LEGISLATION UPDATE

Foreign resident capital gains withholding (FRCGW) regime

Treasury Laws Amendment (2024 Tax and Other Measures No 1) Bill 2024  has been introduced to PArliament to introduce changes to the FRCGW regime, together with other measures:

• Increases the FRCGW rate from 12.5% to 15% and remove the $750,000 threshold before which withholding applies. This measure is intended to apply from 1 January 2025.
• Enables single touch payroll standing declarations
• Provides the Commissioner with a discretionary power to retain tax refunds and credits for up to 90-days in order to obtain the taxpayer’s nominated Australian financial institution details.

Tax Agents Code of Professional Conduct

Exposure draft amendments have been released to clarify certain tax agent obligations imposed under the Tax Agent Services (Code of Professional Conduct) Determination 2024. 

Becoming aware a statement made to the Commissioner or TPB was materially false or misleading

• The obligation to advise the maker of the statement that it should be corrected only applies to statements which were false or misleading because of a failure to take reasonable care; intentional disregard; or recklessness to the operation of a taxation law.
• Where a client does not act to correct a statement, after being advised by the practitioner, within a reasonable time period, the practitioner may be obliged in certain circumstances to take steps to withdraw services from the client.

Keeping clients informed 

• Lists the matters, events and circumstances which tax practitioners need to disclose to current and prospective clients.
• This includes certain breaches that have led to penalties, matters relating to the solvency of the tax practitioner, any fraud or dishonesty offence conviction, any sanction in relation to promoting a tax avoidance, any conviction relating to serious tax offences, or conditions applying to registration. 

Denying Deduction for GIC & SIC

Exposure draft legislation has been released on the proposal to deny deductions for general interest charge (GIC) and shortfall interest charge (SIC) incurred by a taxpayer from 1 July 2025. The measure was announced in the 2023–24 Mid-Year Economic and Fiscal Outlook.

Payday Super

Treasury has released details on the 2023–24 Budget proposal to require employers to pay employees' superannuation at the same time as their salary and wages, rather than quarterly. The proposal is to apply from 1 July 2026. The updated superannuation guarantee charge (SGC) framework will:

• Ensure employees are fully compensated for any delay in receiving their superannuation,
• Incentivise employers to catch-up on any missed payments, while increasing the severity of consequences for those that deliberately or repeatedly do the wrong thing.
• Impose a SGC liability if contributions are not received by the employees’ fund within 7 days.
• Revise the choice of fund rules to make it easier for employees to nominate their existing superannuation fund when they start a new job. 

 CASE LAW UPDATE

Sladden v FCofT—Compensation Payments

The taxpayer in this case held a linked Life Protection Plan and Professional Income Protection (PIP) Plan. After claiming income protection benefits under the PIP Plan, the taxpayer sought to commute her benefit and was offered $1m as full settlement. An actuary estimated the value of the benefits at around $1.8m. After accepting the offer, the taxpayer was advised that both policies would be surrendered. The settlement deed was then amended to provide that the payments were “in respect of lost income and other events including death”. The taxpayer contended that the payment was an undissected lump sum comprising capital and income and was therefore all on capital account.

The Full Federal Court held that the taxpayer had resolved to commute her entitlements in respect of the PIP Plan in consideration of payment of the $1m. As this did not change when she agreed to surrender the life cover, no part of the settlement was other than in respect of commutation of the income protection payments, and the whole amount was therefore assessable as income.

Key point: If compensation payments are on capital account they may be eligible for the 50% CGT        discount or fully exempt where they relate to a personal injury.

TAX RULINGS & DETERMINATIONS

TD 2024/7—Deductibility of Financial Advice Fees

The ATO has finalised its determination on the deductibility of financial advice fees paid by individuals who are not carrying on an investment business. TD 2024/7 confirms the ATO view that:

• Fees for financial advice on a new investment prior to acquisition will not be deductible
• Fees may be deductible to the extent advice relates to managing their tax affairs, if provided by a recognised tax adviser. 

The TD also sets out evidentiary requirements to claim a deduction.

OTHER UPDATES

Agent Nomination Process

The ATO has updated its guide for taxpayers to assist with the process of engaging a new registered agent, or change the authorisations given to an existing agent. The agent nomination process currently applies to all types of entities with an ABN, excluding sole traders.

A taxpayer needs to nominate the agent in ‘Online services for business’. If a taxpayer hasn't accessed ‘Online services for business’ before they will need to:

• Update their ABR details (if they've changed)
• Set up myGovID (soon to be renamed to myID)
• Link myGovID to their ABN using Relationship Authorisation Manager

https://www.ato.gov.au/tax-and-super-professionals/digital-services/in-detail/client-agent-linking-steps