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ATO data matching program – Visa Holders

The ATO will acquire information on holders of a Visa from the Department of Immigration and Border Protection for the 2017/18, 2018/19 and 2019/20 financial years.

It is estimated that records of 20 million individuals will be obtained over the course of the three year period.

These records will be electronically matched with ATO data holdings to identify non‑compliance with obligations under taxation and superannuation laws, as well as (for example) support compliance activities under Australia’s foreign investment rules.

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ATO warning regarding small business record-keeping

According to the ATO, of all of the things that can cause small businesses to fold, “high on that list is poor record keeping”.

More than half of the businesses they visited in their Protecting honest business campaign needed to improve their record keeping.

Issues they found include businesses:

  • estimating their sales and income;
  • using the ‘no sale’ and ‘void’ button on cash registers when taking cash payments;
  • not keeping cash register tapes and not reconciling at the end of the day; and
  • paying their employees cash-in-hand.

They are writing to these businesses to recommend they attend one of the ATO’s record keeping workshops, which cover why good record keeping is important and how it will save them time.

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Consultation on ‘protecting superannuation entitlements’

Following the recommendations of the Superannuation Guarantee Cross‑Agency Working Group, the Government has released draft legislation “to protect workers’ superannuation entitlements and modernise the enforcement of the superannuation guarantee”.

The draft laws extend Single Touch Payroll to all employers from 1 July 2019, and will require superannuation funds to commence ‘event-based’ reporting to the ATO of payments they receive for employees from their employer from 1 July 2018.

Combined, these measures (if passed as drafted) should provide the ATO with more timely information to support earlier detection and proactive prevention of non‑payment of superannuation owed to employees.

The ATO will have a suite of enforcement and collection tools for employers who break the law, including

  • strengthened arrangements for director penalty notices and security deposits for superannuation and other tax-related liabilities;
  • the ability (for the first time) to apply for court‑ordered penalties, including up to 12 months imprisonment; and
  • the ability to require employers to undertake training.

The Government’s commitment to a Director Identification Number will also help identify those directors who are robbing their employees of their superannuation.

Editor: The Government introduced legislation last year to implement another recommendation by the Working Group to close a loophole that could be used by unscrupulous employers to shortchange employees who use salary sacrifice arrangements, and will progress that legislation along with this broader compliance Bill.

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Further ‘affordable housing’ measures passed

Parliament has passed the legislation allowing first home buyers to save for a deposit inside superannuation through the First Home Super Saver Scheme (FHSSS), and also allowing older Australians to ‘downsize’ and then contribute the proceeds of the sale of their family home into superannuation.

From 1 July 2018, a first home buyer will be able to withdraw voluntary superannuation contributions they have made since 1 July 2017 (up to $30,000 each, with individuals being able to contribute up to $15,000 a year within existing caps), along with a deemed rate of earnings, to help buy their home.

Also, from 1 July 2018, when Australians aged 65 and over sell a home they have owned for at least 10 years, they may contribute up to $300,000 from the proceeds into their superannuation accounts, over and above existing contribution restrictions.   Both members of a couple may take advantage of this measure, together contributing up to $600,000 from the proceeds of the sale into superannuation.

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Numerous work-related expense claims disallowed

The AAT has denied a taxpayer’s deductions for work-related travel, clothing, self-education and rental property expenses (totalling $116,068 and $140,581 for the 2013 and 2014 income year respectively), and upheld the ATO’s 50% administrative penalty on the tax shortfall for recklessness.

Apart from being unable to prove (or ‘substantiate’) some claims due to lack of receipts, and documents being in the wrong name, the AAT also criticised the taxpayer for:

  • claiming work-related travel expenses on the basis of the ‘gap’ between travel expenses reimbursed by her employer and the ATO’s reasonable rates (which “was clearly not permissible under any taxation law”); and
  • claiming clothing expenses for “formal clothes of high class”, despite her clothing not being distinctive or unique to her employment at the Department of Finance, and was instead rather conventional in nature (and so was not deductible).
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Other GST News

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).

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Tool for applying the margin scheme to a property sale

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.

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Truck drivers’ reasonable amounts for travel updated

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:

Breakfast         $24.25

Lunch              $27.65

Dinner              $47.70

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.

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ATO’s annual closure

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.

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ATO relief for SMSFs reporting ‘transfer balance account’ events

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).