Tax & Super Australia Article – Weekly Update

MONDAY

Draft legislation: Government’s response to the review of the TPB
The Government is seeking stakeholders’ views on exposure draft legislation on the recommendations of the review into the effectiveness of the Tax Practitioners Board (TPB) and Tax Agent Services Act 2009 (TASA). The proposed amendments to the TASA are intended to enhance community confidence, increase the independence and effectiveness of the TPB, and support high standards in the tax profession whilst streamlining the regulation of tax practitioners. Views are due by 11 December 2022.

Tax treaty network expansion – submissions sought
Treasury is seeking submissions from stakeholders to support the expansion of Australia’s tax treaties network. The Government is entering into new tax treaty negotiations as part of its expansion of Australia’s tax treaty network. Negotiations are planned with Bulgaria, Colombia, Croatia, Cyprus, Estonia, Latvia and Lithuania, as announced in the Assistant Minister’s media release. Submissions are sought on the key outcomes Australia should seek in negotiating these tax treaties and any other issues related to Australia’s tax treaty network. Submissions are due by 23 December 2022.

ACT: COVID-19 Small Business Hardship Scheme declared NANE income
On Thursday 17th the Treasurer, by way of legislative instrument, released an amendment to the Income Tax Assessment (Eligible State and Territory COVID‑19 Economic Recovery Grant Programs) Declaration 2020. The amendment includes the Australian Capital Territory COVID-19 Small Business Hardship Scheme in the list of eligible State and Territory small business COVID‑19 grant programs. As a result, payments received under this grant program are now non-assessable non-exempt income for tax purposes. Applications for the COVID-19 Small Business Hardship Scheme closed at 11.50pm AEDST on Friday 4 March 2022. If amounts were received under the scheme on or before 30 June 2022 and these grant payments have already been included in the recipient’s income tax return for 2021-22, an amendment to that return may be necessary.

ATO: SAN misuse mailout – update
The ATO has advised that its latest SMSF auditor number (SAN) misuse mailout was in October 2022 and that it has already received information from SMSF auditors that their auditor details may have been misused in recently lodged SMSF annual returns (SARs). As part of our follow-up, the ATO said that it will be contacting tax agents and trustees in the next few weeks to ask for more information about the audit of specific SMSFs where it have been informed that the auditor listed in a SAR did not complete the audit.

TUESDAY

Draft leg: Government’s response to the review of the TPB – further info
In relation to yesterday’s report [Mon 22 November 2022] that the Government is seeking stakeholders’ views on exposure draft legislation on recommendations of the review into the effectiveness of the Tax Practitioners Board (TPB) and Tax Agent Services Act 2009 (TASA), the specific recommendations on which the Government is seeking consultation are as follows:

Recommendation 2.1 – amend the object clause of the TASA to make it more contemporary and better aligned with the TPB’s role and responsibilities.
Recommendation 3.1 – enhance the TPB’s financial independence by establishing a Special Account.
Recommendation 4.6 – amending the TASA to strengthen the disclosure requirements to require tax practitioners to not employ or use disqualified entities in the provision of tax agent services without approval from the TPB.
Recommendation 4.7 – converting the 3-year registration cycle to annual registration to align with the TPB’s administrative annual declaration process.
Recommendation 5.1 – amending the TASA to give the relevant Minister the power to supplement the TASA’s Code of Professional Conduct (the Code) to address emerging or existing behaviours and practices.

Interested parties are invited to comment on this consultation by 11 December 2022.

ATO: When a loan from a company will trigger Div 7A
The ATO has released general information on when a loan from a private company may be treated as a Div 7A deemed dividend and included in the borrower’s assessable income. Note: Div 7A is intended to prevent profits or assets being provided to shareholders or their associates tax free.

NSW land tax: General information in preparation for the 2023 year
Revenue NSW has provided some key information which may be useful in preparation for the 2023 land tax year. The Land Tax Rates for 2023 are: General rate – $100 plus 1.6 per cent of land value above the threshold, up to the premium rate; Premium rate: $ plus 2 per cent of land value above the threshold. The Tax Thresholds for 2023 are: General threshold $969,000; Premium threshold $5,925,000. Note also that the 2023 Land Tax Notice of Assessments will be sent from Wednesday 4th January 2023 through to mid-February 2023.

WEDNESDAY

SMSF reporting: What and when to report
The ATO has reminded SMSFs that they must report certain events to the ATO in the event-based reporting framework for SMSFs. The ATO has provided information on: Events you need to report; How often and when you need to report; When you need to report sooner; Working out your reporting due date; Record keeping; and Amended reporting.

Determinations for “Super prudential standards” made
Superannuation (prudential standard) determination No. 2 of 2022 has been made. Its purpose is to revoke and replace existing SPS 530 with a new version of the standard and set out, in SPS 530, revised prudential requirements for an RSE licensee with respect to prudently managing and monitoring investments on behalf of beneficiaries. Superannuation (prudential standard) determination No 3 of 2022 has also been made. It revokes Superannuation (prudential standard) determination No. 1 of 2016 and determines the new Prudential Standard SPS 510 Governance, which applies to all RSE licensees. Its objective is to ensure that an RSE licensee’s business operations are managed soundly and prudently by a competent Board, which can make reasonable and impartial business judgements in the best interests of beneficiaries and which duly considers the impact of its decisions on beneficiaries.

Bills re trade with India and the UK pass Parliament
The following Bills passed dealing with trade between Australia and India and Australia and the United Kingdom have passed the Senate without amendment and now await Assent:

THURSDAY

ATO: One million directors still need to apply for director ID
The ATO has advised that around one million directors still need to apply for their director ID before the 30 November deadline. The Australian Business Registry Services, which administers the new system, is urging directors not to leave it to the last minute to apply.

Tax Bill for previous announced measures introduced
The Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 was introduced to Parliament on Wednesday, 23 November 2022. Among other things, it will:

Introduce a refundable tax offset in relation to eligible expenditure incurred in the development of digital games. Date of effect: for expenditure incurred in relation to eligible game development from 1 July 2022.
Clarify that digital currencies (such as bitcoin) continue to be excluded from the income tax treatment of foreign currency. Note: For the purpose of these amendments, the term digital currency does not include digital currencies issued by, or under the authority of, a government agency (‘government-issued digital currency’) which continue to be taxed as foreign currency. Date of effect: from the 2021/22 and later income years.
Reduce compliance costs for employers finalising their FBT returns by empowering the Commissioner to allow them, where it is appropriate to do so, to rely on adequate alternative records holding all the prescribed information instead of seeking that information again by way of statutory evidentiary documents, such as prescribed employee declarations. Date of effect: for FBT years starting on or after the first 1 January, 1 April, 1 July or 1 October that occur after the day the Bill receives the Royal Assent.
Provide small businesses (with aggregated annual turnover of less than $50m) with temporary access to a bonus deduction equal to 20% of eligible expenditure for external training provided to their employees. Date of effect: applicable to eligible expenditure incurred from 7:30pm on 29 March 2022 until 30 June 2024.
Provide small businesses (with aggregated annual turnover of less than $50m) with temporary access to a bonus deduction equal to 20% of their eligible expenditure on expenses and depreciating assets for the purposes of their digital operations or digitising their operations. The bonus deduction applies to the total of eligible expenditure of up to $100,000 per income year or specified time period, up to a maximum bonus deduction of $20,000 per income year or specified time period. Date of effect: applicable to eligible expenditure incurred from 7:30pm on 29 March 2022 until 30 June 2023.
Amend the Corporations Act, the ASIC Act and the SIS Act to extend and adapt the financial reporting and auditing requirements in Chapter 2M of the Corporations Act to apply to registrable superannuation entities. Date of effect: 1 July 2023. (See also Assistant Treasurer’s media release – “Increasing super fund transparency”.)
List, or extend, the following entities as deductible gift recipients (DGRs): Melbourne Business School Limited, Leaders Institute of South Australia Incorporated, St Patrick’s Cathedral Melbourne Restoration Fund, Jewish Education Foundation (Vic) Ltd, Australian Education Research Organisation Limited, and Australians for Indigenous Constitutional Recognition Ltd; Sydney Chevra Kadisha and Australian Women Donors Network. It will also remove the DGR listing of the Mt Eliza Graduate School of Business and Government Limited. Dates of effect: Various, as relevant
Modify the Clean Energy Finance Corporation Act 2012 to enable the CEFC to receive additional funds to implement Rewiring the Nation, establish the Powering Australia Technology Fund and streamline the ability of the government to provide the Clean Energy Finance Corporation with additional funds in the future.
Confirm the tax treatment of certain defined military superannuation benefit pensions following the Full Federal Court decision in FCT v Douglas [2020] FCAFC 220. It also provides a non-refundable tax offset for recipients of invalidity benefits paid in accordance with the Military Superannuation Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme to ensure they do not pay additional income tax because of the Douglas decision. Date of effect: the day after Royal Assent.

Modernising Business Communications Bill introduced
The Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022 was introduced to Parliament on Wednesday, 23 November 2022. Among other things, it will:

Amend the Corporations Act to modernise communication methods available to consumers, businesses and regulators when interacting with each other by: (a) extending the global communications regime, allowing members of certain entities to elect to receive documents in hard copy or electronic form, and providing relief to entities that are unable to contact members; (b) updating payment provisions in Treasury laws to allow electronic payments to be used; and, (c) replacing requirements to publish notices in newspapers with a requirement that notices be published in an accessible and reasonably prominent manner. Date of effect: day after Royal Assent (generally).
Implement recommendations and improvements identified by the Australian Law Reform Commission in Interim Report A to simplify and improve the navigability of Australia’s financial services laws. Date of effect: day after Royal Assent (generally).
Amend the Corporations Act and the National Consumer Credit Protection Act 2009 to transfer longstanding and accepted matters currently contained in ASIC legislative instruments into the primary law in order to improve navigability of the law and provide industry and consumers with greater certainty and clarity. Date of effect: day after Royal Assent.

FRIDAY

PSI ruling released
The ATO has released Taxation Ruling TR 2022/3 Income tax: personal services income and personal services businesses. It does the following things: (a) combines and updates Taxation Rulings TR 2001/7 Income tax: the meaning of personal services income and TR 2001/8 Income tax: what is a personal services business – but does not change the principles as established in the 2 rulings on the application of the personal services income rules; (b) forms part of the ATO’s view on personal services income and should be read in conjunction with Taxation Rulings TR 2003/6 Income tax: attribution of personal services income and TR 2003/10 Income tax: Deductions that relate to personal services income, and (c) provides more examples to help taxpayers understand the personal services income rules and personal services business tests. For further details see here.

Bill passes: Exemption for certain payments to Indian residents
The Treasury Laws Amendment (Australia-India Economic Cooperation and Trade Agreement Implementation) Bill 2022 has been passed by Parliament. It amends the Agreements Act to stop Australian taxation on certain payments or credits made to entities that are Indian residents for tax purposes. These payments or credits are made for services provided remotely (not through a permanent establishment in Australia) to Australian customers that are covered by Article 12(3)(g) of the Indian agreement, that is not a royalty within the meaning of the ITAA 1936, and that is only taxable in Australia because of the operation of Article 12(3)(g) and Article 23 of the Indian agreement, as given effect by the Agreements Act. Date of effect: The measures will commence on the later of the day of Royal Assent and the day the AI-ECTA signed at Melbourne and New Delhi on 2 April 2022, enters into force for Australia.

Decision to cancel registration of tax-agent stayed
The AAT has ruled that the decision of the Tax Practitioners Board (TPB) to cancel the registration of an individual tax agent and her company for 2 years on the basis that she was no longer “a fit and proper person” to be registered as tax-agent should be stayed pending the outcome of the review of the decision. However, the AAT made the stay subject to two conditions: (a) she was not allowed to take on new clients during this period, and (b) she was to notify clients and employees in writing of administrative action by TPB and of the proceedings before the AAT. In addition, the AAT also denied her application for confidentiality on the basis that they were inconsistent with a “stay” application that was granted on conditions. (Stantin Partners Pty Ltd and Tax Practitioners Board [2022] AATA 3913, 18 November 2022.)

Remedial Power—Disclosure of Protected Information by Taxation Officers
The Taxation Administration (Remedial Power – Disclosure of Protected Information by Taxation Officers) Repeal Determination 2022. It provides for the repeal of the Taxation Administration (Remedial Power—Disclosure of Protected Information by Taxation Officers) Determination 2020 which allowed ATO officers to disclose protected information about a deceased taxpayer to an executor of their estate and other such representatives. Note: This power has now been legislated by measures contained in Treasury Laws Amendment (2021 Measures No 5) Act 2021.

Super: Meeting disclosure requirements – disallowance motion
On Monday 7 September 2022, Tax and Super Australia reported that the Treasury made the Superannuation Industry (Supervision) Amendment (Annual Members’ Meetings Notices) Regulations 2022. The Regulations would amend certain aspects of the relevant disclosure requirements for such meetings, including removing the requirement for “itemised disclosure” of certain expenditure. The Greens Senator Nick McKim has now issued a Notice of Motion that he will move for disallowance of the Regulations.

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