August 2018
THE DEMISE OF TRADING NAMES TO MOVE TO A NATIONAL BUSINESS NAME REGISTRATION SERVICE
A.S.I.C. has commenced work with the Australian Business Register to retire the use of trading names throughout Australia.
After 31.10. 2018, the ABN Lookup will not display trading names – only registered business names will be listed.
The national business names register was established in 2012 to replace the old state and territories system.
Prior to 2012, the Australian Business Register collected the names used by entities to carry on their business activities as ‘trading names’. These ‘trading
names’ included:
- business names registered under the old state and territories system, and
- any unregistered names used for business purposes by an entity. During a transitional period, trading names registered under the old state and territories
system, have continued to be displayed in the trading name field of the ABN Lookup. As of 31.10. 2018 this will cease, and the ABN Lookup will
only display business names registered under the new national system.
The retirement of trading names is the final step in the lengthy process that began in 2012 to move to the national business name registration service.
From November 2018, the process for searching and determining the name used for an entity’s business activities will be more streamlined and accurate.
Entities operating a business or trading under a specific name in Australia should ensure they have that business name registered with ASIC, unless one
of the limited exceptions apply.
Businesses should also seek trade mark protection as business name registration does not provide any exclusive rights in the name, only trade mark registration
provides that protection.
IT IS NOW MORE DIFFICULT TO BE A NON-RESIDENT!
The recent decision of the Federal Court in Harding v Commissioner of Taxation has significant implications for Australians living and working overseas to be non-residents for tax purposes.
Australian tax residents are taxed on their world-wide income. For taxpayers who are living and working overseas, the difference between being a non-resident
and tax resident will often mean a significant tax cost. In a number of overseas jurisdictions particularly the United Arab Emirates, Australians pay
little or no tax.
Under the Australian tax law, a person is a tax resident of Australia if they meet any one of four tests:
- They ‘reside’ in Australia, based on the ordinary meaning of the word ‘resides’.
- They have an Australian domicile, and the Commissioner is not satisfied they have a ‘permanent place of abode’ outside Australia.
- They are in Australia for more than 183 days in an income year (subject to one exception).
- They are members of Commonwealth superannuation schemes, which mostly apply to members of the Commonwealth public service and armed forces.
Mr. Harding had lived and worked in the Middle East from 1990 to 2006 and had returned to Australia to live and work between 2006 and 2009. In 2009, he
and his then-wife decided to return to the Middle East permanently with Mr. Harding taking on a full-time permanent role. Mr. Harding’s wife intended
to join him with their youngest child once their middle child completed his last year of high school. Mr. Harding stayed in furnished apartments in
the Middle East on 12-month leases.
In 2011 as Mr. Harding and his wife had separated, she didn’t join him in Middle East. They later divorced. Mr. Harding has continued living and working
in the Middle East since then….
There were two issues for the Court to decide:
- Did Mr. Harding continue to ‘reside’ in Australia?
- Had Mr. Harding established his ‘permanent place of abode’ outside Australia?
Mr. Harding prevailed on this issue, the Court endorsing the usefulness of particular checklists to identify factors that are ‘frequently relevant to the
determination of the nature and quality of a person’s presence in or association with a particular location’.
Regarding whether Mr. Harding had established his ‘permanent place of abode’ outside Australia…
This does cause concern for many Australian ex-pats living in furnished accommodation.
In Harding, the Court decided that Mr. Harding’s furnished accommodation was not a ‘permanent place of abode’. This was despite:
- having 12-month leases on residential apartments in the same apartment building; and
- living in the same apartment building for six years.
Crucially here the lease stipulated that Mr Harding could be moved from apartment to apartment within the same building.
Harding effectively reverses the favourable decisions for taxpayers that came out in 2014 including: Dempsey, Agius and Engineering Manager.
It can be a fine line and Australian ex-pats need to carefully review their position on a year by year basis.
TWO CLICKS AT TAX TIME AND YOUR SUPER IS SORTED
The Australian Taxation Office (ATO) is urging all taxpayers to take a few moments to check their super while they are using ATO online services through myGov this tax time.
According to Deputy Commissioner James O’Halloran tax time is the best time to check your super.
Most people might not realise how easy it is, you just click on the super tab next to the tax tab while you are online to do your tax or check your return,
and you could find super you have forgotten you have.
Finding your lost super or consolidating any unwanted multiple accounts might not seem like it matters today, but it could make a massive difference to
your retirement. Multiple accounts that you may not be aware of means multiple fees. It’s your money and you should make sure it’s working for you.
Australians have over $18 billion in lost and unclaimed super. If you have ever changed your name, address, job or lived overseas, chances are you
may have lost super waiting to be claimed.
During the last five years more than $10.7 billion of super has been consolidated from over 2.1 million accounts through ATO online services.
Super deductions
Another important thing to remember this tax time is the new super deduction available to help Australians set themselves up for the future.
Most people under 75 years of age can claim a tax deduction for personal after-tax super contributions. Personal superannuation contributions deductions
(PSCD) provide a level of flexibility for young people that change jobs frequently, self-employed contractors, small business employees, freelancers
and people whose employers do not offer salary sacrifice arrangements.
“Being able to claim a deduction for after-tax personal super contributions could benefit millions of Australians and is one of the most significant changes
to the tax system this year,” Mr. O’Halloran said.
The bite is on for Work Related Expenses (WRE) in a recent media, the ATO outlined a tax gap of $8.7 billion in collection. This was based on a random
sample of 900 audits.
This tax season we expect increased ATO scrutiny on WRE –particularly in motor vehicle expenses and uniform costs.
To get a deduction for any personal superannuation contributions you made in 2017/18 you must lodge a notice of intent to claim a deduction with your fund
and receive a confirmation letter from them before lodging your tax return.
PRACTICAL COMPLIANCE GUIDELINE
PCG 2018/3 – Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles
We covered this PCG when it was at draft stage and include further commentary as this situation is very common.
Some employers may wrongly believe they do not have to consider FBT when dealing with commercial vehicles they consider are covered by an exemption.
Do not assume a utility or panel van has no FBT implications. It is necessary to have policies and procedures in place as the below 4 examples show.
a) Generally, a fringe benefit arises where an employer makes a vehicle they hold available for the private use of its employee. However, under subsections
8(2) and 47(6) of the Fringe Benefits Tax Assessment Act 1986 (the car-related exemptions), a fringe benefit is an exempt benefit
where the private use of eligible vehicles by current employees during a fringe benefits tax (FBT) year is limited to work-related travel, and other
private use that is ‘minor, infrequent and irregular’.
b) Feedback and experience has shown inconsistency as to methods used by employers to ensure compliance with the car-related exemptions, leading to additional
compliance costs, especially when the private travel is relatively low. To reduce these compliance costs and provide certainty, this Guideline explains
when the Commissioner will not apply compliance resources to determine if private use of the vehicle was limited for the purposes of the car-related
exemptions.
c) ‘Work-related travel’ is defined in subsection 136(1) to include travel by an employee between his or her place of residence and place of employment
or other place at which employment duties are performed.
(our comment: note this definition pertains to the FBT Act…not the Income Tax Act)
d) This Guideline does not affect the operation of the car-related exemptions. If you choose not to rely on this Guideline or do not meet the requirements
in paragraph 6 of this Guideline; you can rely on the relevant provisions of the FBT law to determine if you can access the car-related exemptions
for car and residual benefits that you provide. You are encouraged to engage with the ATO early (for example, by applying for a private ruling) if
you are uncertain as to whether you can access the car-related exemptions.
This Guideline will apply to car and residual benefits provided in the 2019 and later FBT years.
Application
You may choose to rely on this Guideline if:
(a) you provide an eligible vehicle to a current employee
(b) the vehicle is provided to the employee for business use to perform their work duties
(c) the vehicle had a GST-inclusive value less than the luxury car tax threshold at the time the vehicle was acquired
(d) the vehicle is not provided as part of a salary packaging arrangement and the employee cannot elect to receive additional remuneration
in lieu of the use of the vehicle
(e) you have a policy in place that limits private use of the vehicle and obtain assurance from your employee that their use is limited
to use as outlined in subparagraphs (f) and (g) of this paragraph
(f) your employee uses the vehicle to travel between their home and their place of work and any diversion adds no more than two kilometres
to the ordinary length of that trip, and
(g) for journeys undertaken for a wholly private purpose (other than travel between home and place of work), the employee does not use
the vehicle to travel
(i) more than 1,000 kilometres in total, and
(ii) a return journey that exceeds 200 kilometres.
The ATO’s compliance approach
You do not need to rely on this Guideline, but if you do:
(a) you do not need to keep records about your employee’s use of the vehicle that demonstrate that the private use of the vehicle is ‘minor,
infrequent and irregular and
(b) the Commissioner will not devote compliance resources to review that you can access the car-related exemptions for that employee.
You will need to check that you continue to meet the requirements in paragraph 6 of this Guideline in each year you provide the car or residual benefit
and wish to rely on this Guideline.
Example 1 – diversion and wholly private travel
· An employer provides an employee with a new panel van designed to carry a load of less than one tonne. The van is provided to the employee to enable
the employee to carry bulky equipment to and from their work sites. The van is not provided as part of a salary packaging arrangement and was acquired
for a value below the applicable luxury car tax threshold.
- The van is an eligible vehicle. The van is garaged at the employee’s home and the employee uses the van to travel between their home and their place
of employment. The employer has a strict policy in place about limiting the private use of the vehicle. - The employee usually stops at the newsagent to pick up a newspaper on their way to work. The diversion adds no more than two kilometres to the total
trip from home to work. - On 10 occasions during the FBT year, the employee also transported their niece to school in the van during the employee’s journey from home to work.
The journeys from home to work generally do not exceed 20 kilometres. - At the end of the 2019 FBT year, the employer receives an email from the employee. The email outlines that multiple journeys were undertaken in the
FBT year for a wholly private purpose and these journeys did not exceed 1,000 kilometres in total. The employee also outlines in the email that
in driving to and from work, no diversions were undertaken that exceeded two kilometres. The employer is satisfied that the employee has adhered
to their policy about limited private use. - The employer is able to rely on this Guideline as the requirements in paragraph 6 of this Guideline are met.
Example 2 – not a diversion
- Assume the same facts as in Example 1. However, during the football season the employee attends weekly football training after work. The diversion
adds more than two kilometres to the total journey from work to home. - The employee’s travel from work to football training is not considered to be a diversion, as the primary purpose of the journey was for the employee
to travel to football training, not from work to home. Additionally, the travel to attend this weekly football training and the travel to transport
their niece exceeds 1,000 kilometres. Therefore, the employee cannot provide assurance that the requirements in paragraph 6 of this Guideline are
met and the employer will not be able to rely on this Guideline. - The employer will need to rely on the relevant provisions of the FBT law to determine if they can access the car-related exemptions.
Example 3 – limited wholly private travel
- An employer provides a car benefit to an employee. The vehicle is a panel van designed to carry a load of less than one tonne and is fitted with a
navigation device. The employee uses the van to transport goods in their role as a courier driver. The van was acquired for a value below the applicable
luxury car tax threshold and is not provided under a salary packaging arrangement. - The employee provides confirmation to the employer that their private use of the van during the year was limited to:
- taking domestic rubbish to the tip (100 kilometres return journey), and
- moving residences and travel from home to the new residence three times (200 kilometres travelled in total).
- The journeys undertaken for a wholly private purpose by the employee in the 2019 FBT year amounted to 300 kilometres in total and no more than 200
kilometres was travelled in a return journey. The employer is satisfied that the employee has adhered to their policy about limited private use
and is able to rely on this Guideline.
Example 4 – not limited private use
- Assume that the employer is aware that the van provided to the employee in Example 3 of this Guideline was also used by the employee to travel to the
beach on a public holiday and is not satisfied with the assurance provided. The employee acknowledges they used the vehicle to travel to the beach
and that the return journey exceeded 200 kilometres. As each return journey must not exceed 200 kilometres, the return journey to the beach would
not fall within this Guideline. - Accordingly, even though the journeys undertaken wholly for a private purpose do not exceed 1,000 kilometres, the employer will need to rely on the
relevant provisions of the FBT law to determine if they can access the car-related exemptions.
COMMENT
In the event you fail the above tests the key is being able to establish the personal use of the vehicle is minor, infrequent or irregular.
It is suggested that if this is a stated policy then you have gone a long way to achieving this end as we do not consider the ATO will be devoting a lot
of resources to this.
However, if a utility is supplied to a single employee and that is the only vehicle the person uses, then we suggest it will be difficult to establish
the exemption as there may well be significant personal use. The take out here is that we can no longer assume that vehicles such as Utes and panel
van have no FBT implications.
GARNISHEE NOTICE
The ATO’s current approach to a routine debt collection practice has recently under immense media scrutiny.
The ATO has the power to recover debt through third parties of an entity that owes money to them. The mechanism used to enforce this right is known as
a “garnishee notice”. There were allegations that staff at the ATO were told “to start issuing standard garnishee notices on every case”. The ATO vigorously
denied this position in a statement; saying that “it only issued 14,000 garnishee notices for small businesses in the past financial year, accounting
for 0.5% of ‘collectable debt cases’.”
The Minister for Revenue and Financial Services, Kelly O’Dwyer, is looking into these matters first raised by Four Corners and Fairfax media.
We outline how ATO garnishee notices work in practice.
Legislation
Section 260-5 in schedule 1 of the Taxation Administration Act 1953 (TAA) provides the ATO with the power to recover
tax related liabilities and certain other debts payable to the Commonwealth from third parties owing money to, or holding money for, a tax debtor.
The Commissioner’s practice statement PSLA 2011/18 at paragraph 98 states:
“Where a person (third party) owes money to or holds money for a tax debtor, section 260-5 of Schedule 1 to the TAA empowers the Commissioner to require the third party to pay that money to the Commissioner rather than paying it to, or continuing to hold it for, the tax debtor. This power is commonly referred to as a ‘garnishee power’ and a written notice issued by the Commissioner under subsection 260-5(2) of Schedule 1 to the TAA is referred to as a ‘garnishee notice’.”
The Commissioner goes on to state at paragraph 118:
“A garnishee notice in respect of any tax-related liabilities may be served on a superannuation fund but it will not be effective until the tax debtor’s (member’s) benefits are payable under the rules of the fund (for example, the tax debtor retires or dies). A notice served on the fund will generally request payment as a lump sum unless the anticipated retirement income stream can guarantee repayment within a satisfactory period of time.”
AUSTRALIAN SENATE ECONOMICS COMMITTEE HANDS DOWN REPORT ON CORPORATE TAX AVOIDANCE
The Commonwealth Senate Economics Committee recently handed down its long-awaited final report on corporate tax avoidance in Australia.
This is the culmination of the Committee’s three-and-a-half-year investigation on corporate tax avoidance, following the matter’s referral to the Committee
on 2.10.2014. there were two previous interim reports published by the Committee in 2015 and 2016.
Some of the key recommendations of the final report include that:
- companies with annual turnover of $100 million or more be required to publicly report certain tax information annually;
- the government undertake an independent review into the detriment to Australian tax revenue arising from the current transfer pricing regime, and explore
options to modify transfer pricing rules or other tax laws; - entities with income of a certain level be required to lodge general purpose financial statements with the Australian Securities and Investments Commission;
- uplift rates for future projects incurring Petroleum Resource Rent Tax be revised to be less generous;
- “thin capitalisation rules” be amended so that interest deductions are calculated by reference to a corporation’s worldwide gearing ratio;
- the gas transfer pricing method for Petroleum Resource Rent Tax-eligible projects be made simpler and more transparent.
- the existing voluntary tax transparency code be converted to a mandatory code for all large and medium corporations operating in Australia, including
subsidiaries of multinational corporations; and
The ATO, in its submission to the Committee, stated that its recent success in proceedings against the local subsidiary of a large multinational oil and
gas group had potentially “changed the game” and that the focus of its investigations in respect of transfer pricing practices will cover other industries,
including the pharmaceutical notably.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.