Monthly Tax Update March 2023 |
Posted: May 30, 2023 |
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. Inside you will find
Legislation UpdateTreasury Laws Amendment (2022 Measures No 5) Bill 2022Since our last update, Treasury Laws Amendment (2022 Measures No. 5) Bill 2022, which contains amendments to the list of deductible gift recipient entities, has received Royal Assent on 16 February 2023. You can read more details about these amendments in our February update.
Treasury Laws Amendment (2023 Measures No 1) Bill 2023The Treasury Laws Amendment (2023 Measures No. 1) Bill 2023 (Bill) which passed by the House of Representatives.on 9 March 2023, has been referred to the Senate Economics Legislation Committee. The Bill contains measures to:
Financial Accountability Regime BillsLegislation to enact a new accountability regime for the banking, insurance and superannuation industries (the Financial Accountability Regime) has been re-introduced in parliament. The Financial Accountability Regime Bill 2023 (the Bill) introduces the Financial Accountability Regime. It contains provisions similar to those contained in the Financial Accountability Regime Bill 2022. The Financial Accountability Regime (Consequential Amendments) Bill 2023 contains consequential amendments to relevant Acts to support the Financial Accountability Regime. It contains provisions similar to those contained in Schedule1 and 2 to the Financial Sector Reform Bill 2022. The Bill commences the day after assent. The regime will apply to the banking industry 6 months after commencement of the Bill and to any new entrants beyond that, from the time they become an authorised deposit-taking institution (ADI) or a non-operating holding company. The regime will apply to the insurance and superannuation industries 18 months after commencement of the Bill, and to any new entrants beyond that, from the time they become licensed.
Paid Parental Leave Amendment Bill 2022The Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Bill 2022 (the Bill) has been passed by both Houses and awaits assent. The Bill gives more families access to the paid parental leave, gives parents increased flexibility in how they take leave and encourages parents to share care to promote gender equality. The changes will come into effect for parents whose children are born or adopted from 1 July 2023. Single parents will now be able to receive the full 20-week entitlement, up from 18-weeks currently. Parents can pre-claim up to 3 months before the expected date of birth or adoption so there is no delay to receiving payment. Pre-claims under the improved scheme will be open from the end of March. OECD UpdatesThe design of presumptive tax regimesAs many countries are challenged by the informal economy, presumptive tax regimes target “hard-to-tax” businesses and aim at encouraging tax compliance by reducing tax compliance costs and by levying lower tax rates as compared to the standard tax system. The OECD Taxation Working Papers No. 59 on ‘The design of presumptive tax regimes’ present an analytical framework that allows for cross-country comparability providing a series of best practices on the design of these regimes. Presumptive tax regimes, also known as simplified tax regimes, simplify the tax compliance process for micro and small businesses. By reducing tax compliance costs and levying lower tax rates compared to the standard tax system, these regimes aim at encouraging business formalisation and compliance. They are particularly useful in situations where actual taxable income is difficult to quantify as a taxpayer’s tax base is determined using alternative indicators. Although these regimes exist in many tax systems, they vary greatly in their design. This OECD working paper provides an analytical framework for characterising and comparing these regimes. It also highlights key design aspects that deserve further consideration and lists a series of best practices on the design and administration of these regimes. For more information, please refer to the OECD website.
Other updatesSuperannuation tax breaksThe government has announced a change to the concessional tax rate for superannuation balances above $3 million. From 2025-26, the concessional tax rate applied to future earnings for balances above $3 million will be 30%. Currently, earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15%. This will continue for all superannuation accounts with balances below $3 million. The change does not impose a limit on the size of superannuation account balances in the accumulation phase and it applies to future earnings, ie it is not retrospective. The government is yet to introduce enabling legislation to implement the measure. Further consultation will be undertaken with the superannuation industry and other relevant stakeholders. For more information, please refer to the Treasury website.
Register of Foreign Ownership of Australian AssetsTreasury has released draft legislation that prescribes circumstances in which foreign persons would be required to provide information to be included on the Register of Foreign Ownership of Australian Assets for consultation. As outlined in the explanatory statement of the draft legislation – Treasury Laws Amendment (Measures for Future Instruments) Instrument 2023 – the Register is an integral part of Australia’s foreign investment review framework. Regulatory burden is mitigated by continuing existing exemptions from some notification obligations and the design of the regime to minimise duplication of notifications, according to Treasury. Consultation of the legislation closes 31 March 2023. In relation to the Register, the Australian Taxation Office (ATO) has also released draft data standards that describe the technical requirements for submitting information to the Register for consultation. Consultation for the draft data standards closes 24 March 2023. For more information, please refer here.
ATO Rulings and ActivityClient-agent linking: ATO explains the new agent nomination processThe ATO has updated its client-to-agent linking in online services web content to include more information about reasons for the changes and the phased roll out approach. The ATO explains that the security and fraud environments are shifting and it is seeing increasing attempts to commit identity theft and fraud. These attempts impact taxpayers and practitioners. More taxpayer groups will be progressively introduced into the new agent nomination process. The ATO recognises this change to the client-to-agent linking process may require more time and effort for tax agents and some of their clients, mainly those who are not yet set up to use the ATO online services. For those who are already set up, there are a reduced number of steps to complete the agent nomination process. For those who need to get set up to use the ATO online services or need help, ATO support is available. For more information, please refer to the ATO website.
ATO-led taskforce executes raids in Australia’s biggest GST Fraud – “Operation Protego”The ATO-led Serious Financial Crime Taskforce has executed search warrants and issued warning letters in Operation Protego, which tackled the biggest GST fraud in Australia’s history. The recent operation marks a significant milestone in the ATO’s crackdown on the biggest GST fraud in Australia’s history. The GST fraud was first detected in early 2022 and involves offenders inventing fake businesses and Australian business number (ABN) applications, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund. Operation Protego has entered the compliance phase. The ATO took compliance action in 2022 against more than 53,000 clients and stopped approximately $2.5 billion in fraudulent GST refunds from being paid to individuals seeking to defraud the system. It has commenced writing to more than 20,000 individuals involved in the fraud, warning them of the serious consequences unless they come forward and repay the money they had defrauded. Recently, warrants were executed in 3 states against 10 individuals suspected of promoting the fraud, including on social media. Two individuals have been sentenced to jail time for their crimes so far, and more charges are expected to be laid over coming months. For more information, please refer here. GST industry guidance on digital products supply withdrawnThe ATO has withdrawn GST industry guidance on the supply of digital products to Australian residents from non-resident suppliers where the supply is made online. The Goods and Services Tax Industry Issue — ‘Application of GST to supplies of digital products made to Australian recipients from non-resident suppliers’ is withdrawn with effect from 2 March 2023. The ruling is no longer current due to changes to s 9-25(5), s 9-26 and Subdivs 84-A and 84-B of the A New Tax System (Goods and Services Tax) Act 1999, made as a result of the Tax and Superannuation Laws Amendment (2016 Measures No 1) Act 2016. GST Ruling GSTR 2019/1 Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia) and GST Ruling GSTR 2017/1 Goods and services tax: making cross-border supplies to Australian consumer provide the current ATO view on the GST treatment of a supply of digital products to Australian residents from non-resident suppliers. For more information, please refer here. ATO practice statements on penalties updatedThe ATO has made miscellaneous amendments and updated references to the source of the penalty unit values in the following Law Administration Practice Statements:
No substantive changes have been made to the views expressed by the ATO in the updated practice statements.
Working from home deductionThe ATO has finalised and outlined a new ‘fixed rate method’ for taxpayers to calculate their deduction for certain additional running expenses while working from home from 1 July 2022. The revised method contained in Practical Compliance Guideline PCG 2023/1 published by the ATO on 16 February 2023, allowing taxpayers to claim at a rate of 67 cents per hour for the following additional running expenses for working from home from 1 July 2022:
The revised fixed rate method contained in PCG 2023/1 does not include the decline in value of depreciating assets used for work purposes such as a computer, laptop or similar device, therefore a deduction for the decline in value of these items can be claimed separately to the rate per hour method. PCG 2023/1 was previously issued in draft form as PCG 2022/D4. The ATO has also published a compendium of the feedback it received. For more information, please refer to the Practical Compliance Guideline here. The ATO has also published information on home–based business expenses and deductions for sole trader or partnership home–based businesses
Car parking fringe benefitsFollowing the decision by the Full Federal Court in Commissioner of Taxation v Virgin Australia Regional Airlines Pty Ltd [2021] FCAFC 209, Taxation Ruling TR 2021/2 has been amended to confirm the ATO’s views on the meaning of ‘primary place of employment’ for the purposes of the car parking benefit provisions in the Fringe Benefits Tax Assessment Act 1986. The addendum to Taxation Ruling TR 2021/2, TR 2021/2A1, Fringe benefits tax: car parking benefits was published on 22 February 2023. The updated ruling outlines two tests to determine the primary place of employment:
For more information, please refer here.
ATO fact sheet on FBT and electric vehiclesThe ATO has released a fact sheet for employers on FBT obligations when providing an employee with an electric vehicle and associated items for their private use. The fact sheet highlights the following key points:
(i) use of the plug-in hybrid electric vehicle was exempt before 1 April 2025; and (ii) the employer has a financially-binding commitment to continue providing private use of that vehicle on and after 1 April 2025. An FBT exemption may apply to a car benefit arising from making available an electric vehicle (EV) to an employee, or their associates, for their private use. From 1 April 2025, private use of a plug-in hybrid EV is no longer eligible for the exemption unless:
For more information, please refer to the ATO website.
Draft FBT determinations on adequate alternative recordsThe ATO has released 4 draft FBT determinations dealing with adequate alternative records the Commissioner will accept as an alternative to an employee declaration in respect of expense payment fringe benefits. The draft determinations are:
Feedback on the draft FBT determinations can be provided to the ATO by 17 March 2023. Class rulings issued:
Latest Australian Tax Cases
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