February 2020
ATO encourages more informed decision-making within the business community
Since 1.7.2019, the ATO has been able to disclose the details of businesses with tax debts to credit ratings agencies. This could affect the ability of the business to obtain finance or refinance existing debt.
In general, only businesses with an ABN with debts over $100,000 and that are not “effectively engaged” with the ATO will be affected. A phased implementation is taking place which consists of undertaking education efforts before it targets companies, followed by partnerships, trusts and sole traders.
This aims to encourage more informed decision-making within the business community by making large overdue tax debts more visible. Dealing with the unfair advantage obtained by businesses that do not pay their tax on times. Something the government says it wants to address.
ATO receives five more years of policy details from insurers about “lifestyle assets” like yachts, fine art etc…
On 18 December 2019, The Australian Taxation Office (ATO) revealed it will be requesting a further five years’ worth of policy information from over 30 insurance companies about taxpayers who own marine vessels, thoroughbred horses, fine art, high value motor vehicles and aircraft.
Insurers have been asked to provide the ATO with policy details for “lifestyle assets” over certain asset value thresholds as part of the agency’s efforts to ensure taxpayers are fulfilling their tax and superannuation reporting obligations.
The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2015–16 to 2019–20 as part of its data-matching program of work. Information provided by insurers will be used by the ATO as part of compliance profiling activities.
Deputy Commissioner Deborah Jenkins said knowing who owns these lifestyle assets such as private jets and yachts helps the agency get a more complete picture about the actual financial situation of taxpayers as compared with what is reported on tax returns.
“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three-million-dollar yacht then this is likely to raise some red flags,” Ms Jenkins said.
“Regardless of your level of wealth, we all need to pay the correct amount of tax, and this data will allow us to ensure those people who can afford these kinds of items are doing the right thing, along with everyone else.”
Ms Jenkins clarified that the data will not be used to initiate automated compliance activity.
“Taxpayers selected for compliance activities are identified through other methodologies. The data is made available to our compliance teams to support their risk profiling of the selected taxpayers. Existence of an insurance policy may or may not prompt the compliance officer to pursue a particular line of enquiry”.
Aside from helping identify taxpayers who may be under-stating their income, the data from insurers may be used by the ATO to identify taxpayers who have made capital gains on the disposal of certain assets but who have not declared this to the ATO.
“With high value assets like fine art, there can be some significant capital gains made when these assets are sold, and capital gains tax may need to be paid on the sale or disposal of these items.”
The data will also be used by the ATO as part of their risk profiling activity to identify incorrect goods and services tax (GST) input tax credits where taxpayers are purchasing the assets for purely personal reasons and claiming GST credits as if the item was a business asset.
“If we discover incorrect GST input tax credit claims for items purchased for personal reasons, we’ll be following up and seeking full repayment on top of any applicable interest and penalties” Ms Jenkins said.
Self-managed superannuation funds that the ATO suspects may be acquiring lifestyle assets purely for personal enjoyment of the fund’s trustee or beneficiaries are also likely to be looked at by the ATO.
Insurers will be required to provide the ATO with detailed policy information where the value of assets is equal to or exceeds the following thresholds:
- Marine vessels $100,000
- Motor vehicles $65,000
- Thoroughbred horses $65,000
- Fine art $100,000 per item
- Aircraft $150,000
The ATO’s lifestyle assets data-matching program has been in place since February 2016. Under the program, the ATO has already collected data on insurance policies for the 2013–14 and 2014–15 financial years.
Taxpayers who suspect they have failed to properly comply with their taxation or superannuation obligations are encouraged to speak to their tax professional or make a voluntary disclosure to the ATO. Taxpayers who make a voluntary disclosure can generally expect a reduction in the administrative penalties and interest charges that would normally apply.
Google settles dispute with ATO
On 18 December 2019, e-commerce giant Google has announced that they have settled their tax dispute with the Australian Taxation Office (ATO) with a payment of an extra $481.5 million on top of their previous tax payments.
They join the likes of Microsoft, Apple and Facebook who have all publicly stated that they have settled their tax affairs with the ATO.
This result brings the increased collections made against taxpayers in the ecommerce industry to around $1.25 billion cash.
Due to the successful outcomes under the Tax Avoidance Taskforce and the introduction of the Multinational Anti-Avoidance Law (MAAL), Australian sourced sales by these digital giants will now be returned to Australia’s tax base.
The operation of the MAAL has already seen $7 billion in taxable sales being returned to Australia. That’s $7 billion in sales booked, and the appropriate profit of these activities taxed, in Australia for the first time and locked in for the future. It has also led to the resolution of cases which had over $1 billon in back tax assessments.
“This settlement is another great outcome for the Australian Tax System,” Deputy Commissioner Mark Konza said.
“It adds to the significant success of the ATO in positively changing the behaviour of digital taxpayers and significantly increasing the tax they pay in Australia.
“The extension of the Taskforce until 2023 will ensure that the ATO is able to continue to pursue these issues and provide assurance to the community that we are doing everything in our power to protect Australia’s tax base,” Mr Konza said.
No tax on bushfire disaster payments
It was announced on 8 January 2020 that Australians will not pay tax on federal disaster assistance they receive to rebuild from this summer’s bushfire crisis. This follows the Morrison government unveiled a $2 billion recovery fund.
The tax break will be considered by Parliament when it returns on February 4 and is certain to have bi-partisan support.
Simplified depreciation rules – instant asset write-off
The $30k instant asset write-off is now in its fourth year of operation and it’s possible that some taxpayers are starting to take it for granted. However, as of 1 July 2020 the threshold will revert to $1,000.
If you are a small business (with a turnover of less than $10 million), you can claim a deduction for each asset first used or installed ready for use, costing less than:
- $30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020
As mentioned, the threshold reverts to $1,000 from 1 July 2020.
You may purchase and claim a deduction for multiple assets provided each asset costs less than the relevant threshold.
From 2 April 2019, the instant asset write-off has also been expanded to include businesses with a turnover from $10 million to less than $50 million.
Accelerated depreciation for primary producers
Fodder storage
You can claim a deduction for the full cost of a fodder storage asset, if you:
- incurred the expense either
- on or after 19 August 2018
- before 19 August 2018 and it was first used or installed ready for use on or after 19 August 2018
- mainly use it to store fodder
- use it in a primary production business on land in Australia – even if you are only a lessee of the land.
Claim the deduction through your tax return in the year you incurred the expense.
Otherwise, you will continue to depreciate fodder storage assets over three years if you incurred the expense from 7.30pm AEST, 12 May 2015 to 18 August 2018.
Lower company tax rate changes
2018–19 income year
From the 2018–19 income year, a company must be a base rate entity to be eligible for the lower 27.5% company tax rate.
A company is a base rate entity if both of the following apply:
- they have a turnover less than the turnover threshold – which is $50 million for the 2018–19 income year
- 80% or less of their assessable income is base rate entity passive income (such as interest, dividends, rent, royalties and net capital gain).
When working out the rate to use when franking your distributions, you need to assume that your aggregated turnover, assessable income and base rate passive income will be the same as the previous year.
Future years
The lower company tax rate will reduce – for base rate entities – to 26% in 2020–21 and to 25% from the 2021–22 income year.
Increased small business income tax offset
You can claim the small business income tax offset if you either:
- are a small business sole trader
- have a share of net small business income from a partnership or trust.
From the 2016–17 income year, the small business income tax offset:
- increased to 8%, with a limit of $1,000 each year
- applies to small businesses with turnover less than $5 million.
The tax offset increases to 13% in 2020–21 and to 16% from the 2021–22 income year.
We work out your offset based on amounts shown in your tax return.
Income tax: the value of goods taken from stock for private use for the 2019-20 income year
Ruling
This Determination provides an update of amounts that the Commissioner will accept as estimates of the value of goods taken from trading stock for private use by taxpayers in named industries. The updated amounts are contained in the Schedule for the value of goods taken from trading stock (the Schedule) at paragraph 2 of this Determination.
Schedule for the value of goods taken from trading stock
The Schedule for the value of goods taken from trading stock for private use in the 2019-20 income year is:
TYPE OF BUSINESS | AMOUNT (EXCLUDING GST) FOR ADULT/CHILD OVER 16 YEARS | AMOUNT (EXCLUDING GST) FOR CHILD 4 to16 YEARS OLD |
Bakery | $1,350 | $675 |
Butcher | $850 | $425 |
Restaurant/café (licensed) | $4,640 | $1,750 |
Restaurant/café (unlicensed) | $3,500 | $1,750 |
Caterer | $3,790 | $1,895 |
Delicatessen | $3,500 | $1,750 |
Fruiterer/greengrocer | $880 | $440 |
Takeaway food shop | $3,440 | $1,720 |
Mixed business (includes milk bar, general store and convenience store) | $4,260 | $2,130 |
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