FOREIGN NATIONALS FORCED TO SELL $380 MILLION WORTH OF ILLEGALLY ACQUIRED REAL ESTATE
In a recent media release Federal treasurer Josh Frydenberg disclosed the government had forced the sale of more than 300 Australian properties, worth
more than $380 million, that were illegally acquired by foreign nationals. In total, 316 properties across every state were sold by foreign nationals
in breach of the rules following ATO compliance action, from 2015 to 31.10.2018. The overwhelming majority are in Victoria, which recorded 144 forced
sales of property valued more than $162 million, followed by New South Wales with 73 and Queensland with 64. The foreign owners come from a range of
countries including China, the United Kingdom, Malaysia, Singapore, Indonesia, India, The United States, Hong Kong, Italy and Germany.
LARGE CORPORATE GROUPS’ INCOME TAX GAP
The ATO’s estimate of the net income tax gap for large corporate groups for 2015-16 is estimated to be $1.8 billion or 4.4% of tax payable for this group.
“The gap primarily reflects differences in the interpretation of complex areas of tax law”. The gap is the difference between the total amount of income
tax collected and the amount the ATO estimated would have been collected if every one of these taxpayers was fully compliant. A large corporate group
is defined as a corporate group with gross income of over $250 million in a given income year.
THE USE OF ELECTRONIC DEVICES IN THE WORKPLACE
Does your current Workplace policy adequately cover the circumstances suitable for your workplace, and the devices that may be used by your employees at your workplace?
In today’s world the mode and speed of changes in technology and communication have altered traditional habits and behaviours in a manner that will only
increase in intensity and methodology. These changes have fundamentally modified the way that people in general communicate in both their private lives
and in the workplace.
The difficulty for employers is that the pace of change in many organisations has overtaken their existing policies and procedures and they are struggling
to get a handle on what they should do, what they can do and how to do it.
Smart Phones, tablets, faster internet connections, greatly improved computer capacity and capability combined with the exponential growth and use of the
internet in general have created a new workplace where sales, marketing, corporate information and business transactions are mainly online.
Like any societal change, increase in technology has also filtered through to the workplace. On the more extreme end there is a huge amount of pornographic
or sexual material online (which still continues to provide problems in the workplace), and you can find sites from how to build a bomb to personal
information on competitors and work colleagues.
The compounding problems associated with this issue are when employees access this type of material at work and then retain or forward the material to
co-workers which can give rise to sexual harassment, workplace discrimination and bullying claims. This access to information and the amount and volume
of material available means that employers must ensure that staff (particularly those with access to computers at work) are gainfully employed and
do not waste work time surfing the internet or indulging in inappropriate or unlawful behaviour.
The first point of defence is to ensure your computers are protected by an appropriate security software program which can provide reports on access and
use and can be programmed to selectively filter online use and access.
Where this type of software or monitoring is in place all staff need to be advised of:
- The conditions of use of their computer equipment
- What is monitored
- What online access is allowed or prohibited?
- The consequences of breaches of these requirements
The best and most practical way to ensure compliance and minimise unproductive time spent by employees, is to have up to date policies in place which cover
your particular workplace circumstances, equipment, online structures and access requirements.
Many employers supply mobile phones, laptops or tablets to employees as part of their role or employment conditions.
Where these devices are supplied, it is important to distinguish between business and private use.
It is therefore crucial that your employee policies adequately cover the circumstances suitable for your workplace, and the devices that may be used by
your employees at your workplace.
Some options which may be included in your policies include:
- Employees are required to leave their mobile phones, tablets and personal laptops at the reception desk or similar secured area and retrieve them on
designated breaks or when work is finished.
- The use of mobile phones, tablets and personal laptops for personal activities at work is strictly prohibited and may lead to disciplinary action up
to and including dismissal.
- If the employee’s family needs to contact them at work in the event of an emergency, they can contact the designated number for that employee, and
the message will be relayed to the employee, either immediately or at the next convenient break depending on the urgency.
- The same disciplinary policies apply to the use of mobile phones, tablets and other mobile devices as contained in our Internet Use Policy, and access
to illegal and/or unauthorised sites is prohibited and may lead to disciplinary action up to and including dismissal.
- No personal mobile phones, tablets, personal laptops and other mobile devices are allowed on/in this worksite/construction site/production floor.
- Employees who believe that they have a valid reason to retain their mobile phone at work must seek approval from their supervisor and each request
will be dealt with depending upon the individual circumstances of each employee and the nature of the request.
It is important to remain flexible in your approach to this matter and to lead by example.
Issues such as morale and individual employee performance should be considered when setting the rules at your workplace to assess the level of supervision
and compliance required.
Unfortunately, issues such as the use and abuse of the internet, email and social media sites will not go away, and the adverse effects of the abuse can
have major organisational, financial and operational impacts on the bottom line.
GOVERNMENT PROPOSES TO DOUBLE THE VALUE LIMIT AVAILABLE UNDER EMPLOYEE SHARE SCHEMES
The Federal Government will enhance employee share schemes to help employers attract, retain and motivate employees and grow their businesses.
The Government is simplifying the current regulatory framework, reducing the time and cost burden for businesses – an initiative they see as particularly
important for start-ups in early stages of growth.
Employee share schemes allow employees to invest in the business for which they work. They are offered as an incentive to employees, allowing them to share
in the growth and success of the business.
The government believes the current regulatory framework is too complex and fragmented and ultimately discourages businesses – particularly, small businesses
– from offering employee share schemes.
The Government proposes to simplify and extend the current regime by:
- creating a dedicated exemption for disclosure, licensing, advertising and on-sale obligations under the Corporations Act 2001;
- 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;
- expanding employee share schemes to include contribution plans, where an employee can make a monetary contribution to acquire eligible financial products;
- allowing small businesses to offer employee share schemes without publicly disclosing commercially sensitive financial information unless they are
otherwise obligated to do.
These changes build on improvements the Federal Government has already made to make employee share schemes more attractive, including improving the taxation
treatment of employee share schemes and limiting the requirement for disclosure documents given to employees to be made available to the public.
TAXABLE PAYMENTS REPORTING SYSTEM TO AFFECT ROAD FREIGHT INDUSTRY FROM 1 JULY 2019
From 1.7. 2019, road freight businesses will have to report payments made to contractors to the ATO. The Treasury Laws Amendment (Black Economy Taskforce Measures No 2) Act was passed on 15.11.2018.
Road freight businesses must how report payments made to contractors to the ATO each year using the Taxable Payments Annual Report – the first one being
due in August 2020 for payments made to contractors between 1.7. 2019 and 30 .6. 2020.
This follows recent changes that extended the Taxable Payments Reporting System to businesses providing courier services. Courier businesses must lodge
their first Taxable Payments Annual Report in August 2019 for payments made to contractors between 1.7. 2018 and 30. 6. 2019.
The draft guidance material on the ATO website provides that ‘road freight services’:
- include transportation of freight by road, the leasing or hiring of trucks with drivers for road freight transport (wet hire) and road vehicle towing
- do not include the leasing or hiring trucks without drivers (dry hire), operating road freight terminals or providing crating or packing services.
The information road freight businesses will need to report includes:
- the contractor’s ABN (where known)
- the contractor’s name and address
- total amounts paid to the contractor during the financial year (including any GST).
The ATO may impose penalties for not lodging the annual report by the due date.
The ATO will use the information to identify contractors in the industry who are not accurately reporting their income.
It is likely the ATO will share this information with the various Offices of State Revenue to assist in their payroll tax audit activity. Road freight
businesses should consider whether payments to contractors should be included in their taxable wages’ calculations for the purposes of payroll tax.
ATO EXTENDS DATA MATCHING PROGRAM TO ELIMINATE INCORRECT REPORTING FOR SHARE OWNERS
In October, the ATO announced the extension of its share data matching program. This will see the ATO continue to receive data from ASIC, including details of the price, quantity and time of individual trades dating back to 2014. The ATO will use sophisticated technology to match the data against information reported in tax returns and other ATO records.
This data matching protocol will allow the ATO to better check if there are errors in tax reporting for over five million Australian adults who own shares.
The ATO also intends to make the information available to taxpayers as part of the tax return prefill service in the future.
The ATO sets out the basic rules for preventing errors in reporting for taxpayers that buy and sell shares:
- Keep good records of the share purchase and sale prices, as well as the cost of brokerage fees.
- Declare capital gains.
- If the taxpayer has made a capital loss, remember the loss cannot be claimed as a deduction in the tax return, but can be offset against any current
or future capital gains.
This of course covers non ASX limited shares.
KEY TAXATION DEVELOPMENTS IN 2018
Instant Asset Write Off
The Federal Government has extended the $20,000 instant asset write off for small businesses until 30.06.2019
Businesses with turnover of less than $10 million will be permitted to instantly write off the purchase of capital assets with cost less than $20,000.
An asset with a cost of $20,000 or more are not able to be immediately deducted in the businesses tax return and will need to be written off over time.
On 1.7.2019 the instant asset write off threshold amount will be reduced to $1,000.
Speeding Up the Small Business Tax Concessions
Legislation was passed in October. This means businesses with a turnover below $50 million will face a tax rate of just 25 per cent in 2021-22 rather than
from 2026-27 as currently legislated. Similar timing changes will apply to the roll out of the 16 per cent tax discount for unincorporated businesses.
Additional conditions for Small Business Capital Gains Tax (SBCGT) Concessions
In 2018 legislation was passed that restricts the use of the SBCGT concessions for the sale of assets that are shares in companies or interests in trusts.
Where the asset subject to a CGT event is a share or interest, the new legislation adds further conditions for taxpayers to access the SBCGT concessions.
In addition to meeting the basic eligibility conditions for the SBCGT the taxpayer is also required to be either:
- A CGT concession stakeholder in the object entity (the entity that the taxpayer holds shares or interest in); or
- CGT Concession stake holders in the object entity had a total small business participation percentage in the entity claiming the concession of at least
90 per cent.
The following conditions must also be met:
- Modified Active Asset Test – at least 80 per cent of the total market value of the asset of the object entity (not including shares or interests in
other entities) plus a percentage of the total market value of the assets of any entity in which the object entity has a small business participation
percentage must relate to active assets, financial instruments connected to a business carried by the entity or cash
- The taxpayer seeking to make use of the SBCGT concessions must have been carrying on a business immediately prior to the CGT event happening. However,
this condition will only apply where the taxpayer does not meet the maximum net asset test in relation to the CGT event
- The object entity must have carried on a business immediately prior to the CGT event happening and also must either be a CGT small business entity
or satisfy the maximum net asset value test in relation to be CGT event.
While the aim is to prevent larger entities from being able to access the SBCGT concessions, it also adds another layer of complexity in determining the
eligibility of taxpayers.
This legislation received Assent on 3.10.2018 and applies to CGT events occurring form 8.2.2018. Entities that have lodged their income tax returns and
reported CGT events that may be affected by these changes may be required to amend their tax return.
These measures will combat the illegal activity of companies going into liquidation to avoid paying creditors and employee entitlements. As the name suggests
new measures have been announced that create new offences for conducting phoenix activities and prevent Director’s from evading liability or prosecution.
The proposed measures also include an extension to the Director’s Penalty Notice (DPN) regime to include taxation liabilities such as GST, luxury car
tax and wine equalisation.
Currently the Tax Administration Act 1953 (Cth) allows the commissioner to make estimates of a company’s unpaid amounts of PAYG Withholding and
Superannuation Guarantee charges. The Commissioner can then issue a DPN to the Directors that makes them personally liable for the payment of those
The exposure draft for the new legislation includes amendments that will extend the Commissioners ability to make estimates of unpaid liabilities and to
issue DPNs for the payment of those liabilities, luxury car tax and Wine equalisation tax.
The proposed measures also authorise the Commissioner to retain tax refunds for a taxpayer who has failed to lodge a return or provide other information
that may affect the Commissioner would be required to refund.
Research and Development Tax Incentive
In September, the Government introduced a bill for the amendment of the R&D tax incentive aimed at improving the integrity of the tax incentive.
These proposals include:
- Increasing the R&D expenditure threshold from $100 million to $150 million and making the threshold a permanent feature of the law;
- Linking the R&D tax offset for refundable R&D tax offset claimants to claimants’ corporate tax rates plus a 13.5 percentage point premium (for
entities with aggregated turnover of less than $20 million);
- Capping the refundability of the R&D tax offset at $4 million per annum (however, offset amounts that related to expenditure on clinical trials
do not count towards the cap); and
- Increasing the targeting of the Incentive to larger R&D entities with high levels of R&D intensity, reducing the benefits provided to certain
entities undertaking R&D activities and increasing the benefit to others.
Work Test Exemption for Recent Retirees
In December the Federal Government announced that regulations to give recent retirees an extra year to contribute to superannuation have been made by the
Federal Executive Council.
This measure will provide additional flexibility to contribute to superannuation in the transition to retirement.
The work test exemption was announced in the 2018-19 Budget as part of the More Choices for a Longer Life package.
The regulations mean that from 1 July 2019, Australians aged 65 to 74 with a total superannuation balance below $300,000 will be able to make voluntary
contributions for 12 months from the end of the financial year in which they last met the work test.
Total superannuation balances will be assessed for eligibility at the beginning of the financial year following the year that they last met the work test.
Once eligible, there is no requirement for individuals to remain under the $300,000 balance cap for the duration of the 12-month period.
Existing annual concessional and non-concessional caps ($25,000 and $100,000 respectively) will continue to apply to contributions made under the work
Individuals will also be able to access unused concessional cap space to contribute more than $25,000 under existing concessional cap carry forward rules
during the 12 months.
Following feedback from stakeholders on the draft legislation, the Government has decided to allow those who use the work test exemption in the year they
turn 65 to access bring forward arrangements for non-concessional contributions.
These individuals will be able to make up to $300,000 in contributions from after-tax income, providing extra flexibility to get their affairs in order
as they prepare for retirement.
This change will also align the contribution rules for the work test exemption with those that apply under the work test, making the system simple to understand
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