Archive for the ‘Government’ Category

Government to increase civil penalties for white-collar crime

Friday, May 11th, 2018

In response to recent Senate Economics References Committee and Australian Securities and Investments Commission (ASIC) Enforcement Review Taskforce reports, the Federal Government has agreed to increase the civil penalties for corporate and financial misconduct (white-collar crime), for both individuals and bodies corporate. ASIC infringement notices will also be expanded to cover a broader range of financial services and managed investments infringements.
The new maximum civil penalties will be set at:
• for individuals, the greater of 5,000 penalty units (currently $1.05 million) or three times the value of the benefits obtained or losses avoided; and
• for corporations, the greater of 50,000 penalty units (currently $10.5 million) or three times the value of the benefits obtained or losses avoided, or 10% of annual turnover in the 12 months before the misconduct, up to a total of one million penalty units ($210 million).

“Transition to retirement” pensions to become simpler

Tuesday, April 10th, 2018

In welcome news for superannuation members, the government has announced plans to simplify the payment of transition to retirement income streams (TRISs) so that they will always be permitted to automatically revert to a dependant upon the death of the original pensioner. This is designed to address a trap in the current legislation that is causing some administrative difficulties for funds when a TRIS recipient passes away.
TIP: With greater certainty about the payment of TRISs on death, now is a good time for superannuation members to review their estate plans.

Court finds pay-as-you-go amounts “withheld” from salary payments

Tuesday, April 10th, 2018

The Federal Court has ruled that pay-as-you-go (PAYG) amounts were “withheld” from a taxpayer’s salary payments so that she was entitled to a tax credit, despite the amounts never being remitted or notified to the ATO by her employers.
This case illustrates the importance of records and documentation in tax matters. The Court examined evidence such as the taxpayer’s offer of employment, payslips, bank statements and payment summaries, which suggested that the salary payments she received were “net pay” amounts (and not “gross”).
The Court noted that where an employer has not remitted PAYG withholding amounts to the ATO, this will raise questions about whether amounts were really withheld. However, adequate documentation can – as in this case – be used to prove that PAYG has in fact been withheld by an employer, even if the employer has subsequently failed to remit this to the ATO.

Bill to implement housing affordability CGT changes

Tuesday, February 27th, 2018

As part of the 2017–2018 Budget, the Federal Government announced a range of reforms intended to reduce pressure on housing affordability. Legislation has now been introduced into Parliament that proposes to:
• remove the entitlement to the capital gains tax (CGT) main residence exemption for foreign residents; and
• modify the foreign resident CGT regime to clarify that, for the purpose of determining whether an entity’s underlying value is principally derived from taxable Australian real property (TARP), the principal asset test is applied on an “associate inclusive” basis.
The Bill also proposes to amend the tax law to provide an additional discount on CGT for affordable housing. The discount of up to 10% will apply if a CGT event happens to an ownership interest in residential property used to provide affordable housing.
TIP: The main residence exemption means that CGT doesn’t apply for a capital gain or loss that an individual makes from selling their main residence. A CGT discount applies if the dwelling was their main residence for only part of the time they owned it, or they partly used it to produce assessable income.

Superannuation integrity changes

Wednesday, January 31st, 2018

The Government has released a consultation paper and exposure draft legislation to give effect to the following superannuation taxation integrity measures it announced in the 2017–2018 Federal Budget:
• the non-arm’s length income (NALI) rules in s 295-550 of the Income Tax Assessment Act 1997 for related-party superannuation fund transactions will be expanded from 1 July 2018 to also include expenses not incurred that would normally be expected to apply in a commercial arm’s length transaction (eg reduced interest expenses, brokerage, accountancy fees or legal costs); and
• a member’s share of the outstanding balance of a limited recourse borrowing arrangement (LRBA) will be included in the member’s “total superannuation balance” for new LRBAs entered into on or after 1 July 2018.
The measures are designed to ensure that related-party transactions with super funds and LRBAs can’t be used to circumvent the reduced contribution caps that apply from 1 July 2017. The changes should generally not affect LRBAs entered into with unrelated third parties for commercial rates of interest (and other expenses).

New passive income test for lower corporate tax rate

Friday, November 3rd, 2017

The Federal Government has recently introduced a Bill into Parliament to ensure that companies with more than 80% passive income will not qualify for the reduced company tax rate.
Under the Bill’s changes to the Income Tax Rates Act 1986, calculations of a business’s “passive income” would include:
• distributions by corporate tax entities (other than non-portfolio dividends);
• franking credits attached to such distributions;
• non-share dividends;
• interest;
• royalties;
• rent;
• gain on qualifying securities;
• net capital gains; and
• amounts included in the assessable income of partners in a partnership or beneficiaries of a trust estate that are referable to another base rate entity passive income amount.
At the time of writing, the Bill is still before the Parliament. When passed, it will apply from the 2017–2018 income year.
The lower company tax rate of 27.5% is available in 2017–2018 for small businesses and corporate base rate entities with turnover of less than $25 million.

TIP: You must also “carry on a business” to be eligible for the lower corporate tax rate – read on to find out more about what this means for companies.

Consultation paper: combating phoenix activities

Friday, November 3rd, 2017

The Federal Government has released a consultation paper proposing company and tax law reforms to combat phoenix activities.
Phoenix activities involve stripping assets from a company that’s in debt and transferring them to another company to avoid paying the first company’s liabilities – that is, the new company “rises from the ashes” of the old one.
The government is considering a range of ways to combat this type of activity, including setting up a hotline for phoenix reporting, adding phoenixing to the offences specifically prohibited under the Corporations Act 2001, making directors personally liable for companies’ unpaid GST, and limiting the ability for sole directors to resign unless there is a replacement director or the company is wound up.

Legislation for First Home Super Saver scheme and downsizer super contributions

Friday, October 6th, 2017

A Bill has been introduced into Parliament to establish the First Home Super Saver (FHSS) scheme and allow people aged 65 or over to make “downsizer contributions” to their super.
The FHSS scheme will allow people to make voluntary contributions into super, take advantage of the associated tax concessions, and later withdraw the contributions and associated earnings to buy their first home.
The downsizer contribution changes will allow older Australians who sell their main residence from 1 July 2018 to make non-deductible contributions of up to $300,000 to their superannuation from the sale proceeds.

Tax measures for affordable housing

Friday, October 6th, 2017

The Government has released draft tax legislation to implement elements of its housing affordability plan. The proposed measures include an increased capital gains tax discount for people who hold affordable rental housing investments for at least three years.
Under the draft legislation, managed investment trusts would be allowed to hold affordable housing investments with the main aim of deriving long-term rental income, but purchasing residential property that is not affordable housing would no longer be permitted for these trusts.
TIP: If this legislation is passed, there will be a transitional period for managed investment trusts that already hold non-affordable housing residential property to change their investments to comply with the changes.

Identification numbers for directors: an Icarus moment for phoenix activities?

Friday, October 6th, 2017

The Government has announced a package of reforms to combat phoenix activities, including the introduction of a Director Identification Number (DIN).
Phoenixing involves deliberately transferring assets from a failed or insolvent company to a new company, with the intention to avoid paying the original company’s creditors, tax and employee entitlements (that is, the new company illegally “rises from the ashes” of the indebted company).
The DIN would identify each director with a unique number, allowing regulators to map the relationships directors have with entities and other people.


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