Archive for the ‘Government’ Category

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.

Tax cut closed off for passive investment companies

Friday, October 6th, 2017

The Government has released exposure draft legislation to deny access to the lower corporate tax rate of 27.5% (down from 30%) for companies with predominantly passive income. Under the changes, companies will qualify for the lower tax rate only if:
• their passive income is less than 80% of their assessable income for the year;
• they “carry on a business” in that year; and
• they come below the aggregated turnover threshold for the year ($25 million for 2017–2018).

Bill to increase Medicare levy

Wednesday, September 13th, 2017

The Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017 has been introduced to implement the Government’s 2017–2018 Budget announcement to increase the Medicare levy by 0.5% to 2.5% from 1 July 2019 in order to help finance the National Disability Insurance Scheme (NDIS). Nine other Bills have been introduced to increase the following rates that are linked to the top personal tax rate.
TIP: Think you may be affected by personal tax rate changes? Contact us to find out more.

Higher education HELP changes: faster repayments and threshold changes

Tuesday, May 16th, 2017

The Minister for Education and Training, Simon Birmingham, has announced a package of reforms to higher education – the Higher Education Reform Package – to take effect generally from 1 January 2018. The details announced will be confirmed in the 2017–2018 Federal Budget. They include:

• an increased maximum student contribution from 1 January 2018;
• no up-front fees or deregulation of fees;
• a new set of repayment thresholds from 1 July 2018, changing repayment timings and quantities for all current
and future Higher Education Loan Program (HELP) debtors;
• a new minimum repayment threshold at $42,000 of income from 1 July 2018 with a lower 1% repayment rate,
and a new maximum threshold of $119,882 of income with a repayment rate of 10%;
• phasing in increased maximum student contributions by 1.8% each year between 2018 and 2021, cumulating in a 7.5% increase; and
• from 1 July 2019, indexation of HELP repayment thresholds, currently linked to Average Weekly Earnings (AWE),
will be changed to align to the Consumer Price Index (CPI).

The Minister said that taxpayer-funded student loans stand at more than $52 billion and, without changes to address this situation, around a quarter of that is expected to go unpaid.

Tax assistance for people affected by Cyclone Debbie

Tuesday, May 16th, 2017

The ATO has said it will fast-track refunds for people affected by extreme weather and flooding associated with Tropical Cyclone Debbie and ex-Cyclone Debbie in Queensland and New South Wales, and will allow extra time for those taxpayers and their agents to lodge income tax returns and activity statements.

Tax Commissioner Chris Jordan said taxpayers do not need to apply for a deferral or a faster refund. “If your business or residential address is in one of the identified affected postcodes it will happen automatically”, Mr Jordan said. “We understand that for many people their tax affairs are the last thing on their minds right now. When people are ready, we will make sure they are supported in meeting their tax obligations.”

Automatic deferrals of one month apply for tax lodgment and payment dates for people in the affected postcodes. Employers still need to meet their ongoing super guarantee obligations for employees.
The ATO is offering a range of other support measures, and can help reconstruct tax records where documents have been damaged or destroyed.

TIP: If your personal or business affairs have been affected by Cyclone Debbie, contact us to find out what ATO measures and support you can access.

Taxpayer failed to prove that payments were “loans”

Wednesday, February 1st, 2017

In a recent case, the Full Federal Court has found that several taxpayer companies had not discharged the onus of proving that assessments the Commissioner of Taxation issued to them were excessive. The amended assessments took into account income of some $4 million that the Australian companies received from overseas sources. The taxpayers had claimed that the payments were loans.
In allowing the Commissioner’s appeal, the Court majority held that it would not be appropriate to find that the taxpayers had provided the required proof that the payments were genuine loans; in fact, they had made inconsistent or “alternative” arguments about the nature of the payments.