During May, the Victorian government has expanded the holiday home exemption for Vacant Residential Land Tax, and provided some relief for doctors from Payroll Tax. At the Federal level, the Government has still not agreed on the 2024 instant asset write off. 

LEGISLATION UPDATE

Instant-asset write-off (IAWO)

The House has again disagreed to Senate amendments to the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 to further expand the IAWO from $20,000 to $30,000 for the 2024 income year (Tax Bulletin—March 2024). The Bill also contains the small business energy incentive measure and amendments to the ‘non-arm’s length income’ provisions for SMSFs.

Until the Bill is passed, the IAWO for 2024 will remain at $1,000. Parliament is not sitting again to consider the Bill until the final week of June.

Consultation papers – Anti-money laundering and counter-terrorism (AML/CTF)

The Attorney-General's Department has issued a number of consultation papers on its proposed extension of the anti-money laundering and counter-terrorism (‘AML/CTF’) regime to ’tranche two’ entities. These include lawyers, accountants, trust and company service providers (professional service providers), and real estate professionals.

Professional service providers that provide ‘designated services’ in the course of carrying on a business would be regulated under the regime. These include a number of services that would commonly be carried out by accountants. Providers would be required to put in place certain measures to protect their business from exploitation by criminals. Submissions close 16 June.

2025 car rates and thresholds

The following increases will apply from 1 July 2024:

• The rate of cents per km will increase to 88 cents (from 85 cents) for work-related car expenses under the cents per km method.
• The car limit for capital allowance purposes will increase to $69,674 (from $68,108).

Victoria—Changes to Vacant Land Residential Tax (VLRT)

The Victorian Government has amended the VLRT provisions to extend the holiday home exemption to homes held in trusts or companies at 28 November 2023. This exemption can apply where land is used and occupied as a holiday home for a minimum of 4 weeks during a calendar year by eligible persons.

The exemption for non-individual landowners will only apply where:

• Companies and unit trusts: there is at least one individual who has a minimum of 50% ownership interest in the landowner and who has occupied other land as a principal place of residence. 
• Discretionary trusts: there is a specified beneficiary, who is a natural person, or their relative who  occupied other land as a principal place of residence.
• The only changes in shareholdings, unit holdings, beneficial interests or specified beneficiaries from 28 November 2023 are between persons who are relatives.

There will continue to be no holiday home exemption for residential property acquired by a company or trust after 28 November 2023.

Victoria—Payroll tax and GPs

The Victorian Government has announced that all Victorian general practice businesses will receive an exemption from any outstanding or future assessment issued for payroll tax on payments to contractor GPs for the period up to 30 June 2024. 

A further 12-month exemption for payments to contractor GPs, through to 30 June 2025, will be available for any general practice business that has not already received advice and begun paying payroll tax on payments to their contractor GPs on this basis.

From 1 July 2025, a payroll tax exemption will be provided for payments to contractor and employee GPs for providing bulk-billed consultations.

CASE LAW UPDATE

S&H Investments and FCT—Superannuation guarantee charge

The employer had originally engaged TW as an employee cleaner. TW then accepted new terms under which she invoiced the employer using an ABN, and was paid an increased hourly rate to compensate her for losing leave entitlements. The employer ceased making SG contributions on the assumption she was now an independent contractor. The ATO imposed SGC on the basis TW was an employee under the
extended definition for SG purposes.

The AAT held that the contract between the employer and was wholly or principally for her labour. TW was remunerated for her personal labour and skills in cleaning the office. The conduct of the parties suggested that there was no right to delegate. If TW was absent, it was the employer who arranged for a contractor or staff member to cover for her. Therefore, it was reasonable to conclude that the performance of the work was personal to TW. She was also remunerated by the hour, which suggested she was not engaged to achieve a particular result.

Key point: Employers cannot contract out of their superannuation obligations, nor can employees waive their entitlements.

Merchant v CofT—Dividend stripping & Wash Sale

In this case, the taxpayer was expecting to make a substantial capital gain on the sale of company shares. Prior to the sale, related-party loans owed to the company were forgiven. This reduced retained profits in the lender companies and increased the value (and therefore sale proceeds) of the vendor company, which provided a better tax result. The taxpayer also held other shares with a substantial unrealised capital loss which were sold to a related SMSF. The reasons provided were to free up cash flow outside of  superannuation, and that the shares were considered to be a good investment for the fund.

The Federal Court held that the ‘dividend stripping’ provisions applied to the debt forgiveness, as there was no commercial reason the related companies would have forgiven the debts in light of the sale. Part IVA also applied to the transfer of the loss shares, as it was akin to a ‘wash sale’. The evidence did not establish the funds were required, and there was no contemporaneous documentation supporting it was part of the investment strategy. The purpose was to crystallise a capital loss to offset the capital gains.

Note: The taxpayer is suing its tax adviser in relation to these transactions.

 ATO UPDATES

2024 Tax Returns—Key Focus

The ATO has identified its key focus areas for 2024 tax time.

• Work-related expenses: The ATO has reminded taxpayer to keep appropriate records when claiming work-related expenses.
• Rental properties: The focus will be on ensuring rental properties claims are not inflated.
• Failing to include all income: The ATO has noted that taxpayers should not rush into lodging tax return on 1 July and wait until all information has been pre-filled.

 CONTACT US

If you have questions in relation to matters raised in this bulletin or any other tax matters, please contact us. 

The information contained in this bulletin is intended to provide general information only and is not intended to serve as tax advice. Specific advice should always be sought regarding a taxpayers’ particular circumstances. Please contact MC Tax Advisors if you would like assistance with the issues identified in this bulletin.