The ATO has been issuing ‘Additional tax on concessional contributions (Division 293) assessments’ with respect to liabilities relating to the 2018 income year.
Division 293 imposes an additional 15% tax on certain concessional (i.e. taxable) superannuation contributions.
It applies to individuals with income and concessional superannuation contributions exceeding the relevant annual threshold.
This means that impacted individuals may ultimately pay 30% tax (when the Division 293 tax is combined with the existing 15% contributions tax) with respect to:
- superannuation contributions made on their behalf as a result of employer super guarantee obligations or effective salary packaging arrangements; or
- personal deductible contributions.
The ATO reportedly expects to issue about 90,000 assessments during the first two months of 2019.
Payment needs to be made by the due date to avoid any additional interest charges, although alternative payment methods are available (including the ability to release money from any existing super balances).
Editor: More individuals will receive Division 293 assessments (and be required to pay the additional 15% tax) for the 2018 financial year due to a drop in the applicable threshold from $300,000 to $250,000.
Additionally, one of the key ALP tax policies for the upcoming Federal Election includes a further reduction of this Division 293 threshold from $250,000 to $200,000.
The ability to make ‘downsizer contributions’ effectively commenced on 1 July 2018, prompting the ATO to release further guidance with respect to this new superannuation contribution classification.
Editor: This new measure will be of most assistance for individuals approaching retirement, where they dispose of their family home in an effort to ‘downsize’ and they want to contribute part or all of the proceeds to superannuation.
Basically, these measures allow older Australians to make a downsizer contribution where:
- they are aged at least 65;
- there was consideration received for the disposal of an eligible Australian dwelling;
- the contract of sale for the property was entered into on or after 1 July 2018;
- a superannuation contribution is generally made within 90 days of settlement;
- the contribution does not exceed the lesser of $300,000 and the proceeds received from the sale of the dwelling;
- an ownership interest in the dwelling had been held for at least 10 years (usually by the individual making the contribution or their spouse);
- either a full or partial CGT main residence exemption applies to the disposal of the dwelling;
- a choice to treat the contribution as a downsizer contribution is made in the approved form; and
- broadly speaking, it is the first downsizer contribution the taxpayer has made.
The Government has announced it intends to introduce legislation to improve the ability of small businesses to offer employee share schemes by simplifying the current regulatory framework, and reducing the time and cost burden for businesses by (amongst other things):
- increasing the value limit of eligible financial products that can be offered in a 12-month period from $5,000 per employee to $10,000 per employee;
- creating an exemption for disclosure, licensing, advertising and on-sale obligations in the Corporations Act; and
- allowing small businesses to offer (in most instances) employee share schemes without publicly disclosing commercially sensitive financial information.
The ATO has extended its data matching program, this time focusing on share data.
The ATO will continue to receive share data from ASIC, including details of the price, quantity and time of individual trades dating back to 2014, with more than 500 million records obtained.
The ATO will use the information to identify taxpayers who have not properly reported the sale or transfer of shares as income or capital gains in their income tax returns.
It seems share transactions are high on the ATO’s priority list, given more than 5 million Australian adults (almost one-third) now own
The ATO has finalised a trial relating to sending overdue taxpayer lodgment obligations to external collection agencies.
As a result, it may now refer taxpayers to an external collection agency to secure tax return lodgment.
The ATO has stated that it will only refer a taxpayer to an external collection agency where the taxpayer takes no action in response to its initial correspondence letters.
The ATO has recently advised that it will be contacting taxpayers (and tax agents on behalf of their clients) that have been identified as having cars registered in their business name who have not lodged an FBT return.
The ATO has reminded businesses that:
- a car fringe benefit will occur when a business owns or leases a car and makes it available for an employee’s private travel or use (including garaging the car at or near an employee’s home and making it available for private use); and that
- business directors are also ’employees’ for FBT purposes.
The ATO has advised that it will send SMS text messages directly to taxpayers where incorrect bank account details were included in their tax returns and they were entitled to a refund.
The SMS will advise impacted taxpayers that:
- their refund cannot be processed due to incorrect bank account details; and
- they should phone the ATO on 13 28 61 to correct their details.
If impacted taxpayers contact the ATO with their correct details within seven days, any refund due will be issued electronically.
Editor: In the wake of an increase in recent tax fraud attempts, it is clear that taxpayers need to exercise additional caution when dealing with electronic messaging from (or purportedly from) the ATO.
The authenticity of ATO correspondence can be verified by calling the ATO on 1800 008 540; however, if you are ever unsure about any correspondence received, please contact our office.
The Government has released a consultation paper outlining proposed reforms to ‘simplify’ the loan agreements that are generally required when a shareholder (or their associate) borrows funds (or receives a payment) from a related company.
Editor: Broadly, where a private company makes a payment or loans funds to a shareholder and/or their associate, the amount will be treated as a taxable unfranked dividend paid to the recipient.
To avoid this, many shareholders enter into complying ‘Division 7A loan agreements’ (basically agreeing to repay the relevant amount within 7 years, or 25 years if the loan is secured).
With this in mind, Treasury is currently looking at (among other things):
- simplifying the Division 7A loan rules by converting to a new 10-year model; and
- clarifying that distributions from a trust to a ‘bucket’ company that remain ‘unpaid present entitlements’ come within the scope of Division 7A.
Editor: The proposed amendments are intended to apply from 1 July 2019 and will arguably be the most significant tax reforms impacting business and investment clients over the next two years.
At this stage of the consultation process, the Government is currently considering submissions made with respect to these proposals and it is expected that draft legislation, and further clarity, will be available early in the 2019 calendar year.
The ATO has received increasing reports of a new take on the ‘fake tax debt’ scam, whereby scammers are now impersonating registered tax agents to lend legitimacy to their phone call.
The fraudsters do this by coercing the victim into revealing their agent’s name and then initiating a three-way phone conversation between the scammer, the victim, and another scammer impersonating the victim’s registered tax agent or someone from the agent’s practice.
As the phone conversations with the scammers appeared legitimate and the victims trusted the advice of the scammer ‘tax agent’, victims have been falling for this new approach.
In a recent example, a victim withdrew thousands of dollars in cash and deposited it into a Bitcoin ATM, fearing that police had a warrant out for their arrest.
The ATO is reminding taxpayers that they will never:
- demand immediate payments;
- threaten them with arrest; or
- request payment by unusual means, such as iTunes vouchers, store gift cards or Bitcoin cryptocurrency.
Taxpayers are advised that if they are suspicious about a phone call from someone claiming to be the ATO, then they should disconnect and call the ATO or their tax agent to confirm the status of their tax affairs and verify the call.
From 4 October 2018, the Government has banned activities involving electronic sales suppression tools (‘ESSTs’) that relate to people or businesses that have Australian tax obligations.
The production, supply, possession or use of an ESST (or knowingly assisting others to do so) may attract criminal and administrative penalties.
ESSTs can come in different forms and are constantly evolving, some examples include:
- An external device connected to a point of sale (‘POS’) system.
- Additional software installed into otherwise-compliant software.
- A feature or modification that is a part of a POS system or software.
An ESST may allow income to be misrepresented and under-reported by:
- deleting transactions from electronic record-keeping systems;
- changing transactions to reduce the amount of a sale;
- misrepresenting sales records (e.g., by allowing GST taxable sales to be re-categorised as GST non-taxable sales); or
- falsifying POS records.
Transitional arrangements are in place for six months starting from 4 October 2018 to 3 April 2019 for possessing an ESST.
Taxpayers may avoid committing an offence for possessing an ESST if they:
- acquired it before 7:30pm 9 May 2017; and
- advise the ATO that they possess the tool.
Importantly, the transitional provisions do not apply to the manufacture, development, publication, supply or use of an ESST.
Depending on the offence and severity of the crime, taxpayers can face financial penalties of up to 5,000 penalty units, which currently equates to over $1 million.