us know if:
- your business is no longer in operation (so we can cancel the ABN); or
- if your business structure has changed
(so we can cancel the ABN for the old
structure before applying for a new one).
The ATO also recommends that we add alternative contacts to clients’ ABN records (so please provide us with alternative contact information, if possible), and to update the ABN records where any contact details have changed.
Register trading names with ASIC
By 31 October 2018, businesses will need to register any existing or old trading names as a business name with the Australian Securities & Investments Commission (ASIC) in order to continue operating with it.
The ABN Lookup website will reflect these changes and will only display business names registered with ASIC from this date.
A limited release of ‘Single Touch Payroll’ began for a small number of digital service providers and their clients on 1 July 2017, with Single Touch Payroll operating with limited functionality for a select number of employers.
Editor: Single Touch Payroll will effectively require some employers to report information regarding payments to employees (or to their super funds) in ‘real time’, via their payroll software.
The following timeline sets out what is happening in the lead-up to the mandatory commencement of Single Tough Payroll next year.
September 2017 – The ATO will write to all employers with 20 or more employees to inform them of their reporting obligations under Single Touch Payroll.
1 April 2018 – Employers will need to do a headcount of the number of employees they have, to determine if they need to report through Single Touch Payroll.
From 1 July 2018 – Single Touch Payroll reporting will be mandatory for employers with 20 or more employees.
Editor: Although we don’t normally report on Opposition tax policies, this policy change is so fundamental, and the existing state of the Federal Parliament is so chaotic, that we believe it’s worth bringing this to your attention.
The Leader of the Opposition, Bill Shorten, has announced that a Labor Government (should they be elected) will introduce a standard minimum 30% tax rate for discretionary trust distributions to “mature beneficiaries” (i.e., people aged 18 and over).
Although the ALP acknowledges that individuals and businesses use trusts for p range of legitimate reasons, such as asset protection and business succession, “in some cases, trusts are used solely for tax minimisation.”
Labor’s policy will only apply to discretionary trusts, so other trusts -such as special disability trusts, deceased estates and fixed trusts -will not be affected by this change.
Labor’s policy will also not apply to farm trusts and charitable trusts, and other exemptions will apply, such as for people with disability (the Commissioner of Taxation will be given discretionary powers to manage this).
Their announcement also reiterated their other policies regarding tax reform, including further changes to superannuation, changes to negative gearing and CGT, and limiting deductions for managing tax affairs.
The benchmark interest rate for 2017/18, for the purposes of the deemed dividend provisions of Div.7A, is 5.30% (down from 5.40% for 2016/17).
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
The car limit for the 2017/18 income year is $57,581 (the same as the previous year). This amount limits depreciation deductions and GST input tax credits.
In July 2017, Laura buys a car to which the car limit applies for $60,000 to use in carrying on her business. As Laura started to hold the car in the 2017/18 financial year, in working out the car’s depreciation for the 2017/18 income year, the cost of the car is reduced to $57,581.
Editor: The ATO has released its latest taxation determination on reasonable travel expenses, and it includes a big change for employee truck drivers.
For the 2017/18 income year, the reasonable amount for travel expenses (excluding accommodation expenses, which must be substantiated with written evidence) of employee truck drivers who have received a travel allowance and who are required to sleep away from home is $55.30 per day (formerly a total of $97.40 per day for the 2016/17 year).
If an employee truck driver wants to claim more than the reasonable amount, the whole claim must be substantiated with written evidence, not just the amount in excess of the reasonable amount.
Editor: The determination includes an example of a truck driver who receives a travel allowance of $40 per day in 2017/18 ($8,000 over the full year for 100 2-day trips), but who spent $14,000 on meals on these trips.
In terms of claiming deductions for these expenses, he can either claim $14,000 as a travel expense (if he kept all of his receipts for the food and drink he purchased and consumed when travelling), or just rely on the reasonable amount and claim $11,060 ($55.30 x 200 days) as a travel expense (in which case he will need to be able to show (amongst other things) that he typically spent $55 or more a day on food and drink when making a trip (for example, by reference to diary entries, bank records and receipts that he kept for some of the trips)).