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Monthly Tax Update September 2022

Posted By Tax & Legal  
13/09/2022

In this edition of the Monthly Tax Update, we provide the recent updates in legislation along with tax developments in the areas of corporate tax, individual tax, indirect tax and international tax. We also include the ATO’s recent activities, including its publications, rulings issued in the past month, latest Australian tax cases and other news in this edition.

Underpinning this month’s update, are announcements that focus on the digital and tech space with Government consultations underway into Crypto clarification and foreign currency, Digital Assets and Transactions in Australia and exposure draft legislation for small business investment to develop digital capability.

 

Download the full PDF Report here

Inside you will find

Legislation Update

Since our last update, the following tax related Bills were introduced into the Federal Parliament:

Treasury Laws Amendment (2022 Measures No. 3) Bill 2022 (the Bill) and Income Tax Amendment (Labour Mobility Program) Bill 2022 were introduced into the House of Representatives on 8 September 2022.

The Bills include the following proposals and amendments:

Data sharing to support government responses to major disasters

Schedule 2 to the Bill amends the Taxation Administration Act 1953 (TAA) to allow protected information to be disclosed to Australian government agencies for the purpose of administering major disaster support programs approved by the Minister. This measure has not been previously announced.

Modification power in response to COVID-19

Schedule 3 to the Bill extends a temporary mechanism for responsible Ministers to make alternative arrangements for meeting information and documentary requirements under Commonwealth legislation, including requirements to give information and produce, witness and sign documents, in response to the challenges posed by COVID-19. This mechanism currently terminates at the end of 31 December 2022.

Tax treatment for new or revised visa programs

Schedule 4 to the Bill and the Income Tax Amendment (Labour Mobility Program) Bill 2022 reduce the tax rate on certain income earned by foreign resident workers participating in the Pacific Australia Labour Mobility scheme from marginal rates starting at 32.5% to a flat 15%. This ensures that such workers pay tax at an appropriate rate on program income, consistent with similar migration programs. The amendments apply in relation to salary, wages, commission, bonuses or allowances paid to an employee under the Pacific Australia Labour Mobility scheme with effect from 1 July 2022.

Alternative annual performance test for faith-based super products

Schedule 5 to the Bill amends the SIS Act to provide for an alternative annual performance test for faith-based products. APRA may determine that a product is a faith-based product if a trustee for the product provides APRA with a valid application.

Draft legislation to clarify crypto not taxed as foreign currency

On 22 June 2022, the Government announced it would introduce legislation to exclude crypto assets such as Bitcoin from being treated as a foreign currency for Australian income tax purposes. The proposed legislation maintains the current tax treatment of crypto assets and removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as a legal tender.

Draft legislation has been released to exclude crypto assets from being treated as a foreign currency for Australian income tax purposes.

The proposed legislation maintains the current tax treatment of crypto assets such as Bitcoin and removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as a legal tender.

The draft legislation relies on amending the existing definition of digital currency in the GST Act (A New Tax System (Goods and Services Tax) Act 1999) before adopting it as an exclusion from the definition of foreign currency in the Income Tax Assessment Act 1997.

Interested parties are invited to comment on this consultation. The closing date for comments is 30 September 2022.

For more details, please refer here.

OECD Updates

Global Forum releases eight new peer review reports on transparency and exchange of information on request

The Global Forum has published on 16 August 2022 eight new peer review reports on transparency and exchange of information on request (EOIR) for the Cook Islands, Ecuador, Finland, Pakistan, Poland, Portugal, Sint Maarten and Sweden.

Travel restrictions due to the COVID-19 pandemic having prevented assessment teams from performing on-site visits to evaluate the practical implementation of the EOIR standard, six of the eight reports only cover the first phase of the assessment, analysing the jurisdictions’ legal and regulatory frameworks. Ratings for each of the ten elements of the assessment and overall ratings will be attributed at a later stage for these six jurisdictions, once on-site visits are carried out and full reviews encompassing the implementation of the standard in practice can be undertaken.

Other Updates

Review of the Tax Treatment of Digital Assets and Transactions in Australia

The Board of Taxation (the Board) has released its Consultation Guide (the Guide) for the review of the tax treatment of digital assets and transactions in Australia. Please refer here for a copy of the Guide.

The Guide follows the former government’s release, on 21 March 2022, for a review to be undertaken by the Board into the appropriate policy framework for the taxation of digital assets and transactions (i.e. crypto assets) in Australia. The government has noted that the reference aligns with its commitment to improve tax transparency in the Australian taxation system and ensure the global system is more robust.

The Guide provides an overview of crypto assets and their current taxation treatment in Australia. The Guide also outlines recent relevant reports and announcements and poses a series of questions under the following headings:

Read more

Exposure draft legislation: Technology Investment Boost

The Government is consulting on exposure draft legislation to introduce a Technology Investment Boost to help small businesses operate digitally.

The technology investment boost will provide a bonus of 20% deduction to small and medium businesses on eligible expenditure supporting digital adoption. The additional deduction is proposed to apply for businesses with aggregated annual turnover less than $50 million. To be eligible, expenditure must have a direct link to an entity’s digital operations for its business.

Read more about eligible expenditure and key dates here

Exposure draft legislation: Small business tax incentives

The government has released draft legislation that will introduce two tax incentives that support small businesses to train and upskill employees, and improve their digital and tech capacity.

Small businesses with an annual turnover of less than $50 million will have access to a bonus 20% deduction for eligible expenditure on external training of employees by providers registered in Australia, until 30 June 2024. To be eligible, expenditure must be incurred on external training for employees of the business. The additional deduction will not apply for the training of non-employee business owners, including sole traders, partners in a partnership and independent contractors.

Read more about eligible expenditure and key dates here

ATO Rulings and Activity

Corporate tax transparency income threshold for resident private companies

Changes to the corporate tax transparency income threshold for Australian-owned resident private companies were introduced into Parliament as an amendment in July 2022. These changes became law by the Treasury Laws Amendment (2022 Measures No. 1) Act 2022 on 9 August 2022.

According to the ATO, each year, they are required to publish corporate tax transparency reports which contain information reported to them by large corporations. The corporate tax transparency population refers to the entities which are included in the reports.

The amendment changes the $200 million income threshold for Australian-owned resident private companies to $100 million. From the 2023 income year onwards, the ATO will include in their corporate tax transparency reports, information reported to them by Australian-owned resident private companies with an income of $100 million or more.

For more details, please refer here.

ATO guidance on Division 7A updated

The ATO has updated the following guidance to reflect the publication of TD 2022/11 on unpaid present entitlements and private company deemed dividends under the rules in Division 7A of the Income Tax Assessment Act 1936.

As a background information, TD 2022/11 was issued on 13 July 2022 to consider when an unpaid present entitlement or amount held on sub-trust would become the provision of “financial accommodation” for the purposes of Div 7A of ITAA 1936.

  • Taxation Determination TD 2011/15 Income tax: Division 7A — unpaid present entitlements — factors the Commissioner will take into account in determining the amount of any deemed entitlement arising under s 109XI of the Income Tax Assessment Act 1936;
  • Taxation Determination TD 2015/20 Income tax: Division 7A: is a release by a private company of its unpaid present entitlement a “payment” within the meaning of Div 7A of Pt III of the Income Tax Assessment Act 1936?
  • Taxation Ruling TR 2015/4 Income tax: CGT small business concessions: unpaid present entitlements and the maximum net asset value test, and
  • Practical Compliance Guideline PCG 2017/13 Div 7A — PS LA 2010/4 sub-trust arrangements maturing in or after the 2016–17 income year.

Trust capital gains of foreign residents — determinations finalised

The ATO has finalized the following guidance addressing the taxation of capital gains that flow to foreign resident beneficiaries from a resident trust in light of the full court decision in Peter Greensill Family Co Pty Ltd (Trustee) v Commissioner of Taxation [2021] FCAFC 99.

TD 2022/12 - Income tax: is the source concept in Division 6 of Part III of the Income Tax Assessment Act 1936 relevant in determining whether a non-resident beneficiary of a resident trust, or trustee for that trust, is assessed on an amount of trust capital gain arising under Subdivision 115-C of the Income Tax Assessment Act 1997?

TD 2022/12 provides that a non-resident beneficiary of a resident trust is assessable on an amount of trust capital gain, irrespective of whether the gain has a source in Australia.

Read more here about the source concept and outcomes of the case

TD 2022/13: Income tax: does Subdivision 855-A (or subsection 768-915(1)) of the Income Tax Assessment Act 1997 disregard a capital gain that a foreign-resident (or temporary-resident) beneficiary of a resident non-fixed trust has because of subsection 115-215(3)?

TD 2022/13 sets out the Commissioner’s view that Div 855 of ITAA 1997 does not enable a foreign-resident beneficiary of a resident non-fixed trust to disregard their share of a non-taxable Australian property trust capital gain.

Read more here about TD 2022/13 and to access the link to the ATO compendium

ATO update on eInvoicing

With currently more than 18,000 businesses already using eInvoicing, the ATO is expecting significant growth in the use of eInvoicing over the next 12 months to make their transactions faster, simpler and more secure.

eInvoicing is the new, standardised way to send and receive electronic invoices directly in software, via a secure network. eInvoicing offers a streamlined way of managing invoices. With eInvoicing, suppliers no longer need to print, post or email paper-based or PDF invoices and buyers would not need to manually enter or scan invoices into their software.

ATO Deputy Commissioner Mr Will Day said eInvoicing reduces the risk of fake or compromised invoices and email billing scams as the invoice is delivered directly into the customer’s software via a secure network.

Businesses can get started with eInvoicing by registering in their software or talking to their advisers.

For more details, please refer here.

GST treatment of financial supplies and related supplies and acquisitions

The ATO has provisionally updated its ruling on the GST treatment of financial supplies and related supplies and acquisitions.

The draft outlines the proposed changes to GSTR 2002/2 to reflect changes in the GST law (for instance, changes to the GST legislation applicable to cross-border supplies and in relation to digital currency), include new references to public guidance released relating to financial supplies, and provide some proposed changes to modernise parts of the Ruling.

The draft inserts a buy-now pay-later example that applies the ATO’s longstanding view on interest free loans. Schedule 2 of the Ruling has also been provisionally updated to indicate when certain foreign currency-denominated products and overseas payment products are GST-free.

This publication is a draft for public comment. It represents the Commissioner's preliminary view on how a relevant provision could apply.

For more details, please refer here.

GST Adjustment Note Information Requirements Determination 2022.

The ATO has released for comment a GST related draft determination (LI 2022/D11), A New Tax System (Goods and Services Tax) Adjustment Note Information Requirements Determination 2022.

It outlines the additional information requirements specified under s 29-75(1)(c) of the GST Act for a document to be an adjustment note or recipient created adjustment note.

Read more

GST deferred transfer farm-out arrangements

A draft explanatory statement (LI 2022/D12) has been issued. It sets out specific attribution rules for deferred transfer farm-out arrangements (defined in section 4 of the determination) where a supply or acquisition made under a contract is subject to preconditions. The determination is necessary to prevent Division 29 and Chapter 4 of the GST Act applying inappropriately to these arrangements.

Read more

ATO update on COVID-19 Pandemic event (Subclass 408) visa

A COVID-19 Pandemic event (Subclass 408) visa (408 Pandemic event visa) is a temporary Australian Government Endorsed Events visa that allows eligible individuals to legally stay in Australia and continue to work during the COVID-19 pandemic.

The ATO has released a guide on how the tax outcome of the visa holder may or may not change, depending on their residency status and previous visa.

For more details, please refer here.

Redundant STP legislative instruments repealed

The ATO has registered the Taxation Administration – Single Touch Payroll – Spent Instruments Repeal Determination 2022 legislative instrument, which repeals six redundant legislative instruments related to Single Touch Payroll reporting (STP).

The six legislative instruments relating to STP reporting that are no longer required and being repealed are:

According to the legislation, the repeal of these instruments will not affect their prior operation in the relevant financial years, due to the operation of section 13 of the Legislation Act 2003 and section 7 of the Acts Interpretation Act 1901.

For further information, please refer here.

Practice Statement Law Administration PS LA 2004/10: Tax law claimed to be invalid

The ATO has refreshed its guidance on how to deal with correspondence from taxpayers who claim that they will not comply with tax laws because the laws are invalid or do not apply to them.

The Practice Statement has been updated to provide more complete references, including to internal procedures, and to improve readability.

Read more about the Practice Statement here

Class rulings issued :

  • Class Ruling CR 2022/72 - Qantas Airways Ltd - Executive Recovery Retention Plan. This ruling applies from 1 July 2021 to 30 June 2024.
  • Class Ruling CR 2022/73 - Qantas Airways Ltd - Employee Recovery Retention Plan. This ruling applies from 1 July 2021 to 30 June 2024.
  • Class Ruling CR 2022/74 - Police & Nurses Ltd - PNL Capital Notes. This ruling applies from 1 July 2021 to 30 June 2027.
  • Class Ruling CR 2022/75 - Uniti Group Ltd - scheme of arrangement and special dividend. This ruling applies from 1 July 2022 to 30 June 2023.
  • Class Ruling CR 2022/76 - Firefinch Ltd - demerger of Leo Lithium Ltd. This ruling applies from 1 July 2021 to 30 June 2022.
  • Class Ruling CR 2022/77 - DGO Gold Ltd - scrip for scrip roll-over. This Ruling applies from 1 July 2021 to 30 June 2023.
  • Class Ruling CR 2022/78 - Vimy Resources Ltd - scrip for scrip roll-over. This ruling applies from 1 July 2022 to 30 June 2023.
  • Class Ruling CR 2022/79 - New World Resources Ltd - return of capital by distribution of shares in Koba Resources Ltd. This ruling applies from 1 July 2021 to 30 June 2022.
  • Class Ruling CR 2022/80 - Metals X Ltd - return of capital by distribution of shares in NICO Resources Ltd. This ruling applies from 1 July 2021 to 30 June 2022
  • Class Ruling CR 2022/81 - Victoria Police - early retirement scheme 2022–2023. This ruling applies from 8 September 2022 to 30 June 2023
  • Class Ruling CR 2022/82 - Australian Construction Industry Redundancy Trust - employer contributions. This ruling applies from 1 April 2022 to 31 March 2027
  • Erratum to CR 2022/35 - Urban Mobility Pty Ltd - use of an electric bicycle by an employee.

Other rulings issued:

  • Product Ruling PR 2022/7 - Bell Equity Lever — instalment receipts. This ruling applies from 1 July 2022 to the specified class of entities.
  • Product Ruling PR 2022/8 - Bell Geared Equities Investment. This ruling applies from 1 July 2022 to the specified class of entities.
  • Addendum to Product Ruling PR 2021/12 Challenger Lifetime Annuity (Liquid Lifetime). This addendum amends PR 2021/12 to incorporate a new product disclosure statement, applicable before and after its date of issue.

Latest Australian Tax Cases

  • GST; group registration - The AAT has upheld a decision by the Commissioner to revoke a GST group’s registration because the group did not meet the ownership requirements in the GST legislation. [Adcon Resources Vic Pty Ltd v FC of T 2022 ATC - 16 August 2022]
  • Superannuation - The AAT has found that additional payments made to an SMSF member were correctly treated as a superannuation income stream benefit in the absence of a clear choice, if not formal election, by the member that they were not to be treated as such. [Prescott v FC of T 2022 ATC - 4 August 2022]
  • Distributions from foreign trust – The AAT has found that the default assessments issued by the ATO to the taxpayer in respect of the distribution received from a foreign trust were not excessive and that there is no basis for the penalty to be remitted. The decision under review is affirmed. [Campbell and Commissioner of Taxation (Taxation) [2019] AATA 2043 - 22 July 2019]

 

Download the full PDF Report here