Archive for the ‘Tax Cases’ Category

Foreign residents and the main residence exemption

Monday, March 16th, 2020

Laws limiting foreign residents’ ability to claim the CGT main residence exemption are now in place. This means that if you’re a foreign resident for tax purposes at the time you sign a contract to sell a property that was your main residence, you may be liable for tens of thousands of dollars in CGT. Some limited exemptions apply for “life events”, as well as property purchased before 9 May 2017 and disposed of before 30 June 2020.
According to the ATO, a person’s residency status in earlier income years will not be relevant and there will be no partial CGT main residence exemption. Therefore, not only are current foreign residents affected, but current Australian residents who are thinking of spending extended periods overseas for work or other purposes may also need to factor in this change to any plans related to selling a main residence while overseas.

ATO scrutiny on car parking fringe benefits

Friday, March 13th, 2020

The ATO has started contacting certain employers that provide car parking fringe benefits to their employees to ensure that all fringe benefits tax (FBT) obligations are being met. Generally, car parking fringe benefits arise where the car is parked on the business premises of the entity, used by the employee to travel between home and their primary place of employment and is parked for more than four hours between 7 am and 7 pm, and where a commercial parking station located within 1 km of the premises charges more than the car parking threshold amount.
Employers have a choice of three methods to calculate the taxable value of the benefits: the commercial parking station method, the average cost method and the market value method. The method currently under ATO scrutiny is the market value method, which states that the taxable value of a car parking benefit is the amount that the recipient could reasonably be expected to have to pay if the provider and the recipient were dealing with each other under arm’s length conditions.

Australia’s independent tax complaints investigator

Thursday, March 12th, 2020

Do you know who to turn to when you have a complaint about the ATO? Whether you’re an individual or business, the Inspector-General of Taxation and Taxation Ombudsman (IGTO) should be your first port of call.
As the Taxation Ombudsman, the IGTO provides all taxpayers with an independent complaints investigation service. As the Inspector-General of Taxation, it also conducts reviews and provides independent advice and recommendations to government, ATO and other departments.
The IGTO can investigate and assist with issues including extensions of time to pay; the ATO’s debt recovery actions; delays with processing tax returns; delays in ATO communication and responses; information the ATO has considered regarding taxpayers’ matters; understanding the ATO’s actions and decisions; and identifying available options and other relevant agencies that can help.
Complaints can be made online and via phone or post, and services are offered in languages other than English as well as for people who are hearing, sight or speech impaired.

Insurance payouts: are they taxable?

Wednesday, March 11th, 2020

In recent months, parts of Australia have been battered by a combination of fire and floods. As people try to piece their lives together in the aftermath, insurance payouts can go a long way in helping rebuild homes and replace lost items.
However, if you receive an insurance payout in relation to your business, home business or rental property you need to be aware there may be associated tax consequences. For example, if you keep a home office or run a business from home, or make money from renting out your home on a short-stay website, you may be subject to capital gains tax (CGT) when receiving an insurance payout on the home.
Businesses that receive an insurance payment may be subject to varying tax consequences depending on what the payment is designed to replace.
TIP: If you’ve recently received an insurance payment or you’re expecting one, contact us to find out more about how your tax obligations could be affected.

New measures to combat illegal phoenixing

Tuesday, March 10th, 2020

New laws are now in place to target illegal phoenixing of companies in Australia.
Phoenix activity is when a new company is created – “rising from the ashes” of another company that was in debt and has been deliberately liquidated – to continue the business of the old company while avoiding having to pay its debts. Recent estimates are that illegal phoenix activity directly costs Australian businesses, employees and governments between $2.85 billion and $5.13 billion each year.
To combat this type of debt and tax evasion, the new laws target a range of behaviours, including preventing property transfers to defeat creditors, improving the accountability requirements for resigning company directors, allowing the ATO to collect estimates of anticipated GST liabilities and authorising the ATO to retain tax refunds where lodgements are outstanding.

ATO tackling international tax evasion

Friday, March 6th, 2020

Australian tax residents are taxed in Australia on their worldwide income. While most do the right thing and declare all their income, some people and businesses try to avoid paying tax by exploiting secrecy provisions and information-sharing gaps between countries.
A recent coordinated effort by the Joint Chiefs of Global Tax Enforcement (J5) has yielded evidence of tax evasion by Australians. The J5 consists of the tax and revenue agencies of Australia, the United Kingdom, the United States, Canada and the Netherlands and was initially formed in 2018 to fight global tax evasion. The countries share intelligence on international tax crime as well as money laundering.
According to the ATO, several hundred Australians are suspected of participating in arrangements with an international financial institution in Central America whose products and services are believed to be facilitating worldwide money laundering and tax evasion. Multiple investigations are currently under way, and anyone with information about the scheme or other similar arrangements is encouraged to contact the ATO.
The ATO has a network of international tax treaties and information exchange agreements with over 100 jurisdictions. In recent years over 2,500 exchanges of information have occurred, enabling the ATO to identify unpaid tax amounts totalling $1 billion.
TIP: The message from the ATO is that anyone with offshore income or assets is better off declaring their interests voluntarily. Those who do so may be eligible for reductions in related administrative penalties and interest charges.

$10,000 cash payment limit: the facts

Wednesday, February 12th, 2020

The proposed $10,000 economy-wide cash payment limit has understandably elicited some confusion. While the proposal is not yet law, once enacted it will be a criminal offence for certain entities to make or accept cash payments of $10,000 or more. This is intended to combat the use of cash in black economy activities.
Chief among the questions is to what extent personal transactions will be included in the limit. The government has now released information outlining the circumstances in which the limit would not apply in relation to personal or private transactions.
Among other categories, payments relating to personal or private transactions (excluding transactions involving real property) would not be subject to the limit. Cash gifts to family members (as long as they are not donations to regulated entities such as charities) and inheritances are likely to be exempt. In other words, it is unlikely you will be prosecuted if you give your family members a lavish cash wedding gift or help your kids with a house deposit that happens to be over $10,000.
However, if you occasionally sell private assets (eg a used car) you may need to be careful and take reasonable steps to ascertain whether the other party is acting in the course of an enterprise.

ATO extends bushfire assistance: lodgements deferred

Thursday, February 6th, 2020

On 20 January 2020 the ATO announced an extension of the tax assistance package for people impacted by the 2019–2020 bushfires in New South Wales, Victoria, Queensland, South Australia and Tasmania.
Commissioner of Taxation Mr Chris Jordan said the 3.5 million businesses, individuals and self managed super funds (SMSFs) in the impacted local government areas will have until 28 May 2020 to lodge and pay BAS and income tax returns. This additional time is on top of the two-month extension previously granted.
Additionally, the ATO said it will fast-track any refunds that are due to taxpayers in the impacted regions. For example, businesses expecting a refund as a result of GST credits due to large purchases to replace stock are encouraged to lodge their activity statements at the first opportunity. The ATO will also remit any interest and penalties applied to tax debts since the commencement of the bushfires.
TIP: A complete list of the impacted areas is available at www.ato.gov.au/individuals/dealing-with-disasters. If you have been affected by the bushfires in a postcode not currently in the list, you can use the ATO Emergency Support Infoline to ask for tailored help: phone 1800 806 218.

ATO backs down from controversial time limit ruling

Wednesday, February 5th, 2020

In 2018, the ATO issued a controversial draft ruling which took a very strict stance on the four-year time limit for claiming input tax credits and fuel tax credits. The ruling had been used by the ATO to deny input tax credits and fuel tax credits where the Commissioner of Taxation made a decision outside the four-year period on an objection or amendment request, even where the objection or request was made within the period. However, a recent observation by a judge ruling on a related matter has put the ATO’s strict stance in doubt and as a result the ruling (Draft Miscellaneous Taxation Ruling MT 2018/D1) has been withdrawn.
Where the Commissioner makes a decision on an objection or requests for amendment in relation to input tax credits and/or fuel tax credits outside the four-year period but the initial objection or amendment request was lodged within the time limit, the taxpayer will no longer be automatically denied the credits in situations where the decision is in the taxpayer’s favour.
As a result, any taxpayer that the draft ruling has affected is encouraged to contact the ATO.

Super guarantee opt-out for high income earners

Friday, December 13th, 2019

Under the superannuation guarantee framework, employers are required to contribute a minimum percentage (currently 9.5%) of their employees’ ordinary time earnings into superannuation. Employers that fail to do so will be liable for a penalty called the superannuation guarantee charge, payable to the ATO. If you’re a high-income earner with multiple employers, this requirement has the very real chance of pushing you over the concessional contributions cap of $25,000.
To avoid this unintended consequence, laws have recently been passed so that eligible high-income earners with multiple employers can opt out of the super guarantee regime. From 1 January 2020, employees with more than one employer who expect their combined employers’ contributions to exceed the concessional contributions cap can apply for an “employer shortfall exemption certificate” with the ATO.

TIP: It’s a good idea to speak to your employers before deciding to apply for an exemption certificate, as it may impact relevant awards or your workplace agreements.


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