In this edition of the Monthly Tax Update for September 2021, we provide the recent updates in legislation along with tax developments in the areas of corporate tax, individual tax and international tax. We also include the ATO’s recent activities, including its publications, class rulings issued in the past month, latest Australian tax cases and other news in this edition.
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Inside you will find
Legislation Update |
Other Updates |
ATO Rulings and Activity |
Latest Australian Tax Cases |
Legislation UpdateSince our last update, the following Commonwealth tax legislation were introduced into Parliament and currently awaits assent: Paid Parental Leave Amendment (COVID-19 Work Test) Bill 2021 A Bill containing changes to the Paid Parental Leave scheme has completed its passage through parliament and awaits assent. The Bill amends the Paid Parental Leave Act 2010 to provide that a person in receipt of a COVID-19 Australian Government payment or the COVID-19 disaster payment will be considered to be performing qualifying work for the purpose of the paid parental leave work test. The amendments apply from the day after assent. For more details, please refer here.
Treasury Laws Amendment (COVID-19 Economic Response No 2) Bill 2021 The Bill was introduced into the House of Representatives on 3 August 2021 and since enacted, amends the:
For more details, please refer here.
Treasury Laws Amendment (2021 Measures No 6) Bill 2021 The Treasury Laws Amendment (2021 Measures No 6) Bill 2021 has completed its passage through parliament and awaits assent. Once enacted, it will amend the:
For more details, please refer here. |
OECD and Other UpdatesTreasury, Reserve Bank, APRA, ASIC release corporate plans Treasury, the Reserve Bank of Australia (RBA), the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have all released corporate plans for the 2021-22 financial year. Further information on the corporate plans can be assessed on the respective website, as below:
Committee report on tax treatment of Employee Share Schemes The House of Representatives Standing Committee on Tax and Revenue has presented its report on the tax treatment of Employee Share Schemes (ESS). The report makes 18 recommendations to support the uptake and use of ESS in Australia. The Committee’s overarching recommendation is that ESS be treated as capital for tax purposes, and that a tax liability would arise on the disposal of the assets granted, using the current capital gains tax regime. Other recommendations by the Committee include:
For more details, please refer here.
Draft legislation for Corporate Collective Investment Vehicles regime The government has released for public consultation revised exposure draft legislation (with explanatory materials) that implements the tax and regulatory components of the Corporate Collective Investment Vehicle (CCIV) regime. A CCIV is an investment vehicle with a corporate structure, designed to be an alternative to a trust-based managed investment scheme. A single CCIV can offer multiple products and investment strategies within the same vehicle. The proposed new draft legislation includes:
Interested parties are invited to submit responses until 24 September 2021. For more details, please refer here. |
ATO Rulings and ActivityATO consultation on changes to LIBOR and other interest rate benchmarks The Australian Taxation Office (ATO) is undertaking consultation to seek input for proposed high level guidance on common tax implications of changes that will be required to certain financial instruments as a result of the transition of various interest rate benchmarks, including the London Inter-bank Offered Rate (LIBOR), the Euro Inter-bank Offered Rate (EURIBOR), the United States of America’s Effective Federal Funds Rate and other Inter-bank Offered Rate (IBOR) benchmarks, to alternative risk-free rates (RFRs). Although the change is of particular relevance to financial institutions, taxpayers outside the financial sector may also be impacted as LIBOR is used to determine the interest rate for a large number of loans, derivatives and other financial instruments. The paper notes that the tax consequences of IBOR reform will largely depend on the legal effect of any amendments made to legacy contracts in response to IBOR reform and specifically whether the relevant amendments cause a mere variation or rescission to the existing legal contract. In order to illustrate some of the more common tax issues that may arise as a result of changes made to financial arrangements driven by IBOR, the principles discussed in this discussion paper are provided in a series of examples. Comments in response to the discussion paper are due by 10 September 2021. A&A has previously published two articles in respect of reforms to IBOR. For further information, please refer to the respective article below:
Practice statement on default assessment penalties updated The ATO has updated its practice statement on the administration of default assessment penalties. The updates to Law Administration Practice Statement PS LA 2014/4 reflect the ATO’s new format for practice statements and do not contain any policy changes. PS LA 2014/4 was previously titled “Administration of the penalty imposed under subsection 284 75(3) of Schedule 1 to the Taxation Administration Act 1953”. For more details, please refer here. Updated ATO tax residency guidance for individuals The ATO has updated its tax residency guidance on 10 August 2021. Under the updated guidance, unless there are specific circumstances preventing a taxpayer leaving Australia and returning to their usual overseas home, they will likely have become Australian tax residents. The following are factors the ATO has indicated would be considered in a determination of whether or not a taxpayer has been able to leave Australia:
Proof of application of a declined travel exemption to leave Australia or enter a taxpayer’s home country may, for example, be important to substantiate an inability to leave. Similarly, proof of flight cancellations, or evidence that flights into a certain country simply are not available may help demonstrate an inability to leave. The ATO has not indicated whether consideration would be given to the heightened costs of international flights during the COVID-19 pandemic. Such costs may be prohibitively expensive for an individual, thereby preventing them from leaving Australia without suffering serious economic hardship. For further details, please refer here.
Ruling on foreign employment income exemption amended The ATO has issued an addendum to Taxation Ruling TR 2013/7 dealing with the interpretation of s 23AG(1AA) of ITAA 1936 on foreign employment income exemption. The addendum amends TR 2013/7 to reflect that para 23AG(1AA)(a) of ITAA 1936 does not apply where the person’s employer is an Australian government agency. Amendments are also made to reflect changes to website documentation and linkages and updates to case citations and other content issues. The addendum applies from 25 August 2021. For more information, please refer here.
ATO released guidance on deductions for employee travel expenses The ATO has finalised guidance explaining when an employee can deduct travel expenses for income tax and fringe benefit tax (FBT) purposes.
Taxation Ruling TR 2021/4 considers the income tax and fringe benefits tax implications of food and drink expenses incurred by employees while travelling for work. The Taxation Ruling also sets out the criteria for when an allowance is a travel allowance or a living-away-from-home allowance (LAFHA) benefit. The final ruling provides further guidance on circumstances where the period an employee is away from home is unexpectedly extended and on determining whether an employee has relocated. The ruling applies both before and after its date of issue. The Commissioner will have regard to any conflict between TR 2021/4 and the earlier draft rulings TR 2017/D6 and TR 2021/D1 in deciding whether to apply compliance resources for income years to which the earlier draft rulings applied. The ATO has published a compendium on the feedback it received. For more details, please refer here.
Practical Compliance Guideline PCG 2021/3 outlines the ATO’s compliance approach to determine if employees in certain circumstances are travelling on work or living at a location away from their normal residence. PCG 2021/3 is intended to provide practical guidance to assist employers with determining whether an allowance is paid for travelling on work or living at a location and also whether amounts reimbursed or paid by an employer would have been deductible to the employee had they purchased the goods or services. PCG 2021/3 does not apply to employees who work on a fly-in fly-out or drive-in drive-out basis. These employees are instead specifically addressed under ss 31A and 31E of the Fringe Benefits Tax Assessment Act 1986. The final guideline also clarifies that the number of days an employee is away for work purposes includes both the day of departure from the employee’s residence and the day of departure from the work location. The guideline finalises draft PCG 2021/D1 and applies both before and after its date of issue. The ATO has published a compendium on the feedback it received. For more information, please refer here.
Class rulings issued:
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Managing Director Cameron Allen +61 3 9939 4488 cameron.allen@aa.tax |