July 2021

Voice Page 1

Voice®

Tax Advisers'

The

What's New This Edition

July 2021

Edition No.315

Representing the Tax Agent Community

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Your Association

Practice Notes

– Superannuation reforms pass parliament

– Further tax relief for Australian brewers and distillers

– Repeated dishonest behaviour involving COVID stimulus measures by tax agentleads to termination of registration

– Small increase to TPB tax agent application fees

– Relief for financial advisers to meet their ongoing fee disclosure obligations

– ASIC releases guidance on ongoing fee arrangements

Direct from the ATO

FBT, GST and Income Tax Rulings

Recent tax cases update

Monthly Tax Tip

What's on at the NTAA

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Your Association

DISCLAIMERThis publication has been prepared for the members of the National Tax & Accountants' Association Ltd. Many of the comments contained in Voice are general in nature and anyone intending to apply the information to practical circumstances should independently verify their interpretation and the information's applicability to their particular circumstances.

Messages from the Tax Practitioner Stewardship GroupEditor: The ATO's Tax Practitioner Stewardship Group ('TPSG') has asked us to pass the following messages on to our members.

How to apply the super guarantee rate riseOn 1 July 2021, the super guarantee rate rose from 9.5% to 10%. The ATO understands some pay periods will cross over between June and July when the rate changes.

The percentage employers are required to apply is determined based on when the employee is paid, not when the income is earnt. The rate of 10% will need to be applied for all salary and wages that are paid on and after 1 July 2021, even if some or all of the pay period it relates to is before 1 July 2021. That is, the date of salary and wage payment determines the rate of super guarantee payable, regardless of when the work was performed.

For example, if the work was done in June (or partly in June) but employees were paid in July, the rate is 10% and contributions totalling 10% of the employee’s ordinary time earnings for the September 2021 quarter must be made to the employee’s super fund by 28 October. However, if the work was done in July but employees were paid in advance (before 1July), the rate is 9.5% and contributions totalling 9.5% of the employee’s ordinary time earnings for the June 2021 quarter must be made to the employee’s super fund by 28 July.

Ref: Communication by Michelle Allen, ATO Assistant Commissioner (Superannuation and Employer Obligations) to Tax Practitioner Stewardship Group, 16 June 2021

Tax professionals digital education seriesThe ATO has developed a new educational video series to help both tax and BAS agents use functionality in Online services for agents ('OSfA').

The Tax professionals digital education series is a suite of instructional videos which demonstrate how to perform common tasks in OSfA. The series has been created in consultation with a diverse group of tax and BAS agents and is designed to help maximise efficiency and capability in using this system, saving practitioners time and allowing them to better support your clients.

The first four videos in the series focus on creating a payment plan, checking the progress of a return, adding a GST registration, and cancelling a GST registration.

Refer to www.ato.gov.au/TPeducationseries.

Ph: (03) 9209-9999Fax: (03) 9686-4744Email: ntaainfo@ntaa.com.auWebsite: www.ntaa.com.auABN: 76 057 551 854

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Practice NotesSuperannuation reforms pass parliament The Government has passed "landmark reforms" to Australia’s superannuation system through the Parliament.

This includes the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 which will increase the maximum number of allowable members in self-managed superannuation funds ('SMSFs') and small APRA funds from four to six from 1 July 2021.

The passage of the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 should also help boost the retirement savings of Australians by giving them more options to contribute to their superannuation.

Specifically, the Bill extends the bring‑forward arrangements to people aged 65 and 66 for non-concessional contributions made on or after 1 July 2020 (which complement previous changes allowing people aged 65 and 66 to make contributions without meeting the work test).

The Bill will also remove the excess concessional contributions charge, which currently applies to contributions in excess of the concessional contributions cap, from 1 July 2022.

Also, from the 2021/22 year, individuals who released superannuation under the COVID‑19 early release scheme will have the option of recontributing these amounts as non-concessional contributions, over and above the existing caps.

In addition, the passage of the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, should prevent the creation of unintended multiple superannuation accounts when employees change jobs from 1 November 2021.

It should also become easier to choose a better fund, with access to a new interactive online YourSuper comparison tool from 1 July 2021, and members will be notified by 1 October 2021 if their fund fails an annual objective performance test (among other changes).

Ref: Treasurer's media release (jointly with the Minister for Superannuation, Financial Services and the Digital Economy), 17 June 2021

Further tax relief for Australian brewers and distillersThe Government has put regulations in place to ensure Australia’s brewers and distillers can receive additional tax relief from 1 July 2021.

Under changes announced in the 2021/22 Budget, the Excise remission scheme for alcohol manufacturers will provide brewers and distillers a full remission of any excise they pay, up to an annual cap of $350,000.

This Budget measure builds on and complements the Government’s 2020/21 Mid‑Year Economic and Fiscal Outlook ('MYEFO') announcement to allow eligible alcohol manufacturers to receive their excise duty remission automatically, thereby reducing administrative overheads and providing additional assistance by addressing cash flow concerns, which will also commence from 1 July 2021.

These changes will bring the Remission Scheme into alignment with the existing Wine Equalisation Tax ('WET') producer rebate for wine producers, ensuring all alcohol manufacturers are placed on an equal footing.

The new regulations can be found on the Federal Register of Legislation website, and further information on the measure can be found at the Australian Taxation Office website.

Ref: Assistant Treasurer's media release, 16 June 2021

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Repeated dishonest behaviour involving COVID stimulus measures by tax agent leads to termination of registrationFollowing a referral from the ATO, the Tax Practitioners Board ('TPB') investigated and then terminated the tax agent registration of Maricar Santos Rosauro, after finding that Ms Rosauro had engaged in serious misconduct (which involved multiple breaches of the Code of Professional Conduct ('Code')) and was no longer fit to be registered.

The maximum five‑year ban was imposed, as the TPB found that Ms Rosauro breached the Code by failing to:

q act honestly and lawfully in the best interests of her clients relating to COVID stimulus measures by submitting over 100 business activity statements ('BASs') and 43 JobKeeper applications for clients without obtaining the necessary prior authority;

q account to her clients for Commonwealth funds in excess of $550,000 that she received on trust as a result of lodging their BASs and Jobkeeper applications (but which Ms Rosauro used for her personal and business expenses); and

q comply with the taxation laws in the conduct of her own affairs, including failing to declare information to the ATO, pay her outstanding taxation debts and meet her lodgment obligations.

Additionally, the TPB found that Ms Rosauro made false statements to the TPB and misused the MyGov platform to assume the identity of clients for the purposes of dishonestly obtaining a benefit for herself.

Speaking about the case, Chair of the TPB, Mr Ian Klug said "This decision, and ongoing matters, makes it clear to other tax practitioners and the community that such egregious and fraudulent behaviour will be met with appropriate sanctions to ensure both taxation system and the public are protected."

The TPB currently has 99 active COVID compliance cases under investigation, with conduct ranging from practitioner error or incompetence, to reckless or fraudulent claims made either for themselves or on behalf of their clients.

So far, the TPB has terminated six practitioners for COVID stimulus related misconduct (with varying exclusionary periods), suspended seven, and issued written cautions and orders to another three.

Ref: TPB media release, 7 June 2021

Small increase to TPB tax agent application feesThe application fee to register or renew as a tax agent, BAS agent or tax (financial) adviser is subject to a consumer price index ('CPI') adjustment on 1 July each year.

Applications paid and submitted after 30 June 2021 will be based on the increased fee, as outlined below.

Practitioner typeApplication fee up to

30 June 2021Application fee from

1 July 2021

Tax agent $700 $704

Tax (financial) adviser $560 $563

BAS agent $140 $141

Practitioners can apply to renew their tax agent, BAS agent or tax (financial) adviser registration at least 30 days, but not more than 90 days, before it expires if they wish to continue providing these services.

Ref: TPB media release, 1 June 2021

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Relief for financial advisers to meet their ongoing fee disclosure obligationsThe financial advice sector has been undergoing a period of significant change as the Government delivers recommendations from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ('FSRC').

As part of delivering Recommendation 2.1 of the FSRC, from 1 July 2021 the financial advice industry is required to report the fees paid under an ongoing fee arrangement and provide a reasonable estimate of the fees that will be paid in the subsequent 12 months. Financial advisers can issue this fee disclosure statement anytime between 1 July 2021 and 30 June 2022 and the date of issue will become the anniversary date for future fee disclosure statements.

The Government is aware that industry may have difficulties generating an accurate fee disclosure statement during the transition period of 1 July 2021 to 30 June 2022, as fees are required to be reported up to the day before the statement is issued.

To address circumstances where advisers are unable to report actual fees in the required time, the Government will make a regulation to allow financial advisers to report an estimate of fees for the 60 days prior to the statement being issued. The estimate would be reported alongside the actual fees charged for the remainder of the previous 12 months.

This regulation will only apply for the transition period. After the transition period, financial advisers will have 60 days from the anniversary date to issue their fee disclosure statements which must report all fees paid in the previous 12 months.

The Government will continue to work constructively with industry to provide an enhanced regulatory framework for financial advice.

Ref: Minister for Superannuation, Financial Services and the Digital Economy's media release, 11 June 2021

ASIC releases guidance on ongoing fee arrangementsASIC has released an information sheet (INFO 256) on ongoing fee arrangements, to provide greater clarity to financial advisers and advice licensees on their obligations when providing personal advice to retail clients.

This follows recent changes to the law that took effect on 1 July 2021.

Editor: The Financial Sector Reform (Hayne Royal Commission Response No.2) Act 2021 implemented a number of recommendations from the Financial Services Royal Commission Final Report to address consumer harm resulting from fees for no service and poor advice from financial advisers, whose duty to their client conflicts with their own interests.

INFO 256 answers frequently asked questions about the obligations that apply to fee recipients in relation to ongoing fee arrangements, fee disclosure statements ('FDSs'), and ongoing fee consents. INFO 256 will replace Regulatory Guide 245 Fee disclosure statements, which will be withdrawn.

ASIC has also released consequential amendments to RG 175 Licensing: Financial Product Advisers-Conduct and Disclosure (RG 175), which reflects new advice obligations introduced into the Corporations Act 2001, following the Financial Services Royal Commission. It includes an example of the lack of independence disclosure statement to help advisers understand the requirements in ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125.

Editor: In relation to the Government's above announcement that a new regulation will be made to assist advisers with meeting their existing obligation to provide an FDS during the transition year, ASIC will also update INFO 256 to reflect the new regulation after it is made. ASIC will also make consequential amendments to other regulatory guidance to reflect the new obligations, including Regulatory Guide 182 Dollar Disclosure (RG 182) and Information sheet 228 Limited AFS Licensees — Advice conduct and disclosure obligations (INFO 228).

Ref: ASIC media release 21-134MR, 15 June 2021

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Direct from the ATOEditor: The following are excerpts from additional reminders provided to tax practitioners and taxpayers during the past month.

ATO "here to help" those hit by COVID-19 and natural disastersThe ATO recognises the significant challenges that continue to face the Australian community this year, and Assistant Commissioner Tim Loh is reassuring taxpayers that, no matter their circumstances, the ATO has a range of information and support options to make tax easy.

“Whether you’ve received JobKeeper, JobSeeker, COVID support or disaster assistance payments, accessed your super early, or had your records damaged, destroyed or lost, the ATO is here to give you the tools you need to get it right this tax time,” Mr Loh said.

Tax treatment of different paymentsJobKeeperJobKeeper payments received as an employee will be included in the employee's income statement as either salary and wages or as an allowance, and the ATO will automatically include this information on their online tax return.

Income statements can be accessed in ATO online services through the individual's myGov account and should be finalised by 14 July (tax agents also have access to this information).

Sole traders who have received JobKeeper payments on behalf of their business will need to include the payments as assessable income for the business.

JobSeekerJobSeeker payments will also be included in a recipient's tax return at the Government Payments and Allowances question once it’s ready (but if the individual lodges before this information is there, they will need to add it themselves).

Stand down paymentsOne-off or regular payments received from an employer after being temporarily stood down due to COVID-19 are taxable and should appear in the income statement and will be automatically included in the stood-down employee's return.

COVID-19 disaster payment for people affected by restrictionsThe Australian Government (through Services Australia) COVID-19 disaster payment for people affected by restrictions is taxable and must be included as income in the return.

Tax treatment of other assistanceThe tax treatment of assistance payments can vary; the ATO website outlines how a range of disaster payments impact tax returns.

The ATO website also includes guidance on COVID payments, including the taxable pandemic leave disaster payment.

Early access to superannuationIf an individual accessed their super early under the special arrangements due to COVID-19, they do not need to declare this in their tax return, as any eligible amounts withdrawn under that program are tax-free.

Lost, damaged or destroyed tax recordsThe ATO knows that many taxpayers are facing lasting impacts left in the wake of natural disasters, so if they find their records have been lost or destroyed, whether in cyclones, floods or bushfires, the ATO can help. Mr Loh said:

“If you have a myGov account linked to the ATO, you’ll be able to view some of your records, including income tax returns, income statements and previous notices of assessments. If you lodge through a registered tax agent, they can also access these documents on your behalf.”

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Government agencies, private health funds, financial institutions and businesses provide information to the ATO which is available to tax agents and automatically included in returns by the end of July.

If taxpayers have lost receipts due to a natural disaster, the ATO can accept reasonable claims without evidence, so long as it’s not reasonably possible to access the original documents. The taxpayer may be required to tell the ATO how they calculated the claim.

Other ATO supportThe ATO understands that unexpected life events can make it hard to pay tax, but even if they can't pay, it's still important for taxpayers to lodge on time. Once they lodge and have up-to-date records, the ATO can work with them to tailor a payment plan to their circumstances.

In most cases, taxpayers are able to set up their own payment plan online depending on how much they owe.

Support is also available to all registered tax agents at any time, and the ATO is working hard to ensure that this help is tailored and personalised. Agents that need assistance for any reason are encouraged to reach out to the ATO as soon as possible.

More informationTaxpayers and their registered tax agents impacted by COVID‑19, natural disasters, or financial hardship can access support at ato.gov.au/disasters.

Information about reconstructing tax records is available at ato.gov.au/Reconstructing-your-tax-records.

Information about support to lodge and pay is available at ato.gov.au/supporttolodgeandpay.

Support services for tax professionals, including requests for deferrals, are available at ato.gov.au/TPSupport

Ref: ATO media release, 21 June 2021

GIC and SIC rates for the September 2021 quarterThe ATO has published the September 2021 quarter rates for the General Interest Charge ('GIC') and the Shortfall Interest Charge ('SIC'):

GIC annual rate 7.04%

GIC daily rate 0.01928767%

SIC annual rate 3.04%

SIC daily rate 0.00832877%

Ref: ATO website – GIC and SIC rates

Business Portal to retire at the end of July 2021The ATO has advised that its Business Portal will be retiring at the end of July, after which businesses will be required to use Online services for business.

The ATO has set out some of the reasons "that make Online services for business a great switch":

n secure mail interaction with the ATO;

n improved features and functionality;

n quick and intuitive navigation;

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n easily lodge an amended annual return; and

n single log-in for multiple ABNs.

Businesses and super funds can log in easily and securely using their myGovID.

Note that super funds currently using the member verification service ('MVS') will still be able to access it after the Business Portal retires.

Ref: ATO website, Super, 17 June 2021

SMSF limited recourse borrowing arrangements interest ratesThe ATO has confirmed that the following interest rates charged under a limited recourse borrowing arrangement ('LRBA') would be consistent with the safe harbour terms outlined in Practical Compliance Guidelines ('PCG') 2016/5 (in relation to arm’s‑length terms for limited recourse borrowing arrangements established by SMSFs) for 2021/22.

Real property: 5.10%

Listed shares or units: 7.10%

These rates are unchanged from those accepted by the ATO for 2020/21.

Ref: ATO website, Rates, Key Superannuation Rates and Thresholds, 21 June 2021

Car depreciation limit for 2021/22Editor: In last month's edition of Voice, we advised that the luxury car tax ('LCT') threshold will increase to $69,152 from 1 July 2021 (or $79,659 for fuel efficient cars).

The ATO has also advised the following further car threshold amounts that will apply from 1 July 2021.

The car depreciation limit (being the upper limit on the cost that can be used to work out the depreciation for the business use of a car in the year it is first used or leased) for 2021/22 is $60,733.

Also, if a car is purchased for a price more than the car limit, the maximum amount of GST that can be claimed is one-eleventh of the car limit amount (which in 2021/22 is $5,521). Note that no credit can be claimed for any luxury car tax paid when purchasing a luxury car, regardless of how much the car is used in carrying on a business.

Editor: Note that the ATO no longer issues annual Taxation Determinations for the car depreciation limit (the last one they issued was TD 2018/6).

Ref: ATO website, Small business newsroom, 3 June 2021

Extension of time to make minimum yearly repayments on Division 7A loansUnder a complying Division 7A loan from a private company, the borrower must make minimum yearly repayments ('MYR') before the end of the lender’s income year to avoid the loan being treated as an assessable dividend.

To offer more support due to the ongoing effects of COVID-19, an extension of the repayment period is now available for those who were unable to make their MYRs by the end of the lender’s 2020/21 income year, generally 30 June (under S.109RD of the ITAA 1936).

The borrower can apply for this administrative relief using the ATO's streamlined online application. Note that they must still make up the shortfall of their 2020/21 MYR by 30 June 2022.

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Editor: A similar extension was also available for the 2019/20 MYR, and borrowers who obtained this extension needed to have made up that shortfall by 30 June 2021.

If they didn't meet this deadline, they will need to either obtain a further extension of time for the 2019/20 MYR outside the streamlined process, or amend their 2019/20 tax return to include a dividend.

Note that the extension available through the streamlined online application for the 2019/20 and 2020/21 MYR is not intended to be available for the 2021/22 income year and beyond.

Ref: ATO website, Business Bulletins Newsroom, 21 June 2021

Updated personal transfer balance cap available online from 5 July 2021On 1 July 2021, the superannuation general transfer balance cap will be indexed, meaning individuals will have a personal transfer balance cap between $1.6 and $1.7 million.

Their personal transfer balance cap is based on the highest ever balance of their transfer balance account between 1 July 2017 and 30 June 2021.

Members will be able to view their personal transfer balance cap in ATO Online and their tax agents will be able to view this information in Online Services for Agents.

However, due to the timing of APRA fund reporting, the ATO won’t be calculating and displaying member’s personal transfer balance cap until 5 July 2021, to minimise confusion for individuals.

After 5 July 2021, the member’s personal transfer balance cap may change if the ATO receives information that changes the highest ever balance of their transfer balance account before 1 July 2021. This could occur if an SMSF hasn’t completed its reporting of pre-1 July 2021 transfer balance account events to us.

The ATO encourages funds to continue reporting transfer balance cap information between 1 and 5 July 2021, even though it will not be processing any reporting during this period, and will not be able to issue or revoke excess transfer balance determinations it has sent to a member, or commutation authorities it has sent to funds.

The ATO's event-based reporting and valuation guidelines web content has been updated, and the changes will:

q help funds understand how the timing of their reporting impacts how the ATO calculates members' personal transfer balance caps from 1 July 2021;

q extend the circumstances where SMSFs can use the reasonable estimate method to support their transfer balance account report ('TBAR') reporting; and

q include examples and address myths and misunderstandings.

Ref: ATO website, Super, 16 June 2021

New SMSF independent auditor's reportThe ATO has advised that a new version of the Self-managed super fund independent auditor’s report ('IAR') (NAT 11466‑07.2021) form has been released and must be used for all audits completed on or after 1 July 2021, regardless of what income year they apply to.

The new version contains two new paragraphs which highlight the need for auditors to ensure they comply with the auditor independence requirements in APES 110 Code of Ethics for Professional Accountants (including Independence standards) (2018) — effective 1 January 2020 ('the Code') when conducting annual SMSF audits.

The changes emphasise the importance:

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n of the auditor needing to ensure their firm or network firm is not providing any non‑assurance services to an audit client that are prohibited under the Code; and

n that, where their firm or network firm is preparing financial statements for an auditclient after 1 July 2021, a management responsibility has not been assumed for the fundand the services provided are routine or mechanical and safeguards have been applied.

The parts of the IAR that have been changed for the reporting period commencing 1 July 2021 are as follows:

u Part A — A new independence clause has been included in the Basis of Opinionparagraphs, and requires auditors to choose the applicable option that describeswhether their firm or network firm also prepared financial statements for the fund, andan acknowledgment that their firm hasn’t provided any non‑assurance services to theaudit client that are prohibited under the Code.

u Part B — A similar independence clause has been inserted under the Basis of Opinionparagraphs relating to Independence and quality control. Other modifications to PartB include a reference to the new Auditing Standard ASQM 1, Quality Managementfor Firms that Perform Audits or Reviews of Financial Reports and Other FinancialInformation, or Other Assurance or Related Services Engagements. Systems ofquality management in compliance with this ASQM are required to be designed andimplemented by 15 December 2022. Up until this time an auditor can continue to applythe existing ASQC1.

None of the sections or regulations listed at Appendix 1 of the reports requiring compliance assurance have been changed.

To enable auditors time to transition to using the new IAR, the ATO will not take any compliance action where auditors continue to use the previous version of the IAR (NAT 11466‑07.2019) during the month of July 2021. Note that this version of the IAR will be removed from the ATO's website at the end of July.

Ref: ATO website, Forms, 24 June 2021

Withholding the right amount for seasonal workersDue to COVID-19, the visa status of workers in the Seasonal Worker Program may have changed, resulting in employers withholding tax at a higher rate.

The law has now been changed so that employers can continue to withhold 15% on payments made to workers where they:

u have been participating in the program and continue to do so;

u were previously on a subclass 403 visa; and

u are now on a different temporary visa (e.g., subclass 408 visa).

If an employer has withheld tax at a higher rate for a seasonal worker because their visa has changed, they will need to refund their employee the over-withheld amounts. This may include refunding the amount directly to the employee or revising activity statements they have already lodged.

If the employer withheld tax at a higher rate during the 2019/20 financial year, the employee will need to request a refund of withholding tax from the ATO.

Ref: ATO website, Small business newsroom, 7 June 2021

Rent or lease payment changes due to COVID-19The ATO has provided updates regarding the tax implications when a landlord gives, or a tenant receives, rent concessions as a result of COVID-19 (in a business context).

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This information applies to:

n tenants who receive rent concessions, such as waivers or deferrals of rent, from their landlords; and

n landlords who give rent concessions, such as waivers or deferrals of rent, to their commercial tenants.

For example, the ATO provides the following advice for tenants that have received a rent waiver.

If the waived rent is related to a past period of occupancy that the tenant has already incurred and claimed a deduction for, they are still entitled to that deduction.

However:

u if they have already paid the incurred rent and it has been waived and refunded to the tenant, they will need to include this amount in their assessable income when they receive it; or

u if they have not already paid the incurred rent and it has been waived, the rent waiver will be a debt forgiveness. When such a debt is forgiven, the tenant will make a gain. The amount isn't usually included in the business's assessable income — it is instead offset against amounts that could otherwise reduce the business's taxable income. These rules generally apply if some or all of the interest payable on the debt would have been allowed as a deduction had interest been charged.

If the waived rent is related to a future period of occupancy, they will not be entitled to a deduction for that amount.

Editor: The ATO's update provides information regarding tax obligations for tenants, tax obligations for landlords, and rent concessions under the mandatory Code of Conduct (including GST implications depending on whether the business accounts for GST on a cash or accruals basis).

Ref: ATO website, Property used in running a business, 21 June 2021

COVID-19 and permanent establishmentsThe ATO has updated its guidance on whether the presence of employees in Australia, due to the impacts of COVID-19, may create a permanent establishment.

The ATO's updated guidance states that it will not apply compliance resources to determine if a business has a permanent establishment in Australia if:

q the business did not otherwise have a permanent establishment in Australia before the effects of COVID-19;

q the temporary presence of employees in Australia continues to solely be as a result of COVID-19 related travel restrictions;

q those employees temporarily in Australia will relocate overseas as soon as practicable following the relaxation of international travel restrictions; and

q the business has not recognised those employees as creating a permanent establishment or generating Australian source income in Australia for the purpose of the tax laws of another jurisdiction.

This approach is applicable until 31 December 2021.

From 1 January 2022, this approach will cease to apply and the business will be required to consider whether ongoing arrangements give rise to a permanent establishment in Australia (and/or contact the ATO to discuss the taxation consequences of these ongoing arrangements after that date).

Ref: ATO website, Business bulletins newsroom, 25 May 2021

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Introducing SMSF rollover alertsSince February 2020, the ATO has been issuing alerts via email and SMS when certain changes are made to a self-managed super fund ('SMSF').

With the inclusion of SMSF rollovers in SuperStream, the ATO will send the fund an email and/or text message alert when the fund uses the SMSF verification service ('SVS') to verify the SMSF's details before making a rollover.

Note that funds may use this service multiple times when actioning a single rollover request, which may result in receiving multiple alerts.

These alerts are being sent to help safeguard retirement savings and reduce the risk of fraud or misconduct.

If a fund receives an alert and is already aware of the rollover request, there is nothing more that needs to be done.

However, if a member didn't request a rollover to be made to an SMSF, or they want more information, they will need to contact their existing super fund(s) as a matter of priority, as rollovers through SuperStream may be processed in as little as 3 business days.

Ref: ATO website, Super, 21 June 2021

Temporary full expensing and loss carry back labels now in 2021 tax return The ATO provided a substituted accounting period and part-year lodgment interim claims process for temporary full expensing, backing business investment, and loss carry back from late February 2021. However, the ATO is now ready for Tax Time 2021 and all eligible businesses can make their claims in the 2021 income tax returns.

From 1 July 2021, the following forms will no longer be available for use:

u Temporary full expensing and Backing business investment schedule — Substituted accounting period or lodging a tax return for a part year form; and

u Loss carry back — 2020–21 early balancer substituted accounting period or lodging a company tax return for part year form.

From 1 July 2021, eligible business can use the additional labels in the 2021 income tax returns to claim these measures. As there will no longer be a separate form to lodge, this should make it easier for substituted accounting period clients, or clients lodging part-year 2021 income tax returns.

Ref: Communication by Hoa Wood, ATO Deputy Commissioner — Individuals and Intermediaries to Tax Practitioner Stewardship Group, 25 June 2021

Cryptocurrency data-matching programThe ATO will acquire account identification and transaction data from cryptocurrency designated service providers for the 2021 financial year through to the 2023 financial year inclusively, to identify and treat clients who failed to report a disposal of cryptocurrency in their income tax return.

The data items include:

n Client identification details (names, addresses, dates of birth, phone numbers, social media accounts and email addresses); and

n Transaction details (bank account details, wallet addresses, transaction dates, transaction time, transaction type, deposits, withdrawals, transaction quantities and coin type).

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The ATO estimates that records relating to approximately 400,000 to 600,000 individuals will be obtained each financial year.

Ref: Notice of Data Matching Program, Commonwealth Gazette — C2021G00416, 9 June 2021

Novated leases data-matching programThe ATO will acquire novated lease data from McMillan Shakespeare Group, Smartgroup Corporation, SG Fleet Group, Eclipx Group, LeasePlan, Toyota Fleet Management, LeasePLUS and Orix Australia for 2018/19 through to 2022/23.

The data items include:

q Lessee/employee identification details (unique identifier of the lessee, name of the lessee, addresses of the lessee (residential and postal), date of birth of the lessee, all contact telephone numbers (for example: fixed line, mobile) for the lessee, email address(es) of the lessee);

q Employer identification details (unique identifier of the employer, name (trading name and legal name) of the employer, ABN of the employer, addresses (business and postal) of the employer, contact name for the employer, contact telephone numbers (for example: fixed line, mobile) for the employer, email address(es) of the employer); and

q Lease transaction details (unique identifier for the lease transaction, lease start date, lease end date, lease expected end date, lease termination date, number plate of the vehicle, type of vehicle (new or used), category of vehicle (sedan, wagon, utility etc), lease price per month including GST, items packaged with the vehicle lease, expenses packaged with the vehicle lease (for example: fuel, servicing), bank account name for the lessee, bank account number for the lessee, bank account BSB for the lessee).

The ATO estimates that records relating to approximately 260,000 individuals will be obtained each financial year.

Ref: Notice of Data Matching Program, Commonwealth Gazette — C2021G00417, 9 June 2021

Capital allowances: Reviews in progressThe ATO has started a review of the assets used in the following industries with a view to making new effective life determinations:

u casino operations industry;

u medical and surgical equipment manufacturing industry;

u salt manufacturing and refining (excluding harvesting);

u clothing manufacturing industry;

u fertiliser manufacturing industry;

u e-bicycles and e-scooters;

u plastic safety screens used to prevent the spread of COVID-19; and

u wooden furniture and upholstered seat manufacturing.

The ATO expects to complete its review of these assets within 12 months, with new effective life determinations applying from 1 July 2022. Draft effective lives will be issued for public comment well before final decisions are made. Participation in the review process is voluntary (although the ATO says that it finds strong participation from an industry gives its members confidence that the ATO will properly consider their range of experience, and that the determinations will be useful to industry members).

Ref: ATO website, Business, Depreciation and capital expenses and allowances, In detail, Effective life, Reviews in progress

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FBT, GST and Income Tax RulingsThe following are summaries of Tax Alerts, Practice Statements, Public Rulings and Draft

Rulings and Tax Determinations. Copies are available from the ATO Website.

TR 2021/2 — Fringe benefits tax: Car parking benefitsThis Ruling sets out when the provision of car parking is a car parking benefit for the purposes of the Fringe Benefits Tax Assessment Act 1986.

The Ruling replaces Taxation Ruling TR 96/26 (which was withdrawn on 13 November 2019), and should be read in conjunction with Chapter 16 of Fringe benefits tax — a guide for employers (Employers' guide) which provides guidance to help employers calculate the taxable value of a 'car parking fringe benefit' and provides practical examples.

The conditions which must be satisfied before a benefit is a 'car parking benefit' are set out in S.39A(1) of the Fringe Benefits Tax Assessment Act 1986. Specifically, a taxpayer provides a car parking benefit on a particular day when, between 7.00am and 7.00pm:

q a car is parked at a work car park for the minimum parking period;

q an employee uses the car in connection with travel between their place of residence and primary place of employment at least once on that day;

q the work car park is located at or 'in the vicinity of' the primary place of employment, on that day (meaning the two locations are "near, proximate, or close to each other" — when considering the distance between the places, it is the spatial and geographical separation that is significant);

q a commercial parking station is located within a one kilometre radius of the work car park used by the employee;

q the 'lowest representative fee' charged by any commercial parking station for all-day parking within a one kilometre radius of the work car park exceeds the car parking threshold (the 'car parking threshold requirement');

q the parking is provided to the employee in respect of their employment; and

q the parking is not excluded by the regulations (for example, a car space is excluded if it is provided to a disabled employee who holds and displays a valid disabled person's parking permit and the permit allows the employee to park in spaces that are designated for the exclusive use of a disabled person).

Among other updates, the ruling provides comprehensive guidance on what is meant by a "commercial parking station", in line with recent cases, including Commissioner of Taxation v Qantas Airways Limited [2014] FCAFC 168 ('FCT v Qantas').

Except to the extent that this ruling conflicts with views in TR 96/26 (or with the terms of settlement of a dispute agreed to before the date of issue of this ruling), it applies both before and after its date of issue.

However, paragraph 81 of TR 96/26 expressed the view that car parking facilities that have a primary purpose other than providing all-day parking (that is, one that usually charges penalty rates significantly higher than the rates chargeable for all‑day parking at commercial all-day parking facilities) were not commercial parking stations.

That view is not retained in this new ruling in recognition of the decisions of the Federal Court in FCT v Qantas and the Administrative Appeals Tribunal in Qantas Airways Limited and Commissioner of Taxation [2014] AATA 316.

In respect of this changed view, this ruling applies in respect of car parking benefits provided on or after 1 April 2022.

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Recent tax cases updateEditor: The following cases were among those discussed or highlighted on this month’s edition of ‘Tax on the Couch’.

Accountant's company not entitled to cash flow boostA company had consistently reported wages paid to a director (a chartered accountant and registered tax agent) of $1,300 per quarter (annually, $5,200) for over five years, with no PAYGW payable due to the wages being below the tax-free threshold.

That pattern continued into the 2019/20 year, with the company reporting wages of $1,300 for the first two quarters, but then on 1 April 2020, after the announcement of the cash flow boost ('CFB') criteria on 12 March 2020, the company reported in its March 2020 activity statement wages of $108,700. This apparently comprises 12 weekly wage amounts of $100 and one week’s wage of $107,500 paid to the director in respect of a week in the March 2020 quarter, and a PAYGW withholding amount of $50,009.

The company therefore claimed that it was entitled to the maximum first CFB of $50,000.

Not surprisingly, "that startling departure from the previous consistent pattern of minimal wage payments excited the attention of the Commissioner". Upon investigation, the ATO concluded the company had entered into a scheme with the sole or dominant purpose of obtaining a CFB, and so it had failed to satisfy the eligibility criteria for the first CFB.

The director was adamant the change in the pattern of wages was not driven by obtaining a CFB but rather to enhance the ability of himself and his wife to refinance certain loans.

The Commissioner also did not accept that the company "paid" the reported wages of $108,700 in the March 2020 quarter, as there was no actual payment of the wages in the form of a cash payment, cheque or bank transfer. The company did not have its own bank account, so its receipts were instead directed to a joint bank account held by the director and his wife.

The company nevertheless said the wages were “paid” when the company determined they should be paid, as reflected in its activity statement for the March 2020 quarter, and included in a single journey entry for the annual wages made at the end of the financial year.

The AAT was not persuaded the company actually paid those wages in the March 2020 quarter as asserted, and concluded, even if the payment was in fact made, that the company was not entitled to the CFB:

"The Director is not an unsophisticated man. He is a practising chartered accountant of some years standing. It would defy common sense to accept that he caused the applicant to make an extraordinary one-off payment of this order, as wages for a single week, mainly for the purpose of encouraging a bank to extend finance on the basis that the Director was in receipt of significant wages. It is in my view far more likely, given the limited utility in doing so for financing purposes and the timing, that the large one-off payment of wages was mainly for the purpose of obtaining the maximum CFB. It certainly would have had that effect, if indeed the wages were in fact paid. And the Director admitted he was aware that reporting the greatly increased wages would have that effect . . .

"The long-established previous pattern of reported wages, the timing of the extraordinary payment said to have been made, and that it would give rise to a PAYGW obligation of a mere $9 over the amount required to qualify for the maximum CFB, point to the scheme being for the dominant purpose of obtaining the CFB. It was almost inevitable this would lead to ATO scrutiny. And yet, the Director was not able to offer a credible alternative explanation for the decision to depart from his established pattern of minimal wage payments and, in particular, have the applicant pay him over $100,000 in wages for a single week reported shortly after the announcement of the CFB criteria."

Ref: VNBM and Commissioner of Taxation [2021] AATA 1626

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July 2021Page 16

Profit from subdividing and selling rental property was ordinary incomeThe AAT has held that the profit made when a taxpayer and her husband acquired, subdivided and sold a rental property should be taxed as ordinary income.

They had acquired the residential property at auction on 27 August 2016 for $675,000, with settlement occurring on 31 October 2016. At the time of purchase, there was a long‑term tenant in residence in the property, and the taxpayer claimed that it was their intention "to rent the Property long-term with the option to potentially sub-divide the block some years in the future, should they decide to do so".

However, they lodged an application to subdivide the property into two lots on or about 10 November 2016 (and that subdivision plan was fully surveyed, drawn and settled by 21 October 2016 — i.e., ten days before the settlement of the purchase of the property occurred).

The tenant vacated the property in May 2017 and the house was demolished in July 2017. The two lots resulting from the subdivision were then sold under two contracts of sale dated (a) 3 August 2017 (for a sale price of $480,000) and (b) 2 January 2018 (for a sale price of $490,000).

The taxpayer claimed that they had acquired the property with “a view to renting it out for the long term”, with an option to subdivide at a time well into the future. They also claimed that the reason for subdividing the property and selling the lots was not to enter into a profit‑making venture, but rather to maximise the potential of the asset and pay out the debt on the property, as the plan to hold the property long‑term had proven to be financially unsustainable. Therefore, the taxpayer asserted that the profit from the sale of the subdivided lots should be assessed under the CGT provisions.

However, the AAT concluded that the profit generated by the purchase and subdivision of the Property and the sale of the subdivided lots should properly be treated as ordinary income under S.6‑5 of the ITAA‑1997:

"The issue for determination by the Tribunal is whether, at the time of the purchase of the Property, the Applicant had a potential profit by subdivision and sale as a purpose for the purchase. As noted above, such a purpose does not have to be the sole or even the predominant purpose, it just has to be a not insignificant purpose. Even on the Applicant’s own case, it would be hard for her to argue that the possible subdivision and sale of the Property was not a live option in the Applicant and her husband’s consideration at the time of the purchase. No specific timeline for that option had been set and almost immediately after the purchase of the Property, in fact before the sale had even settled, the Applicant was taking positive steps to bring that option to fruition, which, in effect, continued without pause to the final realisation of that option, being the sale of the subdivided lots at a profit."

Ref: McCarthy and Commissioner of Taxation [2021] AATA 1511

Term put in partnership agreement to avoid tax meant agreement invalidIn a dispute between parties involved with a property development, the Supreme Court of the ACT has held that there was no partnership between them. Also, "even if a partnership had been established, it would have been void for illegality or unenforceable as it was against public policy reasons".

Basically, the plaintiffs claimed that they had entered into a partnership with the defendant to develop and sell a residential property, but the defendant denied the existence of any partnership agreement and contended that the relationship between the parties was an ordinary arms-length builder/owner relationship. The defendant also claimed that, if there was a partnership to develop and sell the property, the whole partnership was void for illegality or unenforceable due to public policy reasons, as it involved an alleged scheme to avoid the payment of CGT. Specifically, the following term was part of the agreement:

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MONTHLY TAX TIP — Some of the changes for businesses from 1 July 2021

Small business entities (or 'SBEs'), being broadly small businesses with an aggregated turnover of less than $10 million, are generally eligible for a range of tax and administrative concessions.

However, from 1 July 2021, businesses that are not small businesses because their turnover is $10 million or more but less than $50 million will nonetheless be able to access these small business concessions:

n the simplified trading stock rules;

n the PAYG instalments concession;

n a two-year amendment period; and

n the excise concession.

The rate of the small business income tax offset has also been increased to 16% for the 2021/22 income year (up from 13% in 2020/21). The small business income tax offset may be available to small businesses with turnover less than $5 million which are either:

q small business sole traders; or

q those with a share of net small business income from an eligible partnership or trust.

The maximum offset is $1,000 and the ATO works out an individual's offset based on amounts shown in their tax return.

In addition, the lower company tax rate for 'base rate entities' will be reduced to 25% from the 2021/22 income year. A base rate entity is a company:

u that has an aggregated turnover less than the aggregated turnover threshold (which is $50 million for the 2021/22 income year); and

u where 80% or less of their assessable income is 'base rate entity passive income' (such as interest, dividends, rent, royalties and net capital gain).

Editor: These and many other issues affecting both individual and business taxpayers are discussed in the NTAA’s 2021 Tax Schools Day 1 and Day 2 seminars, which are available online at www.ntaa.com.au.

"Upon completion of the building, the defendant would live in the property for one year to avoid capital gains tax, following which the property would be sold and the profits from the sale would be divided equally between the first plaintiff and the defendant."

The Supreme Court concluded that this term of the alleged partnership, referred to as the "tax avoidance term" was designed to avoid the payment of CGT to the ATO, and so the "agreement is unenforceable as it is against public policy".

The Supreme Court also held that the tax avoidance term could not be "severed" from the partnership agreement, as it would alter the nature of the partnership agreement and be inconsistent with the expressly alleged intention.

Ref: Cobanov v Josifovski (No 2) [2021] ACTSC 111

Music teacher an "employee", not an independent contractorThe AAT has held that a taxpayer was liable for superannuation guarantee charge in relation to its engagement of a music teacher which it had claimed was an independent contractor, as he was an employee under both common law and the extended definition in the Superannuation Guarantee (Administration) Act 1992.

Ref: Olias Pty Ltd as trustee for the Storer Family Trust and Commissioner of Taxation [2021] AATA 1524

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July 2021Page 18

What's on at the NTAA

Tax on the Couch – July 2021

In the July 2021 edition of ‘Tax on the Couch’, our tax specialists discuss the latest tax bills and cases, and also take a closer look at topical issues including (among others):

u theATO'snewrulingoncarparkingfringebenefits,alongwithitsdraftDraftLawCompanionRuling regarding the temporary full expensing measure, and a newdraft taxation determination on the calculation of 'aggregatedturnover';

u the latest legislative changes introduced by the Government,including the changes contained in the Treasury Laws Amendment(2021 Measures No. 4) Bill 2021;

u changes to be aware of in relation to the 2021 Business Returns;and

u an in-depth discussion with the ATO on the Taxable Payments Reporting System.

NTAA Online Seminars

2021 FBT Seminar

Tax & Property

Fundamentals of Primary Production

2021 Tax Structures & Asset Protection

2021TaxSchoolsDay1

2021TaxSchoolsDay2

Available soon

2021IncomeTaxBasicsDay1

2021IncomeTaxBasicsDay2