BUDGET MEASURES THAT APPLY FROM 01.07.2019
The following key Government measures came into effect on 1 July 2019.
The Government passed its Personal Income Tax Plan announced in the 2018-19 budget last year, ensuring that Australians pay lower taxes.
Low- and middle-income earners will receive a benefit when they lodge returns from 1 July 2019, with millions more to benefit over the next decade. Under
the already legislated part of the plan, the low- and middle-income tax offset will provide tax relief of up to $530 every year from 2018-19 to 2021-22.
It is projected that the offset will assist more than 10 million Australians with around 4.5 million people receiving the full $530 benefit for 2018-19.
In the 2019-20 Budget, the Government announced additional tax relief to ensure that hard-working Australians are rewarded for their effort. The offset
has effectively increased from $530 to $1,080.
From the 2018–19 income year:
- The low- and middle-income tax offset increases from a maximum amount of $530 to $1,080 per annum and the base amount increases from $200 to $255 per
- Taxpayers with a taxable income:
- of $37,000 or below can now receive a low- and middle-income tax offset of up to $255;
- above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080;
- above $48,000 and below $90,000 are now eligible for the maximum low- and middle-income tax offset of $1,080;
- above $90,000 but is no more than $126,000 are now eligible for a low- and middle-income tax offset of $1,080, less an amount equal to three
per cent of the excess.
The Protecting Your Superannuation package will safeguard Australians’ superannuation savings from excessive fees, unnecessary insurance and the costs of inadvertently holding multiple superannuation accounts.
New legislation starting on 1 July caps certain fees on balances less than $6,000 and bans exit fees, so members can switch funds, if they choose to, without
It also makes insurance opt-in for inactive accounts and empowers the ATO to automatically consolidate inactive low-balance accounts with people’s currently
Ensuring big business and multinationals pay their fair share of tax
From 1 July, a package of new measures to protect the integrity of Australia’s corporate tax system will tighten the rules on stapled structures and similar arrangements to ensure foreign investors pay their fair share. A special rate will continue to be available for affordable housing, disability housing, and student accommodation to encourage investment in this housing.
As announced in the 2019-20 Budget, the Government will provide $1 billion over four years from 2019-20 to the Australian Taxation Office to extend the
operation of the Tax Avoidance Taskforce for four years, with a focus on Multinationals. This is estimated to raise a further $4.6 billion in tax liabilities
over the next four years.
From 1 July 2019, the Government will also provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation
liabilities, including from large corporate entities and high wealth individuals.
Improving access to the National Disability Insurance Scheme
From 1 July, the National Disability Insurance Scheme (NDIS) will be fully available in Victoria, Tasmania, the Australian Capital Territory and the Northern
Territory. The NDIS is already accessible in New South Wales and South Australia.
This continued rollout of services means more people with a permanent and significant disability will be able to access the support they need.
Increasing the Medicare rebate
The Government is increasing the patient rebate for further general practitioner (GP) items on the Medicare Benefits Schedule from 1 July. Specialist procedures,
allied health services, other GP services, such as mental health and after-hours services, will also be indexed from 1 July 2019.
Improving the quality of aged care
A new single set of Aged Care Quality Standards will start from 1 July to ensure aged care providers are clearly accountable for consumers safety and quality
From 1 July, the National Aged Care Mandatory Quality Indicator Program is mandatory for all Commonwealth subsidised residential aged care services. Providers
must collect and provide quality indicator data to the Department of Health against the following quality indicators: pressure injuries; use of physical
restraint; and unplanned weight loss.
Additional Identified Skills Shortage (AISS) apprenticeship payment
The Government will provide $156.3 million over four years from 1 July to introduce an Additional Identified Skills Shortage Payment that will encourage
up to 80,000 new apprentices to enter occupations facing skill shortages over the next five years.
Default Market Offer
From 1 July, Australian families will get a better deal on standing electricity offers in New South Wales, South Australia and South East Queensland.
Under the Default Market Offer (DMO), set by the Australian Energy Regulator, standing offer prices will be capped. This will act as a price safety net,
ensuring that consumers who do not shop around are not paying excessive prices for electricity. Depending on the region, the AEMC has found that an
average residential consumer on the median standing offer can save up to $760 by switching to the best market offer.
The DMO will also act as a common reference point for all electricity offers. This will put an end to confusing and misleading discounting practices, making
it easier for consumers to compare electricity offers and identify the best deal.
TAXI TRAVEL EXPENSES EXEMPTION
Any benefit arising from taxi travel by an employee is exempt from fringe benefits tax (FBT) if the travel is a single trip beginning or ending at the employee’s place of work.
Any benefit arising from taxi travel by an employee is also an exempt benefit if the travel is both:
- a result of sickness of, or injury to the employee;
- the whole or a part of the journey directly between any of the following:
- the employee’s place of work
- the employee’s place of residence
- any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.
The exemption is limited to travel in a vehicle licensed by the relevant state or territory to operate as a taxi. It does not extend to ride-sourcing services
provided in a vehicle that is not licensed to operate as a taxi.
Comment: this may be a consideration for employers who regularly provide taxi travel to staff.
YCNM v FCT  AATA 1592
It was held by the AAT that the majority of a lump sum settlement payment made by an insurer was assessable income in the hands of the insured, as it was
compensation for the discharge by the taxpayer of a monthly salary continuance claim. However, to the extent the lump sum payment was compensation
for the super continuance, it was not assessable income. Therefore, it was apportionable, with 88.2% of the lump sum included in assessable income.
As the capital gain was from a GST event relating to compensation or damages received by the taxpayer for a wrong, injury or illness suffered by the
taxpayer personally, it was exempt from CGT liability under s118-37 ITAA 1997.
Hill v FCT  AAT 1723
These cases come up regularly when a taxpayer has made a loss from share trading. The taxpayer here has a clear incentive to argue it is a business loss
as there is the prospect of the loss being offset against other assessable income.
The ATO has clear guidelines on what legitimately constitutes a share trading business and we can advise you on these.
It was held that a taxpayer who traded shares was not carrying on a business, and therefore, was not entitled to claim losses or carry them forward in
the 2015, 2016- and 2017-income years.
It was found that overall the share trading activities were not carried out in a business-like manner. While the taxpayer had made a “very significant
investment” in dollar terms in the share market, the activities “lacked the sophistication to be a share trading business”. The judgement sets out
the many important factors leading to the conclusion including:
- The taxpayer’s share trading was infrequent and characterised by numerous periods of no trading.
- There was no established system and the trading was irregular.
- The lack of regular or routine trading pointed to the taxpayer being involved in a series of individual transactions on a speculative basis rather
than as a share trader conducting a business.
- As the taxpayer was working full-time in the aviation industry for the majority of the relevant period (30 months out of 36 months), the overall impression
was that the share trading activities were very much a side issue which did not occupy a significant amount of the taxpayer’s time until the final
six months when trading became more frequent and extensive.
- The taxpayer did not arrange his share trading activities in a business-like manner. There was no trading vehicle incorporated or business name registered.
- There were few records kept of the trading or other associated activities.
- The AAT said another indication that the taxpayer was not conducting a business was the lack of sophistication about the share trading activities.
- The taxpayer engaged no professional assistance from a stockbroker or financial planner despite having no qualifications in these areas.
- The written business plan was unsophisticated and contained very little detail.
ESCAPE FROM THE COUNTRY, BUT NOT YOUR STUDENT LOANS
The Australian Taxation Office (ATO) will be contacting Australian expats this year reminding them that leaving Australia doesn’t mean leaving their student loans behind.
As at 31 January, there are over 3.2 million Australians with outstanding student loan debts, totalling over $66 billion. The ATO will be engaging with
the Department of Home Affairs to identify those who leave or have already departed Australia. Individuals who leave or have already departed Australia
with Higher Education Loan Program (HELP), Vocational Education & Training student loan (VSL) and Trade Support Loan (TSL) debts can expect to
be contacted by the ATO in the coming months.
According to Assistant Commissioner Karen Float:
It can be easy to get caught up in the excitement of moving overseas. That’s why the ATO’s reminding expats about obligations they may have forgotten back
On average, it takes someone nine years to pay off their HELP debt. But for Australians who travel overseas and don’t make any repayments, it takes significantly
Moving overseas does not cancel student loan debts and your repayment obligations do not change with your address. Current laws give the ATO the power
to pursue these debts overseas.
Under new rules, Australians with an income contingent loan travelling overseas need to notify the ATO of their new address and lodge an overseas travel
notification. They should also report their worldwide income if they earn over $11,470 (AUD). Expats can lodge their tax returns through ATO’s online
services via myGov.
Expats should know that once their income reaches the new threshold of $45,881 for 2019–20, they need to be making repayments, just like anyone living
Individuals within Australia who have an income contingent loan are also required to make compulsory repayments against their study or training loan debt.
The income threshold for 2019–20 is $45,881. It is important to tell your employer you have a study or training loan debt, so that the correct amount
is withheld from your salary or wages.
GST ON LOW VALUE GOODS MEASURE CONTINUES TO EXCEED EXPECTATIONS
GST on low value goods nets the ATO over $250 million from good partnerships with the international business community.
As at 1 May 2019, the ATO had collected over $250 million in GST for the first nine months of the low value goods measure, which began on 1 July 2018,
outstripping forecasts by $180 million.
The Organisation for Economic Co-operation and Development, the World Customs Organisation and others have studied reform options for low value goods.
The Australian approach is increasingly recognised internationally as the model to follow.
The legislation requires overseas businesses to charge Australian GST on their sales of low value goods to consumers in Australia. Over 1,000 overseas
businesses have registered for GST, which includes all the known major suppliers and international platforms. This includes platforms that are collecting
GST when these goods are sold through them – reducing the number of individual businesses that need to register. GST collections on low value imported
goods have exceeded initial expectations thanks to strong partnerships with the international business community and high levels of compliance. The
measure resulted in $81 million of GST being raised in the first quarter, which surpasses the $70 million projected for the full year. These figures
reflect a very strong overall level of compliance and the ATO is confident that the system is working well.
As businesses do not need to register unless they meet the AUD$75,000 GST turnover requirements, most small independent operators do not need to register
and have not been affected by this measure.
LUXURY CAR TAX THRESHOLD EFFECTIVE 1 JULY 2019
Recently the Australian Tax Office (ATO) revised the Luxury Car Tax (LCT) threshold effective 1 July 2019. Key things to note:
- The new LCT threshold for the 2019-20 financial year is $67,525 (up from $66,331 that applied for the 2018-19 financial year);
- For fuel-efficient vehicles the LCT threshold for the 2019-20 financial year remains the same at $75,526.
A number of Treasury bills were introduced into the House of Representatives on 24.7.2019.
The Treasury Laws Amendment (2918 Superannuation Measures No.1) Bill 2019 will:
- Introduce an employer shortfall exemption certificate for certain employees with multiple employers;
- Introduce reforms to further support the operation and integrity of the Superannuation Taxation Reform Package announced in the 2016-17 budget; and
- Extend the existing non-arm’s-length income rules to capture non-arm’s-length expenses.
The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No.1) Bill 2019 will:
- Remove inappropriate tax deductions which arise on the repayment of loan principal for certain privatised entities;
- Ensure that partners in partnerships can’t inappropriately access the small business capital gains tax concessions when they alienate future income
from the partnership;
- Deny deductions for some taxpayers for expenses associated with holding vacant land;
- Extend to family trusts a specific anti-avoidance rule that applies to other closely held trusts that engage in circular trust distributions;
- Allow the ATO to disclose to credit reporting bureaus the tax debt information of business that have owned the ATO at least $100,000 for more than
90 days and, importantly, have not effectively engaged with the ATO to manage their debt;
- Allow the ATO to implement an electronic invoicing framework-known as e-invoicing-in Australia;
- Prevent employer’s from using salary sacrificed contributions to satisfy the employer’s superannuation guarantee obligations; and
- Prevent employers from reducing the base on which they calculate their superannuation guarantee obligations by the amount of the salary sacrificed
FRINGE BENEFITS TAX (FBT) ISSUES ON THE ATO’S RADAR
The ATO have identified six items that specifically relate to fringe benefits tax (FBT). The below information may help you to avoid making costly mistakes.
What attracts ATO attention in relation to FBT includes:
- Failing to report car fringe benefits, incorrectly applying exemptions for vehicles, or incorrectly claiming reductions for these benefits;
- Mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer’s tax return;
- Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses
as sponsorship or advertising;
- Incorrectly calculating car parking fringe benefits due to:
- significantly discounted market valuations
- using non-commercial parking rates
- not having adequate evidence to support the calculated rates
- Not applying FBT to the personal use of business assets provided for the personal enjoyment of employees or associates;
- Not lodging FBT returns (or lodging them late) to avoid or delay payment of tax.
Please contact us if you have queries or concerns about these issues.
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.